CSL Limited (ASX: CSL) shares and Cochlear Limited (ASX: COH) shares are both interesting ideas as potential investment opportunities after reporting season finished. But which one is better?
For readers who don't know, these are two of the biggest businesses on the ASX.
Based on the latest CSL share price, the biotech giant has a market capitalisation of $141 billion. Cochlear's current market cap is around $14 billion.
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What are these businesses?
Cochlear says that it's a "leader in hearing device implants that help to restore hearing and connect people to a world of sound".
Meanwhile, CSL has a few different businesses.
Behring has a portfolio of medicine plasma-derived products for treating bleeding disorders, immune deficiencies, and chronic inflammatory demyelinating polyneuropathy.
CSL is one of the world's largest and most sophisticated plasma collection networks, with more than 300 plasma collection centres in the United States, Europe, and China.
CSL is also an influenza vaccine business. It has just acquired Vifor, a leader in nephrology, and wants to launch the next generation of therapies to address the full spectrum of kidney disease, with a focus on dialysis and rare disease.
How did the two businesses perform in FY22?
With both companies having reported during the August earnings season, there is a considerable amount of information on which to judge the investment case for Cochlear and CSL shares.
Let's have a quick recap on both of these ASX healthcare shares.
CSL revealed that it generated US$2.26 billion of net profit after tax (NPAT) in FY22, which was a decline of 6% in constant currency terms. This was the top end of the guidance, with revenue up 3% in constant currency.
It said that the performance was "as expected in a difficult global environment", with an "exceptional performance" by the influenza vaccine business, which is an important factor for CSL shares.
As FY22 progressed, plasma collections grew significantly, although at a higher cost. Collections rose 24%, which it expects will underpin "strong" sales growth in its core plasma products going forward.
For FY23, CSL said it was expecting the influenza vaccine business to deliver another strong year. However, the current higher cost of plasma is expected to continue in FY23. The FY23 net profit is expected to be between US$2.4 billion to US$2.5 billion, excluding Vifor.
CSL shares edged 1.32% lower on 17 August after the company released its results.
Cochlear produced a different set of numbers. It said that sales revenue rose by 10% to $1.64 billion. Underlying net profit after tax went up 18% to $277 million, though it only increased by 10% in constant currency terms. Statutory net profit fell 11% to $289.1 million.
The company said the FY22 result was driven by strong demand for acoustic implants and sound processor upgrades with all regions and product segments "tracking above" pre-COVID levels. While implant revenue growth rates improved across the year, it continued to experience "variability" in performance across countries.
For FY23, Cochlear is expecting to achieve a net profit of between $290 million to $305 million, an increase of between 5% to 10% compared to FY22. This guidance anticipates strong growth in sales revenue. Trading conditions are expected to improve progressively across the year.
Are CSL shares a better buy?
Shareholders of each business would probably suggest that their investment is the better pick.
The broker Morgans thinks Cochlear shares are a buy, with a price target of $236.70. This implies a rise of around 10%. However, Macquarie has an underperform rating on Cochlear, with a price target of $194, implying a fall of almost 10%.
Morgans also thinks that CSL shares are a buy, with a price target of $321.30. That's a potential rise of almost 10%. Macquarie also has an outperform rating on CSL, with a price target of $329.50. That's a possible rise of more than 10%.
