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CSL Faces Historic Selloff After Dismal FY25 Results
CSL (ASX: CSL) experienced a staggering decline of over 15% in its share price on Tuesday, marking its most significant single-day drop since its debut on the ASX in 1994. This drastic selloff followed a mixed fiscal year 2025 (FY25) performance and disappointing forward guidance, pushing the stock down to levels unseen since its lows during the market fallout in 2020 and October 2019.
Earnings Performance: A Mixed Bag
While CSL’s FY25 results somewhat met analysts’ expectations, UBS labelled it a “low quality NPAT beat," attributing the success primarily to Seqirus sales alongside lowered research and development costs and tax expenses. Here are the key financials:
- Revenue: Increased 5% to $15.6 billion, slightly below estimates of $15.8 billion (1% miss).
- Net Profit After Tax (NPAT): Rose 17% to $3.0 billion, outperforming expectations of $2.96 billion (1% beat).
- NPATA EPS: Grew 10% to $6.65, exceeding estimates of $6.55 (2% beat).
- Dividends: The company announced a final dividend increase of 12% to $1.62, with a total dividend of $2.92 falling short of estimates of $2.96 (1% miss).
Additionally, CSL revealed intentions to demerge its Seqirus business into a separate ASX-listed entity and initiate a $750 million on-market buyback commencing in FY26, expanding over the medium term. The company is also set to implement cost-cutting measures aiming for annual savings of $500-550 million over the next three years, although this will incur one-off restructuring expenses between $700-770 million in FY26.
Guidance Sparks Investor Panic
The considerable selloff was primarily driven by FY26 guidance that failed to meet market expectations. CSL’s forecast included:
- Group Revenue Growth: Projected at 4-5% versus Citi’s forecast of 7.3%.
- NPATA Growth: Expected to be between 7-10% at $3.45-3.55 billion, significantly below Citi’s estimate of 15.5%.
Analyst Craig Wong-Pan from RBC Capital Markets noted that while FY25 profits aligned with consensus, the disappointments in CSL Behring’s performance and the lacklustre FY26 guidance contributed to a “messy result” that could further burden the stock.
Declining Market Confidence
The selloff starkly reflects CSL’s decline in market confidence. Before this downturn, CSL was trading at a mere 3% premium relative to the broader market, compared to its decade-long average of 73%, according to Morgan Stanley.
Once seen as a robust player in the healthcare sector with reliable growth prospects, CSL has suffered four successive earnings misses. Key performance indicators like return on equity and return on assets have plummeted since the Vifor acquisition in 2021-22.
Historical share price reactions following earnings disappointments include:
- 12 February 2024: Down 4.9% ($290)
- 13 August 2024: Down 4.5% ($294)
- 11 February 2025: Down 4.9% ($257)
The Market Reaction
An analysis of the stock’s intraday chart reveals relentless selling pressure, with shares declining steadily throughout the day—beginning with a 9.5% drop at opening and sinking more than 16% by market close.
CSL intraday price chart (Source: TradingView)
Despite the turmoil, analysts may remain consistent with a Buy rating, viewing the valuation reset as an opportunity. UBS has maintained a Buy rating with a target price of $310. However, the erosion of market confidence, subpar growth forecasts, and complex restructuring strategies are likely to induce continued volatility in the stock’s performance in the near term.
While CSL displays steady growth and could be considered technically oversold, the ongoing issues with earnings and execution challenges have led to a perception of uncertainty, which is generally unwelcome in market circles.
Ultimately, investors appear to have a low tolerance for disarray, reinforcing the notion that clarity and reliability are paramount for maintaining market trust.
