CSL leads a 20% ASX healthcare comeback — is the market rotating out of banks and miners?

Australian healthcare shares have gone from one of the ASX’s weakest trades to one of its strongest in little more than a month.

CSL, Ramsay Health Care, Cochlear and ResMed have reportedly gained more than 20% as a group over the past month, compared with an increase of roughly 1.3% for the S&P/ASX 200. CSL has led the recovery, rebounding around 44% during August from close to $120 to approximately $172.

The gains have followed a series of better-than-feared earnings updates. Ramsay reported a 22.9% rise in underlying profit, Cochlear finished near the top of its revised guidance range, and ResMed delivered double-digit annual revenue growth. Even CSL’s heavily impaired FY26 result helped reduce uncertainty around its earnings reset.

Australian bank shares have pulled back as investors reassess housing and interest-rate risk, while higher commodity prices have pushed parts of the mining sector towards elevated levels. Healthcare now offers a third major ASX trade: global revenue exposure, defensive demand and growth valuations that remain well below their former premiums.

For Australian traders, the central question is whether this is a short-term recovery from oversold levels or the beginning of a broader rotation back into healthcare.

The rally has spread across companies with different products and operating models, suggesting the move is broader than a single-stock rebound.

Contracts for Difference (CFDs) allow eligible traders to take a long or short view on selected Australian healthcare shares without owning the underlying stock. A long position may suit a view that the earnings recovery will continue to rebuild sector valuations, while a short position may suit a view that the rebound has moved ahead of the fundamental outlook.

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SELL BUY

CSL carries the greatest weight in the Australian healthcare sector and remains central to whether the rally can continue.

The company’s FY26 result confirmed the scale of its problems. CSL recorded US$7.1 billion in impairments, primarily connected with the Vifor business acquired for approximately US$11.7 billion in 2022. Behring revenue declined 1% to US$11.4 billion, Seqirus revenue fell 8% to US$2 billion and group revenue came in around US$15.2 billion.

Those numbers would not normally support a 44% monthly share-price recovery. The difference is where expectations began.

CSL had already fallen from above $220 to below $100 as investors priced in weaker immunoglobulin growth, pressure in China’s albumin market, problems at Vifor and uncertainty around management. At its lows, the company was trading at valuation multiples not seen for more than a decade.

Its subsequent recovery suggests investors no longer needed a strong result. They needed evidence that the deterioration was becoming measurable and that management had established a credible base for FY27.

The next test will be whether CSL can produce sustained immunoglobulin growth, improve operating efficiency and stabilise the Vifor portfolio. A rebound based mainly on lower expectations can reverse quickly if another downgrade follows.

SELL BUY

Ramsay Health Care provided the strongest evidence that operational improvement is already flowing through to profit.

FY26 revenue rose 4.2% in constant currency terms to approximately $18.6 billion. Underlying EBIT increased 11.8% to $1.16 billion, while underlying NPAT climbed 22.9% to $364.1 million. Underlying earnings per share increased 27%, and the full-year dividend rose to 91 cents.

The hospital operator also reduced funding-group leverage to 1.83 times, comfortably below its target of 2.5 times.

Ramsay shares surged more than 13% following the result as investors responded to stronger margins, lower balance-sheet risk and an improved contribution from its Australian hospitals.

Risks remain. UK National Health Service volumes declined during FY26, labour and operating costs remain high, and hospital funding continues to depend heavily on negotiations with governments and insurers. However, Ramsay’s result gave investors a clearer earnings reason to reconsider a company that had struggled with debt and overseas execution.

SELL BUY

Cochlear entered reporting season carrying unusually low expectations.

The shares had fallen more than 40% in April after the company cut its FY26 underlying profit guidance from $435–460 million to $290–330 million. The downgrade reflected weaker implant demand, hospital constraints and pressure in developed markets.

The final result did not repair that damage, but it avoided another major disappointment.

Sales revenue increased 2% in constant currency terms to $2.3 billion, with second-half growth improving to 6%. Underlying profit reached $322 million, placing it towards the upper end of revised guidance.

That gave the market evidence that trading conditions had stabilised after the April shock. The rollout of Cochlear’s Nucleus Nexa implant system also provides a potential product catalyst, although investors will want to see stronger implant volumes before treating the recovery as complete.

Cochlear’s rebound remains substantial, but the shares are still far below the levels reached before the downgrade. That leaves room for further recovery if sales improve, while also making the stock highly sensitive to any renewed weakness.

SELL BUY

ResMed’s FY26 numbers showed that fears around sleep-apnoea demand have not translated into an immediate earnings collapse.

Annual revenue increased 10% to US$5.7 billion, adjusted earnings per share rose 17% to US$11.17 and adjusted gross margin expanded by 240 basis points to 62.4%. Free cash flow reached US$1.6 billion.

However, the company forecast FY27 revenue of US$5.75–5.85 billion, below Wall Street expectations near US$5.92 billion. ResMed has also suspended sales of its Astral ventilators following a device correction and FDA recall associated with five serious injuries. The disruption is expected to reduce revenue by approximately US$75 million.

Competition from GLP-1 obesity treatments remains another unresolved issue. Weight loss can reduce the severity of obstructive sleep apnoea for some patients, potentially affecting long-term demand for sleep devices. At the same time, wider screening through consumer devices and greater awareness of sleep disorders could increase diagnosis rates.

ResMed therefore brings both stronger underlying profitability and greater product-specific uncertainty to the healthcare recovery.

Healthcare’s outperformance is consistent with a rotation, but it does not yet prove investors are abandoning Australia’s traditional market leaders.

Bank shares have recently come under pressure as weaker mortgage applications, high interest rates and softer housing activity raise questions about loan growth. Their strong earlier performance also left valuations elevated, increasing the incentive to take profits.

Mining shares present a different picture. BHP and selected gold and energy producers have continued to benefit from higher commodity prices. That means healthcare is competing with miners for capital rather than simply replacing them as market leaders.

The strongest evidence of a durable rotation would be sustained healthcare gains alongside continued weakness in financials and a loss of momentum in large miners.

Several characteristics could support that shift:

• Healthcare earnings depend less directly on Australian household spending and mortgage activity.

• CSL, Cochlear, ResMed and Ramsay generate substantial revenue from overseas markets.

• Ageing populations and higher diagnosis rates provide long-term demand drivers.

• Valuations remain below the historical premiums investors once paid for the sector.

• Earnings results have begun to reduce the risk of further immediate downgrades.

However, healthcare is also sensitive to bond yields. If inflation remains elevated and markets price additional RBA tightening, higher discount rates could again pressure long-duration growth valuations.

The sector may therefore provide diversification away from banks and miners without becoming immune to the same macroeconomic risks affecting the wider ASX.

The initial earnings reaction has passed. The recovery now depends on whether companies can support higher share prices with better operating evidence.

• CSL’s FY27 execution: Investors will watch immunoglobulin growth, Vifor performance, cost reductions and any further strategic changes.

• Cochlear implant volumes: Stronger demand in developed markets would support the view that April’s downgrade marked the low point.

• Ramsay’s margins and leverage: Further margin improvement and debt reduction could extend the hospital operator’s re-rating.

• ResMed’s FY27 guidance: Astral-related disruption, pricing changes and sleep-device demand will determine whether revenue growth can reaccelerate.

• Australian bond yields: Higher yields could restrict valuation expansion across defensive growth shares.

• Bank and mining performance: Continued weakness in banks or fading commodity momentum would strengthen the case for further sector rotation.

Healthcare has already completed the easy part of the recovery: rebounding from exceptionally weak sentiment. The harder stage is proving that earnings can now grow strongly enough to justify a sustained re-rating.

Mitrade gives eligible Australian traders access to CFDs on selected healthcare shares, including CSL, Cochlear and ResMed.

Mitrade includes:

• Long and short positions on selected Australian share CFDs.

• Stop-loss and take-profit orders to define exit levels.

• Pending orders around important support, resistance or breakout prices.

• Real-time charts and mobile access.

• AUD account funding, with margin and profit or loss displayed in Australian dollars.

• A free $50,000 demo account for practice.

• ASIC regulation under Australian Financial Services Licence 398528.

CFDs are complex instruments and carry a high risk of losing money rapidly due to leverage. Traders should understand how CFDs work and consider whether they can afford the risk of losing money.

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