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Shares in Cochlear (ASX:COH) plummeted over 8% on Thursday after the Australian hearing implants maker revealed a profit forecast for the current fiscal year that fell short of market expectations. This unexpected forecast prompted a sharp sell-off, marking the stock’s worst performance since March 2020.
Profit Forecast Misses Market Estimates
Cochlear announced an expected underlying net profit for fiscal year 2025 in the range of AU$410 million to AU$430 million (approximately $270.15 million to $283.33 million). This forecast fell below the market consensus of AU$451.2 million, according to Visible Alpha. The news unsettled investors, leading to a significant drop in the company's share price.
Strong Earnings Growth Still Misses Expectations
For the fiscal year ended June 30, 2024, Cochlear reported a 27% jump in underlying earnings, reaching AU$386.6 million. This robust performance was driven by solid growth across its implants, services, and acoustics divisions. Despite this impressive growth, the figure still fell short of the Visible Alpha consensus of AU$400.2 million, adding to investor concerns.
Market Reaction and Analyst Commentary
Cochlear's shares, known for being among the most expensive in Australia, dropped 8.1% to AU$310.260, reaching their lowest level since early February this year. The stock was one of the top five losers on the benchmark index .AXJO, which was trading about 0.6% higher on the day.
Macquarie analysts noted the impact of the profit forecast, stating, "(COH) stock is going to be pressured today given the miss to the street and a more cautious 6-11% NPAT growth outlook." This cautious outlook from the company, coupled with the profit miss, likely contributed to the sharp decline in its share price.
Dividend and Buyback Program Updates
In addition to the profit forecast, Cochlear announced a final dividend of AU$2.10 per share. The company also approved a share buyback of up to AU$75 million over the next year. This decision comes after Cochlear had previously halted its buyback program in February, citing a high-interest-rate environment.
