Morningstar | Sonova's First-Half Results Slightly Weaker Than Expected; Pipeline Looks Improved
Sonova's first-half results were below our expectations, albeit much of the weakness was due to purchase deferrals ahead of the new product introduction launched this month. We are maintaining our fair value estimate for now, as the modest downward revision to our full-year forecast is largely offset by cash flows realized since our last report. There is, however, a greater uncertainty baked into our 2019 numbers, with volume and pricing highly contingent on the success of Phonak Marvel. We maintain our narrow-moat rating.Group sales were up a modest 2.6% in local currency, with demand in the hearing instruments suppressed ahead of the November launch of the Marvel platform. The hearing instruments business delivered 0.5% local currency growth and weakness was particularly evident in the North American business, which was down 3.6% organically. Coupled with the restructuring of the retail business, the U.S. market has struggled for Sonova in the first half, including its core Veterans Administration channel. While we assume a bounceback in the wholesale unit with the Marvel lineup contributing four months of sales, much will depend on customers' interest in the latest version of the made-for-all, or MFA, device. Early reviews noted better quality in streaming sound, and binaural streaming is a significant upgrade to the previous MFA Audeo B-Direct model. Other features of the new Audeo M device, such as full-day battery life (with streaming) and hands-free smartphone operation are attractive. However, the main question for us is head-to-head comparison with Demant's Opn devices on sound processing.
The implants segment delivered a modest 6.7% local currency growth, though adjusted for the comparison headwind of a large China tender last year, growth was at a solid 10%.
On the bottom line, Sonova's performance was held in check by lower volumes and negative pricing. The updated EBITA full-year forecast is largely in line with our estimates.
Sonova Holding is a hearing instrument manufacturer based in Switzerland. Co. specializes in the design, development, manufacture, and worldwide distribution of technologically advanced wireless and hearing systems for adults and children with hearing impairment. Co. offers a range of digital hearing instruments, along with high tech specialty products and complementary wireless communications systems. Co. comprises two hearing instrument divisions, Phonak and Unitron Hearing, as well as Phonak Communications, a developer of wireless communication devices for both hearing instrument and other applications.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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