Sonic Healthcare (ASX: SHL), Healius (ASX: HLS) and Australian Clinical Labs (ASX: ACL) earnings were pushed years’ ahead thanks to the unprecedented demand for PCR tests.
Last month, Citi said the Australian PCR testing market was worth $2.17bn in FY22.
However, like many other covid inflated industries, these earnings are by all means artificial and unsustainable - no different to Netflix's subscriber growth or supermarket spend at the height of the pandemic.
Citi expects PCR testing revenues to wind down to $900m in FY23 and even further to $298m by FY24. This suggests a -86% decline between FY22 and FY24.
To add some perspective, Sonic revenues rose 28% in FY21. While its base business (ex-covid testing) grew just 6%.
New covid cases in Australia surged more than 10-fold from the 1000s in early December to a peak of approximately 175,000 on 12 January. Case numbers have since moderated to a 7-day rolling average of around 28,000 on 7 February.
Lagging behind the jump in cases was the number of average daily tests, peaking just shy of 300,000 on 25 December. Average daily tests have since declined more than -60% to 101,000 on 7 February.
Coinciding with the peak in daily covid tests, Sonic shares have fallen -20% from late-December highs, down to a 6-month low.
Its peers Healius and Australian Clinical Labs follow the exact same narrative, topping out in late-December and down around -20%.
Macquarie maintained a Neutral rating for Sonic Healthcare with a $42.40 target price (12% upside).
The broker flagged that the omicron variant has shifted testing away from PCRs and more towards RATs.
Macquarie expects less revenue to come from covid testing as volumes and reimbursement rates moderate.
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