Australia | 4:11 PM
Growth is so rapacious for Codan, management has upgraded interim FY27 guidance some six weeks after FY26 results, as demand for unmanned aircraft systems surges.
- Defence demand drives another major earnings upgrade for Codan
- Global drone and autonomous systems investment underpins Communications growth
- Forecasts rise as Codan benefits from structural growth tailwinds
- More upgrades still a possibility
By Danielle Ecuyer
Communications growth surprises
Australia's largest technology company --indeed, look it up!-- Codan ((CDA)) has surprised even the most ardent bulls. Arguably, yesterday's earnings guidance upgrade may have even shocked management at the helm of the company, given the magnitude of the uplift in growth.
Codan recently delivered FY26 results which were described by Canaccord Genuity as “impressive” and reflecting “rapid growth”, prompting Canaccord and other brokers to upgrade their forecasts and target prices.
FNArena’s consensus target price, derived from daily monitored brokers, moved to $51.375 from $43.075, up 19% post results released less than six weeks ago.
See FNArena’s post-earnings update: https://fnarena.com/2026/09/02/codan-how-much-for-a-drone-arms-race/
Yesterday, guidance provided in August was significantly upgraded. Macquarie's response: “that escalated quickly”, vindicating in part the surprise strength in Codan’s businesses as well as the share price reaction, jumping over 23% on the day of the announcement, plus more today.
In a market shrouded in uncertainty and concerns over rising interest rates and their impact on the domestic economy, Codan is involved in two fast-growing, non-correlated segments of the global economy, which is proving to be a winning formula in 2026.
The 1H27 trading update, only one quarter into the period, showed net profit for the period indicated at over $160m, a 57% beat to consensus expectations and 40%-plus above Macquarie’s forecast.
As observed by Bell Potter, 1H27 revenue stands at $400m-$410m versus this broker’s $289m forecast and consensus of $283m, a beat of more than 40%.
Some 50% of the total revenue is expected to come from conflict regions, versus 20% a year ago. Outside of the conflict regions, the Communications segment is flagged to produce 20% revenue growth compared to the prior year.
Bell Potter notes “broad-based” growth across all regions and markets. Operating leverage was a standout, with margins of circa 40% indicated for 1H27, well above the prior FY27 margin guidance of 30%-35%.
Macquarie observes conflict-driven demand is experiencing an acceleration in growth, with an opportunity that is increasingly global. The medium-term growth outlook is expected to be maintained by the fast-growing global UxV (uncrewed vehicle) market, including drones, but covering unmanned/autonomous vehicles across air, land and sea.
Moelis emphasises “conservative” forecasts for Communications in 2H27 due to management signalling order visibility in conflict regions is low.
Notwithstanding this factor, Moelis views an increase in global defence spending, as well as record funding and expansion of new and existing programs, as offering upside from formally approved government-sponsored procurement programs.
Demand for unmanned radio systems in both conflict and non-conflict defence is also growing.
Macquarie makes a similar observation, citing heightened geopolitical tensions and recent conflicts as underpinning defence spending.
Importantly, unmanned and autonomous systems are a “central focus” of modern warfare.
Minelab joins the party
Regarding Minelab, Bell Potter points to the 1H27 revenue run-rate as slightly above 2H26 levels, which is better than August 20, when the company indicated it was tracking in line.
This analyst points to the recent launch of GPZ 8000 and Gold Monster 200 detectors, as well as a supportive gold price and ongoing expansion in Africa and the rest of the world, as supporting growth momentum.
Moelis equally sees positive benefits from an expansion in distribution channels and retains an upbeat view of Codan's outlook.
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