CSL Ltd (ASX: CSL) disappointed the market in May with a major earnings downgrade, but the question now is whether it's plain sailing from here.
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Taking a look at CSL shares before results
UBS has just published a research note on the global blood products company, getting ahead of the company reporting its full-year results.
The broker is hopeful of steady – but not negative – results from CSL, although they note there are still headwinds in the sector.
They said in their note to clients:
Our channel checks suggest competitive conditions have not eased in most major markets and this will inform cautious guidance for FY27, but we are hopeful management will report some recent contract wins.
UBS said CSL is adjusting the way it reports profits, which will lead to a technical downgrade, but accounting for this change, "our FY27 forecast implies flat profits, despite ~$300m of cost savings, due to a rapid decline in the contribution from Vifor''.
The broker added:
Under the interim CEO, CSL has refocused on its core plasma business, particularly in the US. Industry feedback suggests the core US hospital market remains sound and CSL has recently gained share, albeit at lower prices. In China, end patient albumin demand appears to have stabilised but the market remains oversupplied.
UBS said CSL's Vifor division had "endured a difficult second half as generic competition intensified, Velphoro sales weakened rapidly and Tavneos was withdrawn from sale''.
They added:
We have reduced our sales forecasts to reflect these pressures. Lower pricing is expected to drive a sharp ~1100 basis point contraction in gross margins in 2H FY26. With price erosion likely to persist into FY27, we forecast a further 450 basis point decline in gross margins, with risks remaining skewed to the downside.
CSL's May update included about $5 billion in write-downs to be booked across FY26 and FY27, with the company saying at the time it would give further details when releasing the FY26 results.
The company also downgraded its revenue expectations to about US$15.2 billion on a constant currency basis and its net profit to about US$3.1 billion, excluding restructuring costs and impairments.
This compares to the previous guidance of US$15.6 billion and profit of US$3.3 billion.
The company said at the time that its growth initiatives were working, but the financial benefits would take longer than previously expected.
CSL shares looking cheap
UBS has a price target of $158 on CSL shares compared to $115.50 at the time of writing. If achieved, this would be a 36.8% return.
CSL is valued at $55.43 billion.
