Fisher & Paykel Healthcare (FPH), a leading player in the healthcare sector, announced earnings and gave an outlook for 2024 this morning, forecasting an operating revenue of NZ$1.7 billion in line with consensus estimates.
Following this announcement, FPH’s shares took a tumble this morning by -5.5% with investors expressing their disappointment in the results. The NZ$1.7 billion operating revenue projection has stirred mixed reactions from analysts, with potential downside risks driving some of the market jitters.
Citigroup’s Mathieu Chevrier observes a downside to the consensus forecasts and anticipates the stock will trade weaker due to the lower-than-expected guidance. This suggests that investors were hoping for a more bullish prediction for the company’s 2024 revenue. Contrarily, Jarden’s Adrian Allbon regards the revenue forecast as an in-line result, suggesting it should underpin investor confidence. However, Allbon raises concerns over gross margin pressures, higher net interest charges, and increased capital expenditure, which may prompt downward revisions in consensus Net Profit After Tax (NPAT).
The Bloomberg Consensus estimate aligns with the company’s projected operating revenue of NZ$1.7 billion for 2024. Yet, Fisher & Paykel’s annual results paint a mixed picture. The company’s net income has fallen by 34% year-on-year to NZ$250.3 million, with a final dividend per share of 23 NZ cents compared to 22.5 NZ cents the previous year. Gross margin has also contracted from 62.6% to 59.4%, while operating revenue dipped by 6% year-on-year to NZ$1.58 billion.
A closer look at the revenue breakdown reveals a 15% drop in hospital products revenue to NZ$1.02 billion, contrasted by an 18% rise in homecare products revenue to NZ$553.8 million. Regionally, North America delivered a modest 2.8% revenue growth, while Europe and Asia Pacific witnessed a decline of 8.7% and 9.1% respectively.
Despite the mixed bag of annual results and future predictions, FPH maintains optimism for FY24. It expects similar revenue growth rates for both Hospital and Homecare product groups at current exchange rates. The company plans to direct NZ$450 million towards capex as part of its land and building programs. Operating expense growth is projected at around 12%. Furthermore, FPH anticipates FY24 gross margin improvement of about 200 basis points in constant currency or approximately 100 basis points at current exchange rates. The company credits its second half revenue growth of 14% to the strong performance of Hospital new applications consumables and Obstructive Sleep Apnea (OSA) masks revenue.
While the market is clearly disappointed with this morning’s announcement, FPH remains a buy recommendation within the ASX Growth portfolio. With the next rebalance date scheduled for June 15th, how the share price develops over the coming weeks will determine whether FPH remains in the portfolio.