CSL Ltd (ASX: CSL) shares have staged a sharp recovery, gaining around 26% over the past month despite remaining down 17% in the past year.
By comparison the S&P/ASX 200 Index (ASX: XJO) fell 5% in a month and lost almost 1% over 12 months.
After falling 5% across the previous trading days, the ASX blue-chip stock bounced 3% on Monday to $171.57, reigniting the question: how much further can this recovery run?
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From deeply beaten down to recovery mode
To understand CSL's rebound, it helps to remember how severely the market had punished CSL shares.
At one point, CSL was trading around $90, a level not seen for more than a decade. Even the COVID-19 market sell-off failed to push the stock that low.
Investors appeared to be pricing in a prolonged deterioration in the company's earnings. Then came the FY26 result, which delivered a painful set of numbers but also appeared to give the market a cleaner starting point.
CSL reported a US$2.6 billion net loss, following US$7.1 billion of pre-tax impairments and US$799 million in restructuring costs. Much of this was non-cash, with CSL Vifor accounting for a substantial portion of the impairments.
Look beneath the headline loss, however, and the picture was less alarming. Underlying NPATA declined just 2% to US$3.1 billion, while revenue fell 1% to US$15.8 billion, ahead of expectations.
That helped investors focus on what CSL could look like after the reset.
FY27 is the next big test
The recovery now rests heavily on CSL's FY27 outlook.
Management expects underlying NPAT to grow about 5%, ahead of consensus expectations for roughly 2% growth. Behring is expected to deliver mid-single-digit growth, supported by immunoglobulin sales forecast to increase at a mid-to-high single-digit rate.
Vifor remains the weak spot. Revenue is expected to fall around 25% as generic competition hits its iron products.
The bullish argument is that Behring's scale can increasingly offset Vifor's decline. Consensus forecasts currently put earnings per CSL share at about $9.00 in FY27, $9.50 in FY28 and $10.10 in FY29.
At $171.57, that puts CSL shares on roughly 19 times forecast FY27 earnings. That's not obviously cheap, but it could prove reasonable if the expected earnings recovery materialises.
Do brokers see more upside?
Several major brokers remain positive following the rally.
UBS has a buy rating on CSL shares and a $181 price target, while Morgan Stanley is overweight with a $182 target. Morgans is also bullish, with a buy rating and a $187.71 target.
Those targets suggest roughly 6% to 10% potential upside from around $171.
Macquarie is considerably more cautious, however, with a neutral rating and a target of roughly $133.
So, CSL shares may still have room to run, but the easy part of the recovery could be behind them. The key question now is whether earnings can catch up with the share price.
