The Sonic Healthcare Limited (ASX: SHL) share price has fallen almost 4% to $23.30 in early trade following the release of the healthcare company's half-year results.
Here are key takeaways from the release:
- Half-year revenue was 8% higher on the prior corresponding period to $2,673 million.
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) was 9% higher at $445 million.
- First-half net profit after tax was up 16% to $229 million or 6% to $209 million excluding the US net tax benefit.
- Earnings per share of 54.1 cents for the half (49.4 cents excluding US net tax benefit).
- Outlook: On track to achieve full-year guidance of 6% to 8% EBITDA growth.
Overall I thought that Sonic Healthcare's performance was solid during the first-half, though perhaps not strong enough to justify the multiples its shares were previously trading on.
During the period the company reported a 5% increase in like-for-like revenue (in constant currency) across the entirety of its business operations when normalised for working days. Sonic Healthcare was operating for fewer working days compared to the prior corresponding period due to two hurricanes impacting its U.S. business.
A highlight of the half was the performance of its Australian laboratory business. The business continues to report growing earnings and margins, having rebounded from abnormal cost growth due to industry issues for several years.
Pleasingly, there appears to be no danger of these issues coming back any time soon. Management advised that these cost control measures are still in place and it remains confident that its largest segment will continue its growth unabated.
Elsewhere, its German business reported a 20% increase in revenue thanks partly to the synergistic acquisitions of Laboratory Bremen and the Staber laboratory group. Integration of these highly respected laboratories is proceeding to plan, including the first physical laboratory merger, in Hamburg, being successfully completed in the first-half.
Looking ahead, for the full-year management has reaffirmed its guidance of 6% to 8% growth in underlying EBITDA year-on-year despite posting a 9% increase during the first-half.
Should you invest?
At present Sonic Healthcare's shares are changing hands at 21x trailing earnings including U.S. tax benefits. Given its guidance for 6% to 8% growth, I think this is a touch on the expensive side.
As a result, I would suggest investors wait for a sizeable pull-back in order to gain a better entry point. In the meantime, I prefer healthcare peers Ramsay Health Care Limited (ASX: RHC) and Nanosonics Ltd. (ASX: NAN).
