Carl Zeiss Meditec is facing a new problem.

Last Updated: 13. Dezember 2023By

Uncertainty is the last thing you want in a company. Uncertainty about management or uncertainty about products are just two examples I have picked out for you. But the most serious is certainly the uncertainty about future earnings. It represents the most serious form of uncertainty. Stock prices simply do not get going until investors do not know in which direction the profits are developing.

Carl Zeiss Meditec releases guidance Fortunately, the medical technology company Carl Zeiss Meditec has now for the new financial year 2023/24 for the first time removed the uncertainty about future earnings. And they have released a guidance – this is how institutional investors refer to the expectations of the board regarding future earnings development.

According to this, a stable result before interest and taxes (EBIT) is expected for 2023/24. While the EBIT is expected to develop weakly in the first half of the financial year, the EBIT and EBIT margin should exceed the previous year’s level in the second half.

No hurricane over China Before this announcement, as I said, there was uncertainty. Some analysts, such as Stifel analysts, wanted to have identified a „perfect storm“ that would break over Carl Zeiss Meditec.

This had its origin in China, an important sales market for a company specializing in eye lasers and lenses and devices for microsurgery. Here Carl Zeiss Meditec must reduce its stock levels, which the company had increased during the Corona pandemic in order to remain capable of delivery in the event of further lockdowns. This should now lead to burdens in the mid double-digit million euro range.

Share rises significantly Because the financial director of the company has confirmed that the stock reduction should be completed by the end of the first half, the investors were very relieved. As I said, investors avoid uncertainty like the devil avoids holy water.

This was immediately evident on the stock charts. More than 8 percent, the share price rose yesterday and could thus further distance itself from the lows of October this year, when the share was quoted at 75 euros. Just under 94 euros investors have to pay for a share this morning, which in comparison to the highs, when the paper was quoted at almost 200 euros, still offers considerable stock potential.

Is the premium justified? It seems so, but if you look at the valuation of the stock, you might worry. Currently, the stock is traded with a price-earnings ratio of 35.4 – based on the profit estimates for this financial year. Such a premium may have been justified because the company is investing heavily in research and development and resulting new products.

Whether such a premium is still justified is questionable: after all, profit has declined in the past financial year and only stagnation of profit is expected for the current one.

Investors should be more cautious This means: the uncertainty may have been removed, but now the high stock valuation could be a problem – another kind of uncertainty. No, 2024 will certainly not be easy for the shareholders of Carl Zeiss Meditec.