Scott Power: ASX health sector falls almost 10pc with CSL absolutely battered

• The ASX healthcare sector fell ~9.9% over past five days while broader market was up 1.3% in ‘disastrous week’ for sector
• Sector’s largest stock CSL led dips in tough reporting season, down 17% on Tuesday in its biggest ever daily fall
• Sonic Healthcare dropped 10.5% on its FY25 results, surprising Morgans which said it was broadly in line with guidance

Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 27 years, gives his take on the ASX healthcare sector for the week. 

Just as the ASX healthcare sector was on the road to recovery it has experienced a setback fuelled by a tough reporting season. The ASX Health Care Index (ASX:XHJ) fell 9.9% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) rose 1.3% for the same period in what Morgans’ senior healthcare analyst Scott Power described as a “disastrous week” for the sector.

The sector’s largest stock CSL (ASX:CSL) led the falls, bleeding out with its biggest daily fall ever on Tuesday, down 17% with more than $20 billion wiped off its share price.

Investors reacted brutally to CSL’s FY25 results, which included a softer than expected FY26 outlook, a restructure including demerger of its vaccine business CSL Seqirus into a separate ASX entity and cuts to its workforce of 15%, equating to around 3000 jobs.

The blood products and vaccine giant has long been a key pick of Morgans and other brokers and was considered a ‘set and forget’, put in the bottom drawer kind of stock.  But on Wednesday it fell another 2% before recovering slightly for the remainder of the week.

So what is Morgans senior healthcare analyst Scott Power’s diagnosis and prognosis for CSL after its FY25 results triggered such a strong negative market reaction?

Power noted CSL’s financials for FY25 were mostly in line with guidance, including reported net profit after tax (NPAT) of US $3 billion for FY25, up 17% on the previous year with net profit after tax  and amortisation (NPATA) increasing 14% to  US $3.3 bn.

CSL’s three major business divisions also all grew in FY25 with its iron deficiency and kidney care business CSL Vifor revenue up 8% to ~$2.23 bn and CSL Behring, which focuses on rare and serious diseases such as bleeding and immune disorders, seeing revenue growth of 6% to ~$11.16 bn.

CSL Seqirus saw a softer revenue rise of 2% to ~$2.17 bn on significantly lower immunisation rates.

“CSL’s NPATA guidance of 7-10% for FY26 was softer than what we and the consensus had which was sitting at 11%  and a bit higher so that was the first problem,” Power said.

“Even though they had previously flagged they were going to streamline their R&D portfolio the CSL Seqirus demerger came as a surprise.”

CSL said one-off restructuring costs of $560-$620m were expected in FY26 with a cash flow impact of $400m-$450m, with a further $100m in FY27.

“All the one off costs needed some greater explanation and the analysts really had to dig into that on the conference call,” Power said.

Presentation problem for CSL

CSL filed a seven-page ASX announcement on Tuesday titled CSL FY25 results and major strategic initiatives along with a much larger, glossier presentation.

But was it just too much for investors to digest all on one hit. After all there had been a bit of a rotation back into CSL in recent times  as investors and fund managers looked for value on the ASX as other big names such as Commonwealth Bank (ASX:CBA) were seen as overpriced.

Before Tuesday’s results the share price was up ~13% in the past four months and many analysts still saw the company as representing good value.

“I think the presentation of the outlook commentary and all the demerger could have been done better,” Power said.

In its results announcement the company said the board and management team of CSL recognise that the operating environment had changed significantly in recent years.

“A dynamic geopolitical backdrop, competitive pressure and organisational complexity have challenged CSL and hindered its ability to deliver superior returns,” the company said.

Power said looking into the detail of the FY25 result it became clear that CSL had been under pricing pressure in H2 FY25.

“There were reforms coming through in what they’ve referred to as Medicare Part D reform and the figure disclosed there of $100m than was higher than people had expected so that lack of disclosure I think just caught everyone on the back foot,” he said.

Fundamentally CSL still ‘good buying’

Brokers were rethinking and analysing their investment case for CSL following its FY25 results and restructure announcement with some cutting their ratings and drastically reducing price targets.

While Power – who has been covering the ASX healthcare sector with Morgans for almost 30 years – sees the current environment for CSL as challenging he believes there is a path to recovery.

Morgans maintains a buy on CSL and has reduced its 12-month target price by only around $10 from $303.70 to $293.83.

“The revisions we have put through are fairly modest and I think the share price reaction we saw was pretty savage,” Power said.

“The underlying fundamentals we think are still strong and in place with 60% of the business CSL Behring or plasma collection, which should continue to grow north of 10% over the medium term.

“They’ll demerge the vaccine business CSL Seqirus to take out that element of seasonality and CSL Vifor is starting to show some good growth so fundamentally the company is good buying if taking a longer term view but we acknowledge management credibility needs to be rebuilt.”

Rotation into healthcare hits reporting season speed bump 

The ASX healthcare sector appeared to get off to a “reasonable start” to reporting season with the XHJ up 2.33% last week, with positive results in the large caps rewarded by investors including US-focused radiology imaging house ProMedicus (ASX:PME)  and sleep disorder device maker ResMed (ASX:RMD). 

Hearing implant leader Cochlear (ASX:COH) was softer than expected and saw its share price slightly fall but this week’s results has been a completely different narrative.

“It’s become a tough reporting season, that’s for sure,” Power said.

Adding to the FY25 results fallout among the ASX healthcare big names this week pathology and radiology giant Sonic Healthcare (ASX:SHL) fell around 10.5% on Thursday when its annual results were released to market.

For Power market reaction to Sonic was a “bit of a head scratcher” with the company’s FY25 result broadly in line with guidance, though slightly softer than market expectations.

Underlying EBITDA rose 8% to ~$1.75 bn, compared with consensus of ~$1.76 bn and Morgans’ estimate of ~$1.75  bn, on revenue of ~$9.65 bn, up 8% compared with consensus of ~$9.74 bn and Morgans’ forecast of ~$9.62 bn.

Normalised EBITDA margins expanded 40bp to 18.1%, supported by 5% organic revenue growth and cost reduction initiatives. However, higher net interest and tax expenses weighed on the bottom line, with NPAT of $514m, up 7%) coming in below consensus of $530m and Morgans forecast of $535m.

Sonic expects even strong FY26 earnings growth driven by organic growth and significant acquisitions made in Switzerland, Germany and the US, including the most recent of LADR Laboratory Group and Cairo Diagnostics.

The company said FY26 earnings guidance equates to EPS growth of up to ~19%.

“Sonic closed down 10% which was very surprising with the outlook fine, their earnings broadly positive across the different regions and acquisitions  well integrated with indexation coming through and wages under control,” Power said.

“It’s hard to work out why Sonic has fallen so much as it’s a good quality business, which can now be picked up cheaper.

“But again it’s been an underperformer for a couple of years now so what is going to drive it back over $30 is the question.”

Morgans maintains a buy rating on Sonic but has reduced its 12-month target price to $29.33 from $31.36.

‘Chronic underperformer Healius’ falls 13% on FY25 results

Pathology provider Healius (ASX:HLS) fell ~13% on Thursday after release of its FY25 results before staging a rebound on Friday to come back 10%. The company posted a 5.7% increase in group revenue to $1.34 bn, however a 27% drop in underlying EBIT to $17.1 bn.

The Healius board decided against paying a final dividend, noting that a special dividend of 41.3 cents per share was paid in May 2025.

“The intention is to resume dividend payments as soon as practicable,” Healius said in its announcement.

Power said the company provided no guidance on FY26 and was still in the turnaround stage

“This stock has been a chronic underperformer for over a decade and have sold virtually everything they’ve brought,” he said.

“It sits now as a pathology player and they’re looking to right-size that part of the business and it’s in the early stages of being turned around,” Power said.

Legal woes and embryo errors weigh on Monash FY25 results

To finish the week troubled Monash IVF Group (ASX:MVF) reported its FY25 results on Friday, dropping  more than 10%. The company reported  two embryo implant troubles during FY25.

In June Monash reported a patient’s own embryo was mistakenly transferred to them, rather than their partner’s embryo as specified in the treatment plan. In April the company revealed a woman had given birth to a baby that was not hers after receiving the wrong embryo.

The company reported a net profit of $25.7m for the year to June, marking a turnaround from a $5.9m loss in the previous financial year, which included a $56m settlement for a negligence class action filed by more than 700 patients.

In August 2024 Monash agreed to settle the suit, which alleged itused an inaccurate genetic screening test, known as non-invasive pre-implantation genetic testing (niPGT-A), which led to the wrongful destruction of viable embryos.

Underlying profit for FY25 came in at $27.4m, down 8.1% on the prior year but in line with the guidance the company provided to investors in May.

Monash IVF this week also told the ASX it had received a review by Fiona McLeod AO SC into the embryo bungles saga, but it would be kept secret to “protect the privacy of the affected patients”.

More results to come next week

Investors should hold their nerve as more ASX healthcare results come through next week. Among companies due to report are wound-care outfit PolyNovo (ASX:PNV) and leader in protective medical and industrial gloves Ansell (ASX:ANN).

Infection control company Nanosonics (ASX:NAN) will report along with pharmaceutical distributor EBOS Group (ASX:EBO)  and Sigma Healthcare (ASX:SIG), which merged with Chemist Warehouse to create Australia’s dominant vertically integrated pharmacy group.

Australia’s largest private hospital operator Ramsay Health Care (ASX:RHC), which has been another ‘chronic under performer’ according to Power, will also release its results next week.

“There’s a plethora of both large and small companies due to report next week and most interest to us will be Sigma and probably Ramsay,” Power said.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

Disclosure: The journalist held shares in CSL and Sonic Healthcare at the time of writing.