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Sonic Healthcare share price climbs higher on solid half year result

The Sonic Healthcare Limited (ASX: SHL) share price has pushed higher in early trade following the release of the medical diagnostics company’s half year results.

At the time of writing the Sonic Healthcare share price is up 2% to $23.95.

Here’s a summary of how the company performed during the six months ended December 31 compared to the prior corresponding period:

  • Revenue growth of 9% to $2.9 billion.
  • Underlying EBITDA growth of 7% to $485 million.
  • Net profit after tax increased 7% to $223 million, adjusted for a one-tax gain in the previous year.
  • Earnings per share rose 5% of 51.9 cents.
  • Dividend increased 3.3% to 33 cents per share.
  • Outlook: On track to achieve full year guidance of 3% to 5% EBITDA growth.

According to the company’s CEO, Dr Colin Goldschmidt, strong performances from its US, Swiss and Australian laboratory operations were drivers of the solid result.

He said: “Sonic Healthcare has performed well in the half-year, with our US, Swiss and Australian laboratory operations achieving particularly strong earnings growth. I am especially proud that the revenue of our US business grew 8% organically in the half, which we believe is well above market, driven in part by the success of our hospital laboratory joint ventures and early wins from our billing system enhancement project.”

Pleasingly, Dr Goldschmidt believes these initiatives can continue to drive its growth in the future.

He added: “We believe there is significant upside to come from both of these initiatives, and we are working on a number of additional potential hospital laboratory opportunities, as well as pursuing other avenues of organic and acquisitional growth.”

Outlook.

Management believes the company is well-positioned for ongoing strong growth and has a rich pipeline of acquisitions, joint ventures, and contracts underpinning this.

In the near term, it revealed that it is on track to achieve full year guidance of 3% to 5% EBITDA growth.

Should you invest?

I thought this was a solid but unspectacular first half result from Sonic Healthcare. Based on its guidance I estimate that its shares are changing hands at a touch under 20x full year earnings, which is arguably fair value for the company’s current growth profile.

This could make it a decent option for investors looking for exposure to the healthcare sector and a great alternative to Healthscope Ltd (ASX: HSO) and Ramsay Health Care Limited (ASX: RHC).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. 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 Scott Phillips.

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