The share price of the blood products company CSL has shot up more than $20 over the past couple of months but equity analysts still are backing the stock, saying it has a very positive outlook and could go higher still.
Earlier this month, CSL issued updated earnings guidance for the 2017/18 financial year, with net profit expected to be between US$1.68 billion and US$1.71 billion. Previous guidance was for net profit between US$1.55 billion and US$1.6 billion.
The company cited better than expected sales of a number of its products, including Idelvion and Haegarda. It said Seqirus, a flu vaccine, was performing well as a result of a severe northern hemisphere flu season.
Macquarie Securities has increased its forecast for growth in CSL’s earnings per share and maintained its ‘outperform’ recommendation, saying CSL is its preferred healthcare stock. Its 12-month share price target CSL stock is $190 a share.
“In our view, CSL’s plasma collection centre network is a competitive advantage relative to peers,” Macquarie says.
Following the change to earnings guidance, CSL is trading of a forward PE multiple of more than 36 times and expected return on equity of more than 45 per cent. The dividend yield is expected to be 1.2 per cent, with no franking for 2017/18
CSL has been a star performer on the ASX since late 2011, when the share price was around $27. Apart from price weakness in the second half of 2016 and again in July and August last year, the stock has been on the rise since then. It closed on Friday at 183.40
According to DatAnalysis, CSL’s total shareholder return has been 18.6 percent a year over the past 10 years and 27.1 per cent a year over the past five years.
Its ROE has climbed steadily from 25 per cent in 2008 to more than 40 percent over the past few years. Growth in earnings per share have averaged 15.1 per cent over the past five years.
It is a growth stock with a very high proportion of its earnings coming from overseas markets – just the sort of business that is in demand with investors right now.
Last year, it entered into an agreement to acquire 80 per cent of the plasma-derived therapies manufacturer Wuhan Zhong Yuan Rui De Biological Products Co (Ruide) for US$352 million.
The acquisition gave it a strategic presence in the Chinese plasma fractionation market, a position that would complement the leadership position its CSL Behring business has built up as a provider of imported albumin in China.
At the time, it said it saw scope to expand Ruide’s plasma collection capabilities and introduce new products into a market that is growing at 15 per cent a year.
