Cochlear (ASX:COH) share price on watch after hitting FY21 earnings guidance

Cochlear had a solid 12 months and expects more of the same in FY 2022…

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a woman leans forward with her hand behind her ear, as if trying to hear information.

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The Cochlear Limited (ASX: COH) share price will be one to watch on Friday.

This follows the release of the hearing solutions company’s full year results this morning.

Cochlear share price on watch after achieving guidance

  • Cochlear implant units up 15% to 36,456
  • Sales revenue up 10% to $1,493.3 million
  • Underlying net profit up 54% to $236.7 million (compared to guidance of $225 million to $245 million)
  • Net profit margin expanded from 11% to 16%
  • Underlying earnings per share up 40% to $3.60
  • Full year dividend up 59% to $2.55
  • IT systems upgrade to cost $100‐$120 million over the next four to five years
  • FY 2022 guidance: Net profit growth of 12% to 20%

What happened in FY 2021 for Cochlear?

For the 12 months ended 30 June, Cochlear returned to form and reported a 10% increase in revenue to $1,493.3 million. This growth was driven by solid performances across all its segments, which could bode well for the Cochlear share price today.

Cochlear implants revenue increased 10% to $898.6 million, Services revenue rose 11% to $438.5 million, and Acoustics revenue jumped 12% to $156.2 million.

Things were even better on the bottom line thanks to margin expansion. Cochlear reported underlying net profit after tax growth of 54% to $237 million. This was within its guidance range of $225 million to $245 million. Management advised that this strong growth reflects strong trading, market share gains, market growth, and rescheduled surgeries from FY 2020.

However, while Cochlear’s profit was within its guidance range, it appears to have fallen short of the market’s expectations. According to CommSec, the analyst consensus was a net profit after tax of $245.5 million. This could potentially weigh on the Cochlear share price today.

What did management say?

Management appears pleased with the company’s performance during the 12 months.

It said: “During FY21 we have been focused on ensuring we emerge from the pandemic in a stronger competitive position, with our strategic priorities continuing to guide our investments. Over the past 12 months, we have maintained our people and market presence, ensuring the health and safety of our employees while providing ongoing support to our recipients, clinics and professional customers.”

“Our focus on long‐term growth has continued with increasing levels of investment across R&D projects and market growth activities. Despite the challenging trading conditions, new products have been successfully launched across all product categories, with market share gains realised in many markets.“

What’s next for Cochlear?

One thing that could boost the Cochlear share price today is management’s guidance for the year ahead.

It expects its net profit after tax to grow between 12% and 20% to $265 million and $285 million in FY 2022. This reflects market growth, a continuing recovery in surgery rates, investment in market growth activities, and some near‐term COVID impact.

Though, it has warned that a more material disruption from COVID remains a risk factor that does not form part of its guidance.

Cochlear share price performance

The Cochlear share price has been an exceptionally strong performer in 2021. Since the start of the year, its shares have stormed 35% higher.

This is triple the return of the ASX 200 over the same period.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. 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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