Fisher & Paykel Upgrades Guidance Aided By Foreign Exchange Tailwind; FVE to NZD 17.30 and AUD 16.10

Narrow-moat Fisher & Paykel upgraded its revenue guidance for fiscal 2020 by 2% to NZD 1.19 billion and profit after tax by 4% to a range of NZD 255 million to NZD 265 million. This is the second guidance upgrade in two months. Currency movements contributed half of the revenue upgrade, as the firm benefits from the weakening New Zealand dollar given Fisher & Paykel has substantial exposure to the U.S. market, earning just short of 50% of its revenue there. The balance stems from better than expected volumes in the homecare division following the successful launch of a new face mask. Based on the volume uplift, we increase our sales estimate and gross margins for this division and match our currency estimates to spot exchange rates to align with the updated management guidance. However, this increased guidance has little impact on our long-term forecasts, and as a result, we increase our fair value estimate to NZD 17.30 from NZD 16.90 and AUD 16.10 from AUD 16.00. The stock screens as fairly valued at current levels.