Fisher & Paykel Healthcare: Mexico Tariffs to Increase Costs

The United States announced a 25% tariff on products imported from Mexico from Feb. 4, 2025. We estimate roughly 42% of narrow-moat Fisher & Paykel’s full-year revenue is attributable to the US, and approximately 60% of US volumes are supplied from Mexico. As a result, we decrease our fiscal 2026 gross margin forecast by roughly 230 basis points to 60.9% versus an estimated 62.3% in fiscal 2025. However, we leave our midcycle gross margin forecast of 65% unchanged, consistent with Fisher’s long-term target. The firm intends to mitigate the impact of tariffs through cost reductions, manufacturing efficiencies or price increases over time. We maintain our NZD 25 fair value estimate, or AUD 23, at current exchange rates.