The defensive sanctity of CSL Limited (ASX: CSL) shares was rocked last week when the biotech giant delivered a disappointing trading update. Shares went for an abrupt 8% trip to the downside in reaction to the news.
Despite lower forward earnings estimates, analysts at Macquarie remain confident in the company's future prospects. As a matter of fact, Macquarie Research has cautioned investors who are considering abandoning CSL in lieu of a better investment.
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It could be worse elsewhere
Seldom does Australia's healthcare icon dish out a dissatisfying update. Pointing to higher-than-expected foreign currency headwinds for FY23 and margin pressures from stubbornly high donor fees in FY24, CSL's net profit forecasts fell flat.
Nonetheless, Macquarie analysts have not been dissuaded from their optimistic view on CSL shares. The investment bank has reiterated its outperform rating and $326 price target, acknowledging gross margin pressure in the short term for CSL's plasma segment, Behring, stating:
While we have moderated near-term gross margins for CSL Behring, outer-year forecasts remain largely unchanged with upside from pipeline contributions and improved Ig [immunoglobulin] yields.
With an [earnings per share] EPS compound annual growth rate of 14 per cent per annum over FY22-26, we continue to see the growth outlook as attractive for CSL.
Indeed, Macquarie is trying to focus on the forest and not the trees, counting on the long term remaining strong.
In addition, the team cautions the less defensive pockets of the share market could fare far worse. Expecting more downgrades to filter through, Macquarie sees peak pain in cyclical names in the August earnings season.
What are others saying about CSL shares?
Conducting a post-mortem on CSL after its update, analysts at Citi are mostly sitting in the positive camp as well. Albeit, they opted to prune their price target back to $340 — still hovering above Macquarie's target.
The lofty Citi target would suggest a further 19% upside compared to Macquarie's 15%. Either way, both would be a positive outcome for shareholders.
For context, CSL shares have failed to outperform the S&P/ASX 200 Index (ASX: XJO) in the last year. With a gain of 7.9%, the biotech is trailing the Aussie benchmark by 6.5% before dividends.
