Has CSL lost its shine as the market's favourite growth story?

CSL (ASX: CSL) might be a shell of its former self – the stock hasn't rallied off of an earnings result since August 2023, and it's been almost five years since it traded above the $330 mark.

Shares in the healthcare darling tumbled 4.95% on Tuesday after the company reported a broad miss across first-half metrics, including revenue, net profit and dividends. This marks the largest single-day selloff for CSL since October 2023.

Despite falling into oversold territory, the stock has struggled to bounce over the last two sessions, ticking 0.7% lower.

CSL five-year price chart (Source: Market Index)

1H25 Earnings summary

• Revenue up 5% to $8.48 billion vs. $8.54 consensus (0.7% miss)

• NPATA up 3% to $2.07 billion vs. $2.16bn consensus (4.1% miss)

• Earnings per share up 3% to $4.29

• Interim dividend of $1.30 per share vs. Morgans estimates of $1.35 per share (3.7% miss)

• Reaffirmed FY25 NPATA guidance of $3.2 billion to $3.3 billion at constant currency, representing year-on-year growth of 10-13%

Behring recovery, Seqirus disappoints

The half-year presented a mixed bag across the company's three businesses: Behring, Seqirus and Vifor. For context:

• Behring specialises in plasma-derived therapies to treat diseases such as immunodeficiencies and bleeding disorders, and accounted for 67.7% of revenues for the first half of FY25

• Seqirus develops and manufacturers vaccines, antivenoms and other pharmaceutical products, and generated 19.5% of Group revenues for the half

• Vifor is a global leader in the treatment areas of iron deficiency, dialysis and nephrology, and accounted for 12.7% of Group revenues for the half

To summarise the first-half performance, Behring and Vifor both performed slightly ahead of analyst expectations, while Seqirus was a massive miss.

• Behring revenue was 1% ahead of consensus, underpinned by a 170 bp increase in gross margins to 51.7%

• Vifor revenue was 7% ahead of consensus but gross margins were slightly below forecasts, leading to a 4% beat at the gross profit line

• Seqirus revenue missed by 10%, leading to a larger 15% miss in gross profit due to a decline in US vaccination rates and competitive pressures

Analysts reiterate a Buy

Despite the broad miss, analysts including UBS, Citi and Macquarie reiterated a Buy rating and price targets of over $300 on Wednesday.

Ratings as at Wednesday, 12 February 2025

"With several negative catalysts behind (CSL112 trial failure, downgrade of Vifor expectations and approval of Vyvgart in CIDP), we see less headline risks going forward," said UBS analysts.

Similarly, Macquarie analysts continue to the company's medium-to-longer term earnings growth as attractive, with the current valuation undemanding.

Despite the first-half miss, UBS still think CSL is "in a good position to deliver its 100 bp-plus margin improvement goal for FY25." The analysts maintained their rating given the stock is trading at circa 21.5x FY26 forward earnings.

The dilemma

On paper, it’s hard to ignore the $300 target price for CSL, a valuation supported by expectations of double-digit earnings growth in the medium term. However, the company is increasingly a shadow of its former self. Over the past two reporting seasons (Feb-24 and Aug-24), CSL shares have dropped 2.7% and 4.5%, respectively, following results that mirrored previous disappointments in key metrics and guidance.

Despite analysts remaining bullish on CSL for some time, the stock has consistently fallen short of expectations. Here's a recap of Citi's rating and target price history:

Source: Citi

This dilemma is no different from CBA, where most analysts believe the stock is valued at around $90-130, but instead, the stock has been up 40% in the past twelve months to $160.

While CSL's growth outlook is hard to deny, the only consistency the stock has offered over the last five years is its ability to range between lows of $230 and highs of $330.