Fisher & Paykel Healthcare: Why the market darling is suddenly out of favour – Stock Takes

The updated guidance does not incorporate any potential refund of US tariffs paid to date during the 2026 financial year.

FPH makes respiratory products such as those used for the treatment of obstructive sleep apnoea and for use in hospitals, with extensive manufacturing facilities in New Zealand and Mexico.

Adrian Allbon, director equity research at Jarden, expects the result to be a little over the top end of expectations (revenue $2.31b, net profit $475m) but that there would be risks in the current 2027 financial year.

“Looking ahead, three external cost factors present wider-than-unusual uncertainty for FPH to contemplate in its maiden guidance,” he said in a research note.

These were oil-based feedstock inflation, oil-based freight cost – both of which are tied to the Middle East situation – and the evolving US tariff regime.

The only US levy currently in effect is the 10% universal tariff, which was ruled unlawful by the Court of International Trade on May 7, Allbon said.

Oil remains an important input to FPH in producing plastics and resins for its products, as well as being a key component in freight costs, he said.

In the healthcare sector, shares in Australian health giant CSL were sold off this week after the company cut its earning expectations and announced a big write-off. The share price has lost 60% in eight months.

In February, hearing specialist Cochlear reported a 9% drop in underlying net profit to A$195m ($239m) in the first half to the end of December. Over the past 12 months, shares in Cochlear have dropped by about 63% to A$100 a share.

“These are all very different businesses (despite all being in the healthcare sector), and I think FPH is in good shape so it would be wrong to put them all in the same basket,” Craigs Investment Partners investment director Mark Lister said.

“But FPH is a large, liquid stock, which means it has a lot of Australian holders who might be reducing weightings to the sector.”

Healthcare has also been a laggard in the US and it hasn’t experienced the same gains as many other sectors of the US market, which could be another factor, he said.

The US-Australian company Resmed – perhaps FPH’s closest peer – has also seen its share price come under pressure – it last traded at around A$28.14, down 26.5% over the past 12 months, despite reporting strong third-quarter earnings.

“The result was solid across most metrics, with the devices and masks business outside the Americas driving the biggest revenue surprise, with US devices representing a 1% miss,” Jarden said in a note.

Investor confidence fell to 6% in the March quarter, down five percentage points from the previous quarter after stabilising late last year, according to ASB’s latest Investor Confidence survey.

Senior economist Chris Tennent-Brown said global events played a role in shaping sentiment during the quarter.

“The change in mood was especially clear in March, which aligns with the timing of recent global developments. These events tend to amplify uncertainty, even if the underlying economic fundamentals have not materially changed,” he said.

Younger investors stood out as a relative bright spot.

Net confidence among those under 30 rose to 21%, up from 16% in the previous quarter, while confidence declined for all other age groups.

Confidence in KiwiSaver among under-30s also lifted, increasing to 23% from 16%.

Tennent-Brown said it was important to distinguish between confidence levels and actual market performance.

“While confidence has dipped, the world’s major sharemarkets have continued to perform well, albeit with bouts of volatility,” he said.

“KiwiSaver, managed funds and global share markets have recovered from earlier volatility, with US equities back trading around their highs.”

The popular wisdom in the US has been that there is a disconnect between record US equities and high oil prices and bond yields.

But BlackRock, the world’s biggest asset manager with more than US$14 trillion in assets, begs to differ.

It said markets are pricing artificial intelligence (AI) driven growth and the Middle East supply shock from the effective closure of the Strait of Hormuz.

US stocks this week hit record highs even as the effective closure of the Strait of Hormuz disrupts global supply chains.

“A common narrative is that markets are disconnected as equities and credit hold firm while oil, commodities and yields rise,” BlackRock said.

“We see no inconsistency.

“The AI buildout is offsetting the shock’s drag on growth, while energy markets still appear to be pricing the eventual reopening of the strait.

“That leaves inflation and higher yields as the key risk to our pro-risk stance.”

Emerging market and US equities have been leading global markets since the start of the Middle East conflict on strong AI-linked earnings.

Countries exposed to the shock have lagged, while those tied to the AI boom, such as South Korea and Taiwan, have outperformed.

BlackRock favours infrastructure and equipment supporting AI such as semiconductors, power and data centres.

“We think they stand to benefit no matter AI’s eventual winners or losers.

“We see the AI boom lifting US corporate earnings, underpinning our US equity ‘overweight’.”