CSL Limited hits new record highs

Shares in biotechnology company CSL Limited (ASX: CSL) have hit a new record high of $150.11 in morning trade despite no announcement being released to the market. The Melbourne based company has gotten off to a solid start in 2018 with its share price rising 6%. This comes after an excellent 2017 where shareholders enjoyed a 42% gain after CSL delivered another exceptional operational result.

Bullish sentiment over the last couple of weeks surrounding CSL has arisen from a number of factors. A severe flu outbreak in the United States has seen the company’s vaccine business Seqirus increase its share of U.S. flu vaccines over the current Northern Hemisphere winter from 42% to approximately 50% according to data from the U.S. Food and Drug Administration. Management has previously guided for Seqirus to break even for 2018 but a more severe flu season could see the division deliver its first profit. The recently legislated Trump tax cuts which will see the U.S. corporate income tax rate drop from 35% to 21% will also benefit CSL as it earns approximately 43% of its revenues in the U.S.

Several brokers have also recently upgraded their price targets for the next 12 months. The most bullish forecast was issued last week by Citi when it slapped a buy rating for CSL with a projected price target of $165. However, not all the major brokerage houses are as bullish. This morning, broker Morgan Stanley issued a note giving CSL an equal weight rating and a price target of $132. The broker prefers the other large cap Australian healthcare stock ResMed Inc. (CHESS) (ASX:RMD) over CSL and hearing implant manufacturer Cochlear Limited (ASX: COH).

Attention will now turn towards CSL’s half yearly earnings report which is to be released on February 14. Management has previously guided for FY18 net profit after tax to rise between 11% and 16% at constant currency. The current bullishness in the stock suggests that the market is expecting an upwards revision of full year guidance and it is now up to the company to deliver on the market’s expectations.

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Motley Fool Contributor Tim Katavic owns shares of CSL Limited. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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