Cochlear Limited (COH) – Hearing check

Cochlear provides implantable hearing solutions for children and adults worldwide. The company offers cochlear implant systems, sound processor upgrades, bone conduction systems, and other products. The company was founded in 1981 and is headquartered in Sydney, Australia.

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Ord Minnett has reviewed product launches from Cochlear (COH) from the past two decades and their impact on valuation multiples in the1–2- year period post launch to gauge the potential for a re-rating in its price-to-earnings ratio from the recent releases of the Nucleus Nexa implant and the Nucleus Nexa 8 and Kanso 3 Nexa processors. Broadly speaking, we find that share price performance post the release of a new cochlear implant – the surgically implanted internal component of the product – led to a re-rating of its P/E multiple, while share price performance post the (more frequent) releases of sound processors – the external part of the product that converts sound into digital signals for the internal implant to send to the brain – and their impact on valuation was much less clear.  

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The company’s guidance for earnings to be biased to the second half of FY26 reflects industry commentary that cochlear users in the key US market were deferring surgery ahead of the new implant being available, suggesting implant sales in the second half – with a full period of contribution from the new Nucleus Nexa implant – will be greater than in the first half. The downside risk to group earnings comes from pressure on services revenue as households grapple with a cost-of-living squeeze, particularly in the US, although the second half should receive a boost from upgrades of the Nucleus 7 processor as it reaches the end of its useful life.

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We made no changes to our EPS forecast post our review. Cochlear’s appeal stems from its large addressable market with few rivals and high barriers to entry, and a strong technological advantage. These factors are already discounted in the price, however, which means we maintain our Hold recommendation, while our target price stays at $295.00.

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