Cochlear (COH) - Updating currency forecasts

Cochlear Limited provides implantable hearing solutions in the Americas, Europe, the Middle East, Africa, and Asia Pacific. It offers cochlear implant systems; replacement sound processors, accessories, and other services; bone conduction systems and replacement sound processors; and recipient support tools. Cochlear Limited was founded in 1981 and is headquartered in Sydney, Australia.

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Ord Minnett has reviewed its healthcare sector coverage post the end of the September quarter to incorporate the latest currency forecasts. On balance this driven downward EPS revisions of 0–3% across the forecast horizon. We have made no recommendation changes as a result of our review but some target prices have been changed.

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Our preferred choices in the sector are as follow:

·         ResMed (RMD, Buy) – We expect the capital management program to support the shares and earnings. RMD has flagged more than US$1.85 billion will be returned to shareholders through share buybacks and dividends during FY27. Its sleep business we expect will continue to grow ahead of market, and margins will return to expansion as productivity efficiencies and pricing take effect. Further, RMD’s forward price-earnings multiple (circa 18x consensus) is not demanding against our EPS growth estimate of 8% in FY27 (in US dollars).

·         CSL (CSL, Accumulate) – We expect CSL Behring’s immunoglobulin (Ig) franchise can deliver stronger growth. We assume 7% per annum Ig revenue growth persisting from FY27 until FY29. This would see Ig revenues recover to be broadly in-line with the market. We also assume a 50 basis point improvement in CSL Behring’s gross margin in FY27 from increased plasma yields, a stabilisation in inventory write-downs, and declining cost per litre as donor fees stabilise. CSL’s earnings should also be supported by continued cost discipline and share buybacks. We note that CSL has guided to a $50 million headwind to FY27 NPAT from currency.

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