Is the CSL share price a buy to future-proof against rising inflation?

A group of three scientists talking excitedly while working in a lab on a diabetes test developed by Proteomics International Laboratories which is an ASX share tipped to explode by Alto CapitalA group of three scientists talking excitedly while working in a lab on a diabetes test developed by Proteomics International Laboratories which is an ASX share tipped to explode by Alto Capital

The CSL Limited (ASX: CSL) share price finished Thursday’s session down 0.15% to $291.40.

The ASX healthcare share has been making somewhat of a comeback in recent times. In just six weeks, the CSL share price has ascended 13.8% since appearing to turn on 18 June.

What’s driving up the CSL share price?

A number of large-cap ASX shares seemed to do an about-face in mid-June.

Commonwealth Bank of Australia (ASX: CBA) is up 14.5% since 18 June. National Australia Bank Ltd (ASX: NAB) is up 17% since 18 June. Wesfarmers Ltd (ASX: WES) is up 12.5% since that date.

These are all top 10 non-mining companies in the ASX 200 that appear to be on a new growth trajectory.

The S&P/ASX 200 Index (ASX: XJO) is also up 7.09% since 21 June.

So, it’s probably fair to surmise there’s some ‘buying the dip‘ activity going on.

Maybe, just maybe, ASX investors are finally getting comfortable with rising inflation and interest rates.

These two issues have caused a great deal of negative sentiment to enter the share market in 2022.

The consequence has been a sell-off with the ASX 200 falling 13.6% until the apparent change on 21 June.

Maybe investors have decided it’s time to buy up the blue chips after months of volatility and share price falls. And you can’t get a more quintessential blue-chip ASX share than CSL.

So, maybe that’s why the CSL share price is going up. After all, there’s been no price-sensitive news from CSL since 12 May. That’s when it told the ASX its Vifor Pharma AG acquisition would take a bit longer to complete due to regulatory requirements.

Time will tell. Moving on…

What do the experts think?

As my Fool colleague James reported this week, Citi has a buy rating on CSL with a share price target of $330.

Also this week, Tristan Harrison reported that Morgan Stanley has an overweight rating on CSL with a price target of $312. Macquarie has an outperform rating and the same share price target.

According to reporting on Livewire, Macquarie analysts think that earnings resilience is crucial in today’s inflationary economy. For them, CSL is the pick of the ASX healthcare stocks for FY23.

Macquarie says the earnings per share (EPS) of large healthcare companies like CSL have typically been resilient during recessions.

Macquarie also nominates CSL within its recession-proof portfolio of 16 ASX shares.

What’s the outlook for the ASX healthcare sector in FY23?

Jun Bei Liu from Tribeca Investment Partners provides a synopsis on ASX healthcare shares for FY23.

In an interview with Livewire, Liu said:

We believe the healthcare sector will regain its position as the top performing sector in FY23. Our thesis is based on three factors, stabilising interest rate expectation, the opportunity for outsized near-term growth and its structural growth prospects.

In the past six months, market participants have aggressively priced in rapid interest rate increases around the world as a result of elevated inflation.

Higher future interest rate expectations lower the near-term valuation for growth companies such as healthcare and technology businesses.

This is why we saw sharp sell off of these two sectors — with some names down as much as 70 per cent. With falling commodity prices more recently and the debottleneck of global supply chains easing, we believe the inflation reading has now peaked which should see stabilisation of interest rate expectations. This certainly makes healthcare businesses look cheap relative to historical multiples.

… we have entered into a period of economic consolidation with slowing consumer spending and a slower housing market. Many sectors will face slowing revenue lines and rising costs.

Against this backdrop, many of our healthcare companies have a long track record of growing their market share globally throughout many economic cycles. They have been, and are expected to continue, to deliver double digit growth regardless of the economic cycle as their services are often life critical and non discretionary.

In a world where earnings becomes uncertain for many, healthcare businesses generate defensive growth and help future-proof portfolios.

The post Is the CSL share price a buy to future-proof against rising inflation? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has positions in CSL Ltd. and Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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