Treasure Chest: Beware Aussie Healthcare

This story features AUSTRALIAN CLINICAL LABS LIMITED, and other companies.
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FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea is Australian healthcare stocks.

By Rudi Filapek-Vandyck

Whose Idea Is It?

RBC Capital

The subject:

Australian healthcare stocks, in particular Australian Clinical Labs ((ACL)), CSL ((CSL)), Cochlear ((COH)), Healius ((HLS)), Integral Diagnostics ((IDX)), Monash IVF ((MVF)), Ramsay Health Care ((RHC)), ResMed ((RMD)) and Sonic Healthcare ((SHL)).

More info:

There is probably no better example of how dynamics inside the local share market have changed since the 2020 covid pandemic than the savage de-rating of the healthcare sector.

Gone are the days when the likes of CSL ((CSL)), Cochlear ((COH)), Fisher & Paykel Healthcare ((FPH)), ResMed ((RMD)) and Sonic Healthcare ((SHL)) kept outperforming the financials- and resources-skewed indices, and not by inconsequential margins either.

Those days are now gone. That much we can conclude from price action over the past four years.

Healthcare as a sector peaked in August 2021, at the height of the Delta crisis, particularly in NSW, Victoria and the ACT, and has since turned into the market’s worst-performing segment.

Imagine this: even after a strong rally in the CSL share price over the past two months, the shares are still trading at only 13 times forecast FY27 EPS.

The average multiple for the ASX200 is 16.7 times, and that index has 11% invested in BHP Group, whose FY27 multiple of 15.7 times is weighing the average down.

Without the slightest doubt, had today’s reality been foretold to any expert forecaster back in 2021, the likely response would have been: what have you been smoking, mate?

Expressed in numbers, the S&P/ASX 200 Health Care Index gained approximately 113% over the five years to April 2019, while healthcare returned 47.4% in calendar 2019, making it that year’s strongest sector on the ASX.

But then came the reversal. From its August 2021 peak to 10 July 2026, the healthcare index lost approximately -44% of its value.

By the end of FY26, the sector had returned -37.4% over one year, -14.24% annualised over three years and -10.08% annualised over five years.

I asked ChatGPT for a graphic illustration. You know what they say: one great illustration tells the story of a thousand words.

The chart below actually understates what happened, ChatGPT informs me, but it can be considered broadly accurate in terms of the overall trend.

Gone are the days when analysts were eagerly anticipating a turnaround for the sector in Australia. Maybe healthcare has now become the contrarian investment idea du jour?

Judging from RBC Capital’s latest sector update, it is way too early for that. Previewing the upcoming Australian results season, RBC analysts see plenty of risks and therefore advise investors to take profits, with several stocks having enjoyed rallies of late.

In terms of FY26 performances, Cochlear is singled out as potentially delivering an above-consensus market update, while Ramsay Health Care, Sonic Healthcare, Integral Diagnostics and Monash IVF are all believed to be at risk of reporting performances below consensus forecasts.

RBC Capital sees additional risk in the forward guidance yet to be released by Australian Clinical Labs, CSL, Healius, Nanosonics ((NAN)) and ResMed, as well as Integral Diagnostics and Monash IVF.

Ratings have been downgraded to Sector Perform for Cochlear, ResMed and Telix Pharmaceuticals ((TLX)).

RBC Capital’s preferred sector picks are Ansell ((ANN)), Integral Diagnostics and Regis Healthcare ((REG)).

The team at RBC Capital is not alone in publishing a downbeat update on the healthcare sector. In yesterday’s Rudi’s View story, I reported that Citi’s latest sector update showed equally little enthusiasm, with both Cochlear and Ramsay Health Care singled out as potentially delivering negative surprises in August.

Citi’s top pick is Telix Pharmaceuticals, and the analysts have opened a positive 30-day catalyst watch to underpin their conviction that the upcoming Q2 market update will surprise on the upside.

Second in line is Pro Medicus ((PME)).

Citi also believes Ebos Group’s ((EBO)) FY27 guidance, to be communicated alongside the FY26 financial result, might well beat consensus.

Cochlear is currently Citi’s only Sell-rated stock in the sector.

See: https://fnarena.com/index.php/2026/07/16/rudis-view-small-cap-favourites-ai-more/

Here is our recent update on ResMed: https://fnarena.com/index.php/2026/07/14/are-headwinds-building-for-resmed-in-fy27/

US Tariffs (?)

The Trump administration in the US launched a Section 232 investigation into the medtech industry on 2 September last year.

The investigation covers imports of personal protective equipment, medical consumables and medical equipment, including medical devices. Pharmaceuticals were excluded because they were already subject to a separate Section 232 investigation.

The importance to the Australian industry is obvious, as the investigation expressly asks whether tariffs, quotas or other measures are required to reduce US reliance on imported medical products.

Section 232 gives the US president broad authority to “adjust” imports after receiving the Department of Commerce’s recommendations.

If tariffs are imposed, foreign-made products shipped into the US could become more expensive. The consequences would not necessarily be entirely negative.

Companies with US production, highly differentiated products or strong pricing power might gain an advantage over competitors that rely entirely on imported products.

While we do not know the outcome, or even when it will be announced — suggestions are that announcements could be made in September — at face value, the investigation appears potentially most material for Ansell, Cochlear, Nanosonics, Fisher & Paykel Healthcare, ResMed and smaller Australian device exporters.

It appears much less relevant to healthcare software and service providers such as Pro Medicus.

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