Why buyback-ready Cochlear is leading the ASX 100’s top gainers

ASX-listed healthcare heavyweight Cochlear (ASX:COH) was at the front of the top gainer leaderboards on the ASX 100 on Wednesday after its half-year results beat expectations. 

Revenue hit a record high $892m vs expectations of a more subdued $862m. 

Sales revenue climbed 9% on 1H FY22 and Cochlear will pay a dividend of $1.55 per share. The company has also announced a share buyback. 

Earnings (underlying EBIT) were lower at $185m vs an expected $187m, and Europe, Middle East & Africa (EMEA) revenue was also below expectations. 

In fact, underlying net profit decreased -6% using constant currency (read: fixed AUD-USD exchange rate calculations).

But that hasn’t been enough to turn investors off. Apart from those two hiccups, Cochlear has evidently smashed it out of the park on Wednesday. 

What’s more, the company expects one of its new cochlear implant products, the Nucleus 8, to lead to even better performance in the second half. 

The company wrapped up the first half of FY23 with $505m in cash and Cochlear announced on Wednesday it will commence a share buyback. 

Cochlear provided full year guidance of $290-$305m, up to a 10% increase on FY22. 

Revenue breakdown 

Looking at each segment of Cochlear revenue:

• Cochlear implants: $513m (vs expected $499m) 

• Secondary services: $259m (in line with expectations) 

• Acoustics: $121m (vs expected $111m) 

Geographic 

• Americas: $444.5m (vs expected $432m) 

• EMEA: $286.7m (vs expected $297m) 

• Asia Pacific: $161.4m (vs expected $141m) 

Outlook for remainder of the year 

“Trading conditions have been progressively improving, in line with expectations, with intermittent COVID‐related hospital or region‐specific elective surgery restrictions or staffing shortages continuing,” said management on Wednesday. 

“FY23 net profit is expected to be weighted to the second half driven by the rollout of the Nucleus® 8 Sound Processor. Demand for the new sound processor has been strong since its launch which commenced in October.”

Management gave the following full-year financial expectations: 

• Full year earnings estimate of $290m - $305m (70cAUD/USD & 65c AUD/EUR)

• Capex of $100m 

• Cloud computing investment to raise to $36m ($25m after tax), a $14m increase on FY22 

• Dividend payout to target 70% of underlying net profit 

• Guidance excludes earnings from proposed acquisition of Oticon Medical 

Cochlear's one year charts