Fisher & Paykel Healthcare has come out with first half results this week. There has been a positive reaction, with the shares rallying nearly 20% this week. As expected, the numbers reflect a moderation from the peak levels of demand seen in the first two years of the pandemic (when the company sold 10 years’ worth of ventilators). Revenue fell 23% to $690.6m but was above the $670 million guided by the company in its August trading update. Net profit after tax fell 57% to $95.9 million. Gross margins of 59.8% were down from 63.1% a year ago, with NZ freight rates still high.

Management noted that on a pre-pandemic basis the revenue outcome represented solid growth. There are also positive signs that hospital customers are working through their excess inventory holdings, with sales of hospital consumables increasing sequentially on a month-by-month basis since May. The company reports that this trend has continued in the second half to date.

Also positive has been sales in the homecare product group, which rose 10% to $249.9 million. The company reports “a strong reception” for its new Evora Full mask (for the treatment of sleep apnea), which the company will began selling into the United States in April. Overall, FPH upped the interim dividend and reactivated its dividend reinvestment plan. Full year guidance is not being provided, with a number of factors set to impact the second half, including the severity and duration of a Northern Hemisphere flu season. Second half revenue is though expected to be up on the first half.

FPH was a huge pandemic beneficiary, but the shares have been under pressure for much of this year with falling hospitalisation rates as the virus evolves into more benign forms. After spending a long time below the $20 mark, the shares now look like they are set to hit $25+ on better than feared outcomes, and some emerging earnings tailwinds.