February reporting season has so far been largely positive as ASX 200 shares bounce back from COVID-19 related challenges.
Higher commodity prices have helped miners deliver record-breaking profits at the larger end of town, as bad debt and impairment expenses have retreated to help banks deliver upbeat earnings and higher dividend payments.
Despite improved business conditions, these 2 ASX 200 shares have failed to impress brokers and been slapped with a sell rating.
Goodman Group (ASX: GMG)
The Goodman share price was arguably one of the best performing REITs in 2020, thanks to its focus on high-quality properties and essential infrastructure. However, its shares have struggled to make headway in the new year, falling by more than 10%.
Goodman's results on Friday was a testament to its high-quality portfolio, with first-half FY 21 results and full-year guidance ahead of Goldman Sachs consensus.
The company delivered an operating profit of A$614.9 million, well ahead of Goldman's forecasted $565.7 million. However, the result came in below the broker's estimate at the property investment line, and the property management contribution was well below its forecast, despite higher average funds under management balance.
Goldman maintained a sell rating with a 12-month price target of $12.24 or a downside of 30% after digesting the results.
Cochlear Limited (ASX: COH)
Cochlear's half-year report for FY21 on Friday was very much about a recovery in operations following significant COVID related disruptions to its cochlear implants (CI) business. The company's revenues were ahead of Goldman expectations, with a respective 14% and 1% decline in CI units in Q1 and Q2, compared to the -12% and -32% consensus. The upbeat performance saw the Cochlear share price surge by more than 8% on Friday, marking it as the best performing ASX 200 share on the day.
The company cited improving momentum across the second half, however, still very mixed by regional performance. Clinics in the United States, Japan and Korea were operating near pre-COVID capacity for most of the period, whilst Western Europe delivered a small decline, and emerging markets were still down some 30%.
Cochlear went ahead to provide investors with FY21 earnings guidance, targeting earnings of $225 million to $245 million, representing growth of 46-59%. Goldman noted that the FY21 guidance implies a 6-10% 2-year compound annual growth rate (CAGR) from FY19, suggesting the recovery will likely still take longer than for many other stocks in the sector.
The broker also flagged that momentum slowed across several countries from November, and Cochlear saw slower trading again in January and February due to recent surgery slowdowns. However, the deployment of vaccines and an expected recovery in surgical volumes should see volumes improve again.
Despite the recovery taking place, Goldman still sees a greater risk of indefinite delay/volume loss than for most others in the sector. The broker remains sell-rated on Cochlear with a 12-month target price of $165, representing a 20% downside to today's prices.
