CSL

CSL has stunned the market by announcing revised profit guidance for 2013. The company now expects profits to rise by 20% to around US$1.2bn; this is a near doubling of previous guidance. The boosted expectations are being driven by the company’s CSL Behring business which has been performing above expectations; increasing both sales and prices. Additionally CSL’s GARDASIL cervical cancer vaccine is now expected to generate higher royalty revenues.

This upgrade is both welcome and somewhat unexpected. CSL continues to exceed our expectations, making it difficult to peg down a precise valuation. On a forecast price to earnings ratio of around 20—without even considering the impact of a lower Aussie dollar—CSL isn’t clearly overpriced. We’re not keen to part with this high quality business, and are increasing our recommendation guide prices accordingly. Indeed a few more years of growth like this could make these new prices look excessively conservative. Still, we recommend members keep a check on their portfolio limit, which remains unchanged at 4%. With the share price up 12% since 11 Sep 12 (Hold – $44.85), HOLD.

Note: The Growth portfolio owns shares in CSL.