Cochlear (COH) Shares Update

Submitted by Craig Strzelecki on 12 February, 2008 - 11:15

An update on Cochlear (COH) by Australian stock analyst Macquarie Research Equities:

Cochlear shares have been dealt a hefty blow this morning following its first half profit results. The company has reported a 17% rise in first half profits, slightly below analysts forecasts sending the stock down over 7% in morning trading. The stock is now down over 17% from recent highs earlier this month, trading around August 07 levels. Exacerbating the fall, the company said there is also a possibility of receiving a warning letter from the US Food and Drug Administration (FDA) which has also shocked investors.

First half 08 Cochlear (COH) core earnings were reported at $61.9m, short of Macquarie's estimate of $67.2m, the company has maintained earnings guidance of 15-20% for full year. Cochlear implant sales were up only 3% despite a unit sale increase of 13% due FX impacts. With 90% of sales and 50% of expenses in foreign currencies concerns exist over exchange rate risks which have affected the result this half. COH maintains 70% of the global implant market and is generally liked by analysts for its defensive profile, risks remain however due to FX, interest rate changes and the international environment.

Macquarie are cautious of the slowing industry growth with risks flowing to earnings. The outcome of the possible warning letter relating to the Cochlear (COH) operations in Gothenburg, Sweden following first inspection in May 2007 could prove to be a significant determining factor for short term price movements.