What’s the outlook as CSL share price surges on FY20 results?

CSL share price surges above the $300 mark

Australia's largest publicly listed company – CSL Limited (CSL) – saw its share price surge 6.72% after releasing its full-year (FY20) results to the market.

Overall, for the full-year, the biotech reported robust revenue and earnings growth, a US$1.07 per share final dividend, though guided for modestly lower growth in fiscal 2021.

These results – despite softer guidance – whipped investors into a frenzy, with the CSL share price being bid 7.849% higher, to $316.31 per share, by 2:21 AEST. The stock closed at $313 per share.

CSL’s strong intraday showing looks to have helped push the local benchmark higher, with the ASX 200 finishing out Tuesday up 44.2 points or 0.72%, at the 6,167.6 point level.

Full-year results unpacked

With CSL reiterating its profit guidance earlier this year, there were few surprises as part of today’s earnings report. Investors were also likely expecting softer guidance, with the company already flagging plasma collection centre disruptions in April.

Looking at the company’s full-year results in more depth, on the top line and on a constant currency basis, CSL reported total revenues of US$9,295 million, representing an increase of 9%.

Importantly, while management noted that thus far it had not observed a material impact on revenues as a result of the coronavirus pandemic, it was flagged that 'the situation is fluid and some elements are unpredictable.'

Despite the ‘fluidity’ of the pandemic, growth in CSL Behring's immunoglobulin (IG) therapies proved particularly robust – as global demand for the biotech’s IG products remain strong – with total sales rising 22% to US$4,014 million. In particular: IVIG sales hit US$2,699 million (+16%); while SCIG sales climbed 34%, reaching US$1,315 million for the full-year.

CSL’s essential nature looks to have helped the biotech report stabilised results, with Paul Perreault, CSL’s Chief Executive Officer, pointing out:

'Demand for our therapies remains strong, especially for immunoglobulins and influenza vaccines. Governments around the world recognise the capabilities CSL provides to the communities it serves are essential. As a result, our plasma centres and manufacturing facilities remain open and operational to maintain the supply of these medicines.'

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Earnings outpace sales, dividends remain strong

On the bottom line, growth proved even stronger, with the biotech reporting earnings (EBITDA) of US$2,877 million (+15%), profits (NPAT) of US$2,247 million and earnings per share (EPS) of US$4.951 (+17%), also on a on a constant currency basis.

For income focused investors, CSL today declared a final dividend of US$1.07 per share, taking the full-year dividend to US$2.02 per share, or AUD$2.95 per share.

FY21 guidance in focus

Looking forward, CSL on Wednesday guided for fiscal 2021 earnings (NPAT) of between US$ US$2,100 million to US$2,265 million – on a constant currency basis, with the high point of that guidance representing year-over-year growth of ~8%.

Elsewhere, the biotech giant also said it intends to open between 20-30 new plasma collection centres in FY21.

'A key variable to this outlook is the uncertain impact of COVID-19 on the Company's supply chain, particularly the ability to collect plasma,’ the company flagged.

Importantly, while plasma collection volumes declined some 5% on a year-over-year basis – driven by shelter-in-place orders, lockdowns and other government mandates – Mr Perreault remains confident in the company’s ability to execute over the mid-term, saying:

'We have a number of initiatives in place to sustain plasma collections. It is our view that, at some point, the pandemic will recede and, with that in mind, we continue to invest in plasma collection and manufacturing facilities.'

Other bits and pieces

Looking at some of the key reactions to these results:

• Macquarie Wealth Management analysts said: ‘We continue to see plasma collections as the key driver of the near-term outlook and primary factor in the variation of FY21 guidance.’
• Ord Minnet analysts zeroed in on the weakness around plasma collections, noting that ‘commentary confirms collections dropped ~25% in the June quarter and while we believe this has started to improve the guidance confirms there will be an impact on sales.’

Ord Minnet has a Hold rating on CSL, while Macquarie has a Neutral rating on the stock.

How to trade CSL, long or short

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For example, to buy (long) or sell (short) CSL using CFDs, follow these easy steps:

1. Create an IG Trading Account or log in to your existing account
2. Enter ‘CSL’ in the search bar and select it
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4. Click on ‘buy’ or ‘sell’ in the deal ticket
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