Analysts expect F&P Healthcare to report strong earnings growth on Monday. Photo / NZ Herald
Analysts expect F&P Healthcare to report strong earnings growth on Monday. Photo / NZ Herald
Investors will find out if Fisher & Paykel Healthcare's financial performance has justified the stratospheric performance of its share price when it releases its result on Monday.
It has already been taken as read that the March 31 year was a strong one, so the market's focus will be onwhat lies ahead for a company that specialises in making respiratory equipment in a world that is struggling to contain Covid-19, a disease that attacks people's respiratory systems.
Brokers Forsyth Barr said it's already known that the company had a strong year, and that that momentum continued into the company's first quarter.
"The key question is how long this lasts, with first-time full year 2021 guidance and outlook commentary the primary focus of its result on Monday," Forsyth Barr said.
The brokerage expects a net profit of $279m - up 33 per cent on the previous year - and at the upper end of the company's own guidance range of $275m to $280m.
Aside from increased demand arising from the pandemic, F&P Healthcare has had the benefit of a favourable exchange rate, sharply lower litigation costs, and a research and development tax credit.
"There is no doubt Covid-19 will provide a material tailwind for FY21, however, there remains a reasonable margin of error in the extent and duration of this benefit," Forsyth Barr said.
The company's shares last traded at $30.75 - not far off its record high of $31.08 - having rallied by 102 per cent over the last 12 months. Its Thursday closing price of $30.91 gives it a market cap of $17.8 billion, easily the highest on the NZX.
Devon Funds management chief investment officer Mark Brown said the market expects F&P Healthcare to at the very least meet its own earnings forecast and will probably exceed it.
"The stock has been strong and I think the market has been looking for a strong outlook statement for 2021," Brown said, noting the company had a track record on being conservative about its earnings prospects.
"They are clearly doing phenomenally well as a result of the Covid-19 pandemic and the longer that the pandemic extends, then clearly the better it will be for all those healthcare companies and healthcare providers," he said.
F&P Healthcare is often compared with ResMed, which is listed in Australia and the US, and which reported a 39 per cent lift in its net operating profit for the March quarter.
Chief executive Mick Farrell said ResMed had rapidly "pivoted" its business to respond by ramping up production of life support ventilators, non-invasive ventilators, and ventilation mask systems in response to Covid-19.
ResMed shares have also had a strong run, but not nearly to the same extent as F&P Healthcare's performance.
Brown says ResMed is more exposed to the sleep apnea side of respiratory products manufacturing.
"Clearly, in this current Covid-19 environment, hospital respiratory products certainly have more upside than a pure sleep apnea play," he said.
Brown said there was a lot "baked in" to the share price at current levels but that there is also a lot of uncertainty, he said.
F&P Healthcare chief executive Lewis Gradon. Photo / NZ Herald
At an historical price earnings ratio of 76.4, F&P Healthcare is the most expensive stock in the Australasian healthcare sector, Brown said.
At its last guidance on March 17, the company said its respiratory humidifiers and consumables were directly involved in treating patients with coronavirus.
"We have seen an increase in demand globally and have ramped up our manufacturing output," chief executive Lewis Gradon said.
"At the same time, we have benefited from stronger sales in our homecare product group and a weakening of the New Zealand dollar," he said.
F&P Healthcare's result was to have been released on May 28, but the company was able to delay that by a month when the NZX loosened its rules to enable companies more time to prepare during the Covid-19 level 4 lockdown.
