Cochlear share price in focus as sales revenue surges to record $1.6b

The ASX 200 healthcare giant also revealed a $1.45 final dividend.

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Key points

  • The Cochlear share price could be one to watch on Friday after the company released its earnings for financial year 2022
  • It revealed more than $1.6 billion of sales revenue, marking a new record, and a $1.45 partially franked final dividend 
  • And while the company's underlying profit lifted 18% to $277 million, its statutory profit slumped 11% to $289.1 million

The Cochlear Limited (ASX: COH) share price is in focus this morning after the company dropped its financial year 2022 (FY22) earnings.  

Shares in the leader in implantable hearing devices closed Thursday's session at $214.20.

Cochlear share price in focus on record sales revenue

  • Record sales revenue of $1,641.1 million ­­­– a 10% increase on that of the prior comparable period (pcp)
  • Statutory net profit fell to $289.1 million – an 11% drop
  • Underlying net profit, however, lifted to $277 million – an 18% improvement and within guidance
  • Underlying earnings before interest and tax (EBIT) came to $382.7 million – a 17% increase
  • Basic earnings per share (EPS) slipped 11% to $4.396, while underlying EPS rose 18% to $4.21
  • Revealed a $1.45 partially franked final dividend, bringing its full-year payout to $3 – an 18% increase

The company sold 38,182 Cochlear implant units last financial year, marking a 5% year-on-year improvement. It noted its record sales revenue was driven by demand for acoustic implants and sound processor upgrades, with all regions and product segments tracking above pre-pandemic levels.

It boasted an underlying net profit margin of 17%, or 18% when excluding the impact of cloud computing-related expenses.

Its capital expenditure lifted 16% to $77.2 million last fiscal year, while its full-year dividends represent 71% of its underlying net profit.

Its cash balance also grew in FY22, ending the period at $587 million, boosted by strong cash flows. Operating cash flow lifted to $377 million over the period and free cash flow increased to $238 million.

What else happened in FY22?

The major news from Cochlear last financial year was its intent to acquire Oticon Medical. It agreed to snap up the loss-making hearing solutions provider for $170 million in April.

The Cochlear share price slipped 0.5% on the back of the news.

The acquisition is expected to add between $75 million and $80 million to the ASX-listed company's annual revenue. Though, it expects to fork out around $30 million to $60 million in integration costs to get there.  

What did management say?

In a letter to shareholders enclosed in the company's full-year results, Cochlear chair Alison Deans and CEO and president Dig Howitt commented:

We are pleased to report strong growth in sales revenue and profitability with all regions and product segments tracking above pre-COVID levels.

Our clear growth opportunity and strategy, combined with a strong balance sheet, mean we are well placed to create value for our stakeholders now, and over the long term.

What's next?

Cochlear's earnings guidance for financial year 2023 forecasts another year of profit growth.

It expects its underlying profit to come in at between $290 million and $305 million. That represents a potential year-on-year increase of between 5% and 10%, or between 8% and 13% when adjusted for increased cloud computing-related expenses.

It also predicts its investment in cloud computing to cost around $36 million – $14 million more than it did last financial year. Meanwhile, its capital expenditure is expected to come in at around $80 million.

The company believes trading conditions will improve over the fiscal year. Though, it admits intermittent COVID-related hospital or region-specific elective surgery restrictions are likely to continue. It also predicts that FY23 will be weighted to the second half.

Cochlear share price snapshot

The Cochlear share price has struggled in recent months.

It has fallen 4% since the start of 2022 and is currently trading 16% lower than it was this time last year.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has dumped 6% year to date. It's also fallen 5% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

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