The S&P/ASX 200 Index (ASX: XJO) share Sonic Healthcare Ltd (ASX: SHL) has dropped more than 10% since 15 August 2025, which is a large drop for a defensive business with a market capitalisation of more than $10 billion.
As the above chart shows, it has been a disappointing period since April 2023.
The FY25 result numbers didn't seem overly negative – revenue grew 8% to $9.6 billion, operating profit (EBITDA) rose 8%, net profit grew 7% to $514 million, earnings per share (EPS) increased by 6% and operating cash flow grew 21% to $1.3 billion.
It also reported organic revenue growth of 5% and the normalised operating profit (EBITDA) margin improved 40 basis points (0.40%).
However, there were both negatives and positives that analysts from Macquarie Group Ltd (ASX: MQG) pointed out.
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Macquarie highlights the ASX 200 healthcare share's pros and cons
The broker said the result was "decent" with net profit growth of 7% year-over-year, though it was 2% below what Macquarie was estimating, driven by lower pathology revenue and margins.
Pathology revenue increased by 8% year-over-year, which was 2% lower than expectations, with Australia and the US underperforming expectations. The EBITDA margin of 17.7% was 20 basis points (0.20%) below Macquarie expectations, resulting in a 3% EBITDA miss.
With imaging, revenue was 10% higher year-over-year (2% lower than Macquarie was expecting), though the EBITDA margin of 24.8% was largely in line with the forecast.
Macquarie points out that Sonic expects the US Protecting Access to Medicare Act (PAMA) to be deferred or cancelled, with Sonic's guidance excluding the potential A$15 million impact of fee reductions in US from January 2026. In Australia, "management plans to increase the proportion of private billing for select tests for which volume growth will not be affected", according to Macquarie.
But, Macquarie noted that wage inflation has dramatically dropped, easing salary pressures and allowing the ASX 200 healthcare share to return to a steady state where revenue growth exceeds labour cost increases, enabling potential margin expansion.
Sonic has provided guidance that operating profit (EBITDA) in FY26 is expected to be between $1.87 billion to $1.95 billion. Macquarie anticipates it to come in at $1.91 billion, which is the mid-point of management's guidance.
Price target on Sonic Healthcare shares
Macquarie currently has a price target of $25.20 and a neutral rating on Sonic Healthcare shares. A price target is where analysts think the share price will be trading in 12 months.
Therefore, the broker is suggesting the Sonic Healthcare share price could climb by 2.4% over the next year.
Macquarie's concluding thoughts on the business were:
While acknowledging potential synergy benefits from recent acquisitions, we note margin headwinds and elevated leverage in the near term. Further, risks remain around PAMA, Fair Work decision and full impacts from fee cuts.
