The CSL share price has gone backwards in 2022. Could a turnaround be 'just starting to happen'?

Would going for this biotech bring healthy returns?

| More on:
A woman reclines in a comfortable chair while she donates blood holding a pumping toy in one hand and giving the thumbs up in the other as she is attached to a medical machine to collect her blood donation.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • CSL shares have been falling recently, down 4% over the past couple of weeks 
  • Net profit fell in FY22 as COVID impacts hurt margins 
  • Management and some experts think there will be a recovery 

The CSL Limited (ASX: CSL) share price is in the red for 2022. Should investors now view it as an opportunity?

As one of the ASX's largest businesses, what happens to CSL can have a sizeable impact on the S&P/ASX 200 Index (ASX: XJO).

Despite the business benefiting from a strong performance from its vaccine business in FY22 (with 13% revenue growth), it actually saw its net profit after tax (NPAT) fall to $2.25 billion, a fall of 6% in constant currency terms.

What went wrong?

One of CSL's biggest ever profits is not exactly a disaster. But, with the tailwinds that the healthcare industry has (such as ageing demographics), investors may have been hoping for a positive year considering the revenue increased by 3%.

Management said the profit was at the top end of its guidance, but that its performance was as expected in a difficult global environment.

Part of the equation was that there was "significant growth" in its research and development spending. While it's a cost in the short term, it can unlock future profit generation.

The company noted that in FY21, its plasma collections were impacted by the pandemic, which limited its sales of core plasma therapies in FY22, given the "long-term nature" of its manufacturing cycle.

It also said that as the 2022 financial year progressed, it grew collections significantly, though at a higher cost. Collections grew by 24%, which it expects will "underpin strong sales growth in its core plasma products."

How will the CSL share price turn around?

Management is confident that things are going to be better in FY23. The CSL CEO and managing director Paul Perreault said:

We have continued to invest in all facets of our business and I am very encouraged by the improved momentum we are seeing in our core Ig franchise.

The strong growth we have seen in plasma collections is anticipated to continue as COVID recedes and underpin strong future sales growth in our core plasma therapies. The current higher cost of plasma is also expected to prevail into FY23.

We anticipate our influenza business, CSL Seqirus, to deliver another strong year driven by demand for its differentiated products.

CSL's net profit after tax for FY23 is anticipated to be approximately $2.4 billion to $2.5 billion at constant currency, returning to strong sustainable growth.

Fund manager believes in the future

Some experts are still backing the CSL share price in their portfolios. For example, Wilson Asset Management analyst Anna Milne on a recent webinar, according to Livewire, made the following comments about CSL when talking about three ASX shares:

All three of these names are the highest quality names in their respective sectors.

CSL is arguably one of the highest quality names on the ASX, given its defensive earnings profile over the coming decade.

…their turnarounds are just starting to happen. When companies have been through tough periods and they're coming out of them, it's the perfect recipe for us. You have the earnings upside, and then you also have the sentiment. So that's positive for both valuation and earnings, which translates to higher share prices.

Another reason to be positive about CSL is the new Rika device, which is more comfortable for patients to extract plasma and quicker for staff to use.

CSL share price snapshot

CSL shares have fallen 4% since 8 September 2022.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. 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.

More on Healthcare Shares

a biomedical researcher sits at his desk with his hand on his chin, thinking and giving a small smile with a microscope next to him and an array of test tubes and beackers behind him on shelves in a well-lit bright office.
Healthcare Shares

Broker says this ASX 200 biotech stock is a top buy

Let's see what Bell Potter is saying about this biotech.

Read more »

Cropped shot of an attractive young female scientist working on her computer in the laboratory.
Healthcare Shares

Why CSL shares are a buy today despite the looming Trump tariffs

A leading expert believes CSL shares are still trading for a bargain today. Here's why.

Read more »

A businesswoman pulls her glasses down in shock to look at the bad news on her computer.
Healthcare Shares

Why did the Telix share price just crash 16%?

Investors are sending the Telix share price plunging today. But why?

Read more »

Broker analysing the share price.
Healthcare Shares

Expert: 2 ASX healthcare stocks to avoid before reporting season

Not all healthcare stocks are created equal.

Read more »

A group of people in a corporate setting do a collective high five.
Healthcare Shares

Should I buy Pro Medicus or CSL shares ahead of earnings season?

The ASX healthcare sector may be currently undervalued.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Healthcare Shares

Why Mesoblast shares can keep storming higher

More big returns could be on the way for buyers of this high risk stock according to Bell Potter.

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

couple having a happy discussion with a banker
Healthcare Shares

Expert: 4 ASX healthcare stocks to buy ahead of reporting season

Could these ASX healthcare stocks be good additions to your portfolio?

Read more »