3 Healthcare Stocks poised for better performance this reporting season – RHC, CSL and RMD

Ramsay Health Care Limited

RHC Details
 
Reaffirms Core EPS growth:Ramsay Health Care Limited (ASX: RHC) witnessed healthy financial statistics in FY17 and also reaffirmed core EPS growth of between 8% and 10% for FY18. Further, the strong growth in the Australian business is expected to continue, while the company expects ongoing challenging environments in Europe in the near term. Moreover, the company has completed major brownfield projects. The UK cost restructure plan is proceeding well given operational efficiencies of FY17. Additionally, the Federal Health Minister Greg Hunt has recently announced a private health insurance (PHI) reform package, which shows the government’s support of the private health system.
 

Brownfield Projects (Source: Company Reports)
 
Over last 20 years, the group’s revenue CAGR has been 21.6% while dividend CAGR has been 16.5% and this resonates well with a positive outlook. Meanwhile, RHC stock has risen 4.85% in three months as on January 19, 2018. Increasing life expectancy and rise in chronic diseases pave path for the growth prospects. Consulting suites, expansion efforts and new hospitals are under the group’s basket of development looking at the macro picture. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $67.74
 

RHC Daily Chart (Source: Thomson Reuters)
 

CSL Limited

CSL Details
 
New Developments:A good portion of CSL’s (ASX: CSL) total global revenue is accounted for R&D Investment given the product portfolio and expansion efforts. New Product Development activities focus on innovating new therapies for life-threatening diseases. CSL has also launched a Life Cycle Management program which ensures a continuous improvement of its existing products. It focuses on new indications and on geographic expansion along with delivery options. The group’s immunoglobulin product sales for FY17 were $2,774 million. Its Idelvion’s (next generation recombinant coagulations therapy) demand also rose by capturing 2/3 of patient’s switches. Meanwhile, Mr Edward Bailey resigned from his position of Company Secretary, but he will continue to act in the position of Australian General Counsel.
 

Strategy Goals (Source: Company Reports)
 
In FY18, CSL has forecasted a net profit after tax of above US$1.48 billion on a constant currency basis (compared to FY17 reported profit of $1,337 million) and a total operating revenue of around US$7 billion. The group also intends to open 25-30 centres in 2018 to expand its plasma collection network. The share prices have gone up by 12.45% in the past six months and there was a slight rise in past one week (as at January 19, 2018). However, the price to earnings ratio is above the industry average and the stock is trading at higher levels; and looks “Expensive” at the current price of $145.40


CSL Daily Chart (Source: Thomson Reuters)
 

ResMed Inc

RMD Details
 
Fisher & Paykel Healthcare’s patent infringement proceeding against RMD:ResMed Inc. (ASX: RMD) has informed that Fisher & Paykel Healthcare has filed a patent infringement proceeding in the Federal Court of Australia against RMD and several of its related companies. Fisher & Paykel Healthcare has alleged that RMD’s AirSense 10, AirCurve 10, S9 and S9 VPAP flow generators, Lumis non-invasive ventilators, ClimateLine and ClimateLineAir heated air tubing and HumidAir heated humidifier, meant to treat respiratory conditions, have infringed four patents held by Fisher & Paykel Healthcare. Fisher & Paykel Healthcare is seeking a range of remedies, that include damages and injunctions preventing the manufacture and sale of these products by RMD in Australia. Meanwhile, RMD stock has risen 10.89% in three months as on January 19, 2018 and is trading at a high level, and the group’s 1Q FY18 result demonstrated 13% rise in revenue. The group is benefitting from new product innovation and sustainable operating profit growth. RMD has also paid shareholders hefty $49.7 million in dividends. The group will announce its second quarter FY18 results on January 22, 2018 after close of New York Stock Exchange. While investors are eying on the stock performance, we think the same is “Expensive” at the current price of $11.04, given the challenges at legal front and the trading scenario.
 

RMD Daily Chart (Source: Thomson Reuters)

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