Sonic Healthcare Ltd (ASX: SHL) shares have lagged the broader market over the past year due to concerns around growth, cost control, and execution.
However, Bell Potter believes the ASX 200 share still offers meaningful upside from current levels, alongside an attractive dividend yield.
Here is what the broker is saying.
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What is the broker saying?
Bell Potter expects the diagnostics giant to deliver solid earnings growth when it reports its first half results this month, driven largely by acquisitions and steady demand across its core divisions. Though, it concedes that its estimates are below what the consensus is expecting. The broker said:
SHL is expected to report its 1H26 result on 19th February. We have not made changes to our forecasts but summarise our key estimates. We expect a c.10.6% YoY increase in revenue and a c.15.6% YoY increase in EBITDA in reported terms.
We are c.3.1% below consensus on revenue and now c.0.2% above consensus on EBITDA. At the FY25 result, we were c.$10m below consensus, but VA consensus has gradually reduced to meet our estimate. Our EBITDA estimate of c.$1.96b is at the low end of guidance range of c.$1.94b to c.$2.02b.
Looking ahead, Bell Potter believes acquisitions will remain the key growth driver in FY 2026, particularly in pathology. It adds:
The primary growth driver of performance should be the acquired growth in the Pathology business of c.11.7% due to the impact of the LADR acquisition which will have a full-year impact in FY26. The Radiology business should perform around industry trend at c.5.5% growth, while the SCS division is expected to generate c.3.5% growth.
Key issues for investors
While Bell Potter remains positive overall, it highlights several areas investors will be watching closely at the upcoming result. The broker explains:
Key issues for investors to consider include 1) progress on integrating the LADR acquisition and realising synergies, 2) evaluating efforts to control costs overall, 3) assessing the performance of the US business which lags the two leading players, and 4) assessing the agenda of the new CEO Dr Jim Newcombe.
Major upside potential
According to the note, the broker has retained its buy rating on the ASX 200 share with a reduced price target of $28.50. Based on its current share price of $21.98, this implies potential upside of 30% for investors over the next 12 months.
In addition, the broker is forecasting a partially franked 5% dividend yield in both FY 2026 and FY 2027.
Commenting on its buy recommendation, the broker said:
While SHL has outperformed the XHJ, it has materially underperformed the broader market, reflecting concerns with growth and cost control. If the new CEO can impress investors with financial performance and strategy, we believe upside remains in SHL.
