Profit down 57%, share price up 12%. What’s with this ASX 200 healthcare stock today?

The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price is soaring on Tuesday despite the S&P/ASX 200 Index (ASX: XJO) healthcare stock posting seemingly dire first-half earnings.

Though, its results for the six months ended 30 September are in line with previous forecasts.

The Fisher & Paykel share price opened 5.7% higher at $20.30 this morning before peaking at $21.78 – marking a 13.4% gain.

It has since slumped slightly to trade at $21.57 at the time of writing, 12.34% higher than its previous close.

What’s going on with this ASX 200 healthcare stock today?

Here are the highlights from Fisher & Paykel’s first-half earnings report. All figures have been converted from New Zealand Dollars at today’s exchange rate (NZ$1 to AUD$0.93).

• $88.85 million of net profit after tax (NPAT) – a 57% drop on that of the prior comparable period (pcp)
• $639.86 million of operating revenue – marking a 23% drop
• Basic earnings per share (EPS) fell to around 15 cents
• 17.5 New Zealand cent interim dividend declared (around 16 Aussie cents) ­– a 3% increase on that of the pcp

The respiratory care device company took a notable hit over the first half of financial year 2023 as it cycled COVID-19-driven demand in the pcp. Looking longer-term, however, its results appear more positive.

While its revenue fell on that of the pcp, it increased 21% on that of the comparable pre-pandemic period.

Fisher & Paykel’s hospital operating revenue also slumped 35% to $406.47 million last half, while that of its new applications consumables – products used in non-invasive ventilation, Optiflow nasal high flow, and surgical applications – fell 23%. It was a better story for its homecare segment’s operating revenue, which lifted 10%.

The company’s research and development expenses accounted for 12% of its revenue, or around $78 million.

What else happened in the first half?

The first half was tough on both Fisher & Paykel’s earnings and its share price. The stock slumped 27.5% over the six-month period.

Beyond that, the company struggled with higher freight costs and manufacturing inefficiencies. The latter was hampered by demand fluctuations and higher absenteeism.

On a more positive note, it announced its intent to acquire a 105-hectare site for an additional campus in Karaka, Auckland. It hopes to receive regulatory approval on the purchase next year.

What did management say?

Fisher & Paykel Managing director and CEO Lewis Gradon commented on the news driving the ASX 200 stock higher today, saying:

Consistent with what we signalled in August, first half revenue was down on the prior corresponding period as we lapped significant COVID-19-driven demand. Compared to pre-pandemic levels, this represents solid growth.

Customer stock levels of hospital consumables continued to reflect purchases of considerable amounts during our prior half, in preparation for an Omicron hospitalisation wave which proved less severe than originally anticipated.

While we believe the number of hospitals which continue to be overstocked is declining, ultimately, these stocking dynamics are short term, and the fundamentals of our sales strategy remain the same.

It has been pleasing to see a strong reception for our new Evora Full mask, which we began selling into the United States in April.

What’s next?

The ASX 200 healthcare stock has declined to provide full-year guidance today.

It cited uncertainties relating to COVID-19 hospitalisations, the severity of the Northern Hemisphere flu season, a surge in respiratory syncytial virus hospitalisations in some regions, and hospital staffing challenges.

Though, Fisher & Paykel expects its revenue to be higher in the second half. The company is also targeting operating expense growth of around 8% for the full year.

“We remain committed to sustainable, profitable growth,” Gradon said, continuing:

Our confidence in the future is unchanged, evidenced by the significant level of investment in new product development, our global sales force, and our infrastructure.

Fisher & Paykel share price underperforms ASX 200 in 2022

The ASX 200 healthcare stock has struggled to keep up with the market this year.

Today’s gain included, the Fisher & Paykel share price has fallen 31% year to date. It’s also 32% lower than it was this time last year.

For comparison, the ASX 200 has dumped 5% in 2022 and is trading flat over the last 12 months.

The post Profit down 57%, share price up 12%. What’s with this ASX 200 healthcare stock today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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