With earnings season now here, I have been looking at what analysts are expecting from many popular companies this month.
You can see previous earnings previews on Qantas Airways Limited (ASX: QAN) and Telstra Corporation Ltd (ASX: TLS) here and here, respectively.
Today I thought I would turn my attention to biotherapeutics giant CSL Limited (ASX: CSL).
What is expected from CSL in FY 2020?
CSL is scheduled to release its full year results for FY 2020 on 19 August 2020.
According to a note out of Goldman Sachs, its analysts expect CSL to report revenue of US$9,276 million and earnings before interest and tax (EBIT) of US$2,705 million. This represents year on year growth of 8.6% and 8%, respectively.
And on the bottom line, the broker is forecasting net profit after tax growth of 6.25% to US$2,141 million and earnings per share of US$4.56.
What else should you look out for?
Plasma collections will be an important topic for management to cover with this release. There are concerns that the pandemic is weighing on collections, which could lead to higher production costs for key therapies in FY 2021.
It is because of these concerns that the CSL share price is trading well off its 52-week high at present.
Goldman Sachs believes greater clarity on this topic could narrow a valuation deficit. (The broker has a buy rating and $326.00 price target on its shares.)
Goldman commented: "Contrary to some domestic peers, CSL is negatively exposed to spread of the virus in the US. As such, relative to the sector, CSL is at its cheapest level in >5 years. Whilst we understand the nature of the concerns, we incorporate them directly and believe the quality and growth profile still stacks up better than most."
"In our view, a HSD+ growth profile remains intact, and the degree of underperformance has more than adequately incorporated the risks. We believe a -40% decline in collection from 1 Apr-31 Dec should only be considered a low probability tail risk event, and we look to the upcoming results season to provide insights."
Should you invest?
I agree with Goldman Sachs on CSL and believe the recent share price weakness has created a buying opportunity for investors.
And with the worst-case scenario seemingly priced into its shares already, it looks like an opportune time to invest.
