Cochlear first-half profits and dividends disappoint, shares hit lowest level since 2023

Cochlear (ASX: COH) is making a name for itself – but for all the wrong reasons. The company posted its second consecutive earnings miss, sending shares down as much as 12% in early trade to their lowest levels since December 2023.

The key drag on earnings was its services segment, with management citing cost-of-living pressures in the US as a major factor. “Many recipients incur out-of-pocket expenses to fund their new sound processor,” the company noted, leading to delays in replacing ageing technology.

1H25 earnings highlights

• Revenue up 5% to $1.16 billion vs. $1.2 billion consensus (2.5% miss)

• Underlying net profit up 7% to $205.5 million vs. $275.9 million consensus (2.2% miss)

• Statutory net profit up 7% to $205.1 million

• Interim dividend up 8% to $2.15 per share vs. Morgans estimates of $2.18 (1.3% miss)

• FY25 underlying NPAT to be at the lower end of $410-430 million range vs. $426.6 million consensus (midpoint of $410-420m implies ~2.7% miss)

• Preparing for the release of a number of new products, including its next generation cochlear impact and off-the-ear sound processor

Another crushing miss

With a PE ratio of around 50, Cochlear is priced as a high-growth stock expected to meet or exceed growth expectations. Instead, it continues to fall short, as economic pressures push consumers to delay upgrades.

Throwback to FY24 results

Cochlear reported a similar miss in August 2024, including:

• Revenue up 15% to $2.25 billion (1.7% miss)

• Underlying net profit up 27% to $387 million (4.2% miss)

• Full year dividend up 24% to $4.10 per share (4.6% miss)

• FY25 underlying net profit guidance between $410-430 million (midpoint was an 8.9% miss)

Cochlear shares opened 5.0% lower on 15 August and closed the session down 7.3%. Over the next two months, the stock continued its decline, falling another 12%.

Cochlear price chart (Source: TradingView)

The bottom line

Cochlear received several target price downgrades following its FY24 results, including cuts from JPMorgan ($305 to $300) and UBS ($270 to $260). Brokers turned more cautious on ongoing challenges, warning of potential multiple compression as growth expectations normalise.

After Friday's miss, Cochlear may come under further scrutiny following another weak result.