“I’m going in! Cover me. Actually, I might just sit here for a bit.” Pic: Getty Images <\/p>\n
The ASX healthcare sector plunged 12% this week as a rough reporting season took casualties
\nBiggest healthcare name CSL fell heavily on the back of the CEO\u2019s exodus and H1 FY26 results
\nPro Medicus plummeted despite solid result, including record half-year revenue and EBIT up ~30% YoY<\/p>\n
\u00a0<\/p>\n
Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 27 years, gives his take on the ASX healthcare sector for the week and his \u2018Powerplay\u2019 stock pick.<\/p>\n
\u00a0<\/p>\n
It\u2019s been a tough week for the ASX healthcare sector and in the words of\u00a0 Scott Power, \u201cit\u2019s brutal in the trenches\u201d as reporting season took its toll.<\/p>\n
At lunchtime on Friday, the ASX Health Care Index (ASX:XHJ) had plunged 12% for the past five days, while the benchmark ASX 200 (ASX:XJO) was up 0.5%.<\/p>\n
The ASX healthcare sector fell 24.9% last year \u2013 its worst annual performance since 2002, during the height of the dot-com crash.<\/p>\n
While Power holds out hope for a 2026 rebound, he admits the sector faces difficult days.<\/p>\n
\u201cThere\u2019s just been an exodus from healthcare this week,\u201d\u00a0 Power said.<\/p>\n
\u201cThe market has had an absolute shellacking compared to the broader market with a rotation into resources and financials with all the growth and healthcare names down.\u201d<\/p>\n
\u00a0<\/p>\n
Late day CSL announcement triggers start of hefty falls<\/p>\n
The trigger for the selldown came at 4.05pm (AEDT) on Tuesday, when blood and vaccine giant CSL (ASX:CSL)<\/a> announced the sudden retirement of CEO Paul McKenzie to be replaced by interim boss Gordon Naylor, just hours before releasing its half-year results.<\/p>\n The market\u2019s response was swift. CSL \u2013 which had been trading up 1.8% before the announcement \u2013 reversed course and fell about 5% in late trade, suggesting investors were unsettled by the timing and lack of warning.<\/p>\n The late sell-off played out in the ASX\u2019s extended closing auction and was a reminder that material announcements after the 4pm bell can still move prices with CSL\u2019s plunge dragging the broader market from positive to negative territory.<\/p>\n \u00a0<\/p>\n Sell-off continues as results disappoint<\/p>\n The CSL sell-off continued on Wednesday with its shares at one point dipping more than 12% before recovering to close down 5.75% after H1 FY26 results disappointed investors in what felt like a replay of its full-year FY25 earnings in August 2025.<\/p>\n Battling weaker US vaccination rates under public health policies of the Trump administration and softer plasma demand in China, CSL saw net profit dive 81% to US$400 million, while underlying NPATA fell 7% to US$1.9 billion.<\/p>\n Revenue in the core plasma business Behring declined 7%, and the Seqirus vaccines arm posted a small 2% fall, weighed down by a drop in US flu vaccinations.<\/p>\n Offsetting some of the weakness, CSL\u2019s Vifor iron and kidney health division grew strongly, with revenue up 12% to $1.2bn, with the company noting strong performance, driven by growth in nephrology, partially offset by a decline in iron due to competition from generic products. <\/p>\n Operational cash flow increased 3% to US$1.3 billion, the company lifted its share buyback to US$750m, and declared a steady interim dividend of US$1.30 per share.<\/p>\n \u00a0<\/p>\n Morgans drops 12-month target price but all not lost<\/p>\n In a note to clients Morgans\u2019 healthcare analyst Dr Derek Jellinek described CSL\u2019s latest result as \u201csofter and less clean than expected\u201d.<\/p>\n However, he maintained some optimism noting FY26 guidance of plus 4-7% was maintained, which should anchor expectations after recent downgrades.<\/p>\n \u201cImportantly, FY26 guidance was maintained, despite Behring weakness and heightened scrutiny following the announced CEO transition, suggesting a H2 recovery, pointing to an execution reset, not a structural impost, in our view,\u201d Jellinek wrote.<\/p>\n \u201cThe outlook looks supported through a combination of cost-outs, marketing initiatives, new product launches and diminishing headwinds, reinforced by the Board\u2019s urgency around operational delivery.\u201d<\/p>\n Morgans maintains a buy rating on CSL but has reduced its 12-month target price from $249.51 to $241.34.<\/p>\n Further falling on Thursday before rising slightly on Friday CSL shares are now trading at their lowest in eight years and far from their peak of $342.75 in February 2020.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Pro Medicus and Cochlear casualties in brutal earnings season<\/p>\n Fallout from results season for ASX healthcare large caps continued for the rest of the week with hefty falls for medical imaging software and services provider Pro Medicus (ASX:PME)<\/a>\u00a0 and hearing technology play Cochlear (ASX:COH)<\/a>.<\/p>\n Pro Medicus fell more than 20% on Thursday despite delivering record half-year revenue and underlying EBIT up ~30% YoY.<\/p>\n In an note to client Morgans\u2019 healthcare analyst Iain Wilkie said the result fell short of expectations on operating leverage with a jump in staff costs driving an EBITDA miss as Pro Medicus\u2019 contract with Trinity Health, one of the largest not\u2011for\u2011profit health systems in the US contributed less than anticipated.<\/p>\n \u201cThe longer-term outlook strengthened with more than $280m of new contracts signed and five-year contracted revenue now around A$1.1bn, though the market remains wary of a heavy H2 execution load and cost base increase,\u201d he wrote.<\/p>\n \u201cIt is not ideal to deliver a miss in this market, but the reaction feels overcooked and the setup into H2 is far better than the share price implies.<\/p>\n Morgans reduced its 12-month target price from $290 to $275 but maintains a buy recommendation on Pro Medicus, which it regards as one of the highest quality businesses on the ASX, supported by robust margins and a stable, long-term contracted revenue base that affords significant baseline earnings reliability.<\/p>\n \u201cWhile the company\u2019s valuation remains the primary risk, the persistent demand for quality growth assets continues to lend support to PME\u2019s share price,\u201d Wilkie wrote.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Cochlear \u2018misses across the board\u2019<\/p>\n Shares in Cochlear fell more than 15% on Friday after reporting a 9% fall in NPAT to $195m, 4% below consensus, which Jellinek said was driven by softer cochlear implant sales, an unfavourable emerging market mix and a 200bp decline in gross margin. The statutory result was 22% lower at $161.6m.<\/p>\n \u201cH1 FY26 missed across the board, with slower-than-expected product registration and contract renewals for the new Nucleus Nexa System delaying revenue recognition where price increases were sought,\u201d Jellinek wrote.<\/p>\n Nucleus Nexa System is the first upgradeable smart cochlear implant and follows two decades of R&D.<\/p>\n While FY26 guidance of $435\u2013$460m was maintained, management now expects to deliver at the lower end of the range, which Jellinek wrote increased the burden on H2 execution.<\/p>\n Consensus full year guidance is $453m with Morgans at $442m.<\/p>\n An interim dividend was declared at $2.15 per share, in line with with last year and representing a payout of 72% of underlying net profit.<\/p>\n \u201cThe result reinforces our cautious stance on the near-term earnings inflection from Nexa and the elevated expectations embedded in valuation.\u201d<\/p>\n Morgans has a trim rating on Cochlear with a current 12-month target price of $299.54.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Sonic and PolyNovo due to report results next week<\/p>\n Reporting season continues next week with international medical diagnostics company offering pathology and radiology services Sonic Healthcare in the spotlight.<\/p>\n \u201cSonic Healthcare is probably the key result for next week and the market hasn\u2019t been showing it a lot of love over the last six months,\u201d Power said.<\/p>\n \u201cIt\u2019s a number one pathology player in Australia, third in the US and a major player across a number of European countries.\u201d<\/p>\n Power said investors were being particularly harsh on companies this reporting season, which was likely to continue into next week.<\/p>\n \u201cIt\u2019s seemed to be quite indiscriminate so regardless of the strength of a business model the market is just selling it down and Pro Medicus is a good example,\u201d he said.<\/p>\n Morgans will also focus on wound care company PolyNovo (ASX:PNV)<\/a>, which is due to release its latest result on Friday.<\/p>\n