Expectations are for Fisher & Paykel Healthcare to report a big lift in first-half earnings next week, but perhaps more pressing for New Zealand’s biggest listed company is uncertainty surrounding the change of government in the US.
If election messaging is to be believed, President-elect Donald Trump’s potential healthcare reforms could significantly impact the medical scene in the US.
Proposed changes, including Medicaid spending reforms and adjustments to Affordable Care Act subsidies, may alter patient coverage and access to care.
And Trump’s nomination for Secretary of the Department of Health and Human Services - Robert F. Kennedy jnr (RFK) - has caused a sell-off in US healthcare stocks because of concern about his out-of-left-field views on vaccines.
“The role of the Secretary is undeniably crucial in setting the tone for the agency,” Craigs Investment Partners said in a report.
“However, it is important to recognise that several other senior positions within the agency are equally significant, such as the heads of the Centres for Medicare & Medicaid Services (CMS) and the FDA (US Food and Drug Administration), which have yet to be announced.”
Adding to the uncertainty are Trump’s threats to impose import tariffs, particularly against Mexico.
Given America is FPH’s biggest market and that it has substantial manufacturing operations in Mexico, this could conceivably be an issue for the respiratory products designer and maker.
While Trump’s stated policies on trade and the medical sector have created uncertainty, it so far has not impacted greatly on FPH’s share price - if at all - the stock having gained 66% over the last 12 months.
Expectations are that next Thursday’s six-month result will be more than healthy.
The company in August said the year had begun strongly across all products and regions.
At July 31 exchange rates, FPH’s guidance assumptions for the first half put revenue in a range of about $940 million to $950m, for a net profit of $150m to $160m.
At the midpoints of first-half guidance, this would equate to 18% growth in reported operating revenue and 44% growth in reported net profit after tax, compared to the first half of the 2024 financial year.
Market expectations are for a net profit around the middle of the guided range.
Mohandeep Singh, portfolio manager at Craigs Investment Partners, said the market appeared unconcerned about the possible pitfalls of a Trump-led US administration.
“Medical devices - are they going to have a crack at that? I’m not convinced,” Singh told Stock Takes.
If tariffs became a reality, FPH would be impacted a little more than some of its peers because some of the others have a US manufacturing presence.
“Incrementally they would be more affected but the market so far is not pricing in a high degree of profitability that there is going to be an impact.”
Singh expects a strong result from FPH - one of the market’s best performers - but said the company takes a long-term view.
“The important stuff is where FPH is on a three-, five- or 10-year view.
“On that basis, it’s got some pretty substantial growth drivers behind it - whether it’s some of the high-flow products it’s putting into anaesthesia or in non-invasive ventilation,” Singh said.
However, he noted that FPH’s price-earnings ratio of 50 times was at the high end of its recent 40-to-55 range.
“It’s at the high end of that valuation range, but I think that probably reflects some of the strong momentum that the business has got.”
A recapitalised Ryman Healthcare also reports next Thursday, and the market is keen to hear from new chief executive Naomi James, who started work on November 4.
One of the key headwinds for Ryman and the sector has been an increase in stock levels due to slow housing market turnover, making it difficult for incoming residents to sell their own houses, Salt Funds managing director Matt Goodson said.
For Ryman, this has led to a build-up in unsold inventory and a lift in receivables, creating balance sheet pressures and their need to raise equity.
“We’ll be looking keenly at stock levels and receivables,” Goodson said.
“It’s probably too early in the rate-cutting cycle to expect green shoots for housing turnover but that is certainly the hope for the 12-18 months ahead,” Goodson said.
The market will be interested in their performance in Victoria, which has proven difficult in the past.
At its last annual result, Ryman report a net profit after tax (NPAT) of $4.8m, down from $257.8m.
Forsyth Barr said Ryman was in transition.
“After it lifted the veil on a decade of opaque accounting practices and half-truths at its full-year 2024 result, we expect its 1H25 result to be a continuation of the transition for Ryman.”
Multiple factors would likely impact the result, among them being a cyclically subdued housing turnover and completion of large, legacy high-density developments.
“Therefore, we believe its outlook comments will be particularly important for the investment case.”
Ryman, the country’s largest retirement village operator, last year raised $902m to pay down debt.
Forsyth Barr believes a turnaround may be under way with fishing company Sanford.
Sanford last week reported a net profit of $19.7m, a 96% improvement on the previous year’s result.
The broker said the two focus points heading into Sanford’s result were debt reduction and head-office costs.
“Sanford exceeded our expectations on both,” it said.
“Net debt reduced in 2H24 through lower capex plus solid inventory reductions, and head-office costs reduced by 20% sequentially.
“Pleasingly, there was a strong message that costs will continue to reduce and dividends/capex will remain restrictive.”
The key negative was subdued second-half wildcatch prices and margins, which looked set to persist into full-year 2025.
Forsyth Barr noted Sanford’s share price had been range-bound for well over two years.
“Governance issues, unclear capex/strategic priorities, and earnings uncertainty have caused a material de-rating.
“We believe the turnaround story is now under way.”
Napier Port’s result this week was upbeat, despite a weak macro environment.
The key focus was on the outlook statement given the weak macro environment and recent closure of the Winstone Pulp International plant, which Craigs had previously estimated at $4m impact a year on ebitda.
The outlook statement was fairly positive, reflecting the ongoing post-cyclone volume recovery, expectation of more normal volumes from Pan Pac and an improving log outlook, Craigs said.
After the closure of WPI, Napier Port had instead been receiving more raw logs, and this, along with some operating expenditure savings, is going some way towards offsetting the lost container volumes and earnings.
Craigs lowered its 2025 ebitda forecast for Napier Port from $57.8m to $54.7m, mainly to reflect the net impact of the WPI closure.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
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