2 COVID-19 amplified ASX shares to buy

The 2 ASX shares in this article could be worth looking at as a hedge against COVID-19. One pick is healthcare stock Ansell Limited (ASX:ANN).
The post 2 COVID-19 amplified ASX shares to buy appeared first on The Motley Fool Australia. –

small figure representing ASX shares with cape and shield fighting coronavirus

There are some ASX shares that are generating faster growth because of demand for their products or services due to COVID-19.

Some areas of the share market are still in doldrums in terms of customer volume demand, such as travel shares like Qantas Airways Limited (ASX: QAN) and Sydney Airport Holdings Pty Ltd (ASX: SYD).

However, there are some businesses that are seeing record demand:

Sonic Healthcare Ltd (ASX: SHL)

Headquartered in Australia, Sonic is the world’s third largest pathology and laboratory healthcare business, with operations in eight countries. Some of the countries that it operates in includes Germany, the UK, Switzerland, the USA and Belgium. Sonic is also a provider of general practice, radiology, occupational medicine and corporate medical services in Australia.

Sonic is playing a key role in the fight against COVID-19 as it carries out large numbers of PCR tests.

Whilst the ASX share’s base pathology revenue was severely impacted during 2020 in March, April and May, there was a recovery starting from May 2020, with a near normal revenue run rate by the year end in most divisions. COVID-19 testing ramped up progressively from March 2020.

In the first quarter of FY21 Sonic saw revenue grow by 29% to $2.1 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) went up 71% to $580 million. In October 2020, revenue was 33% higher than October 2019.

In November 2020, in the northern hemisphere, the base business is being hurt less compared to the first waves, with COVID-19 testing at record levels due to the high level of COVID-19 cases in Europe and the US. In Australia, the base revenue is in positive growth territory and COVID-19 testing was still at around 50% of half of prior peak levels.

According to Commsec, the Sonic share price is valued at 17x FY21’s estimated earnings.

Ansell Limited (ASX: ANN)

Ansell is an ASX share that is best known for its protective gloves. It also sells other items such as chemical protective clothing.

A couple of weeks ago the company gave a trading update which said that due to the level of coronavirus cases globally, it’s still seeing an elevated level of demand for products across its examination, life sciences and chemical protective clothing. That’s despite the pandemic being around for almost a year.

Ansell said that by implementing efficiencies to improve output and investing in increased production capacity at its own plants, Ansell has been able to successfully and safely meet higher demand where others in the industry have struggled.

Sonic has been able to pass through price increases to customers to offset higher costs from raw materials, which demonstrates pricing power for Ansell.

Ansell acknowledged that there remains significant uncertainties given that the ASX share’s manufacturing operations and supply chain continues to be impacted by COVID-19, such as ocean freight delays.

The company was able to provide earnings guidance for the upcoming FY21 first half result, showing double digit growth. Ansell is expecting to report organic revenue growth of more than 20%, with earnings per share (EPS) in the range of 81 cents to 84 cents, representing growth 62% to 68%. It’s now expecting its FY21 EPS to be higher than 145 cents per share, beating its previous guidance.

Ansell expects higher demand for its products to continue for the remainder of FY21.  

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd. and Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 COVID-19 amplified ASX shares to buy appeared first on The Motley Fool Australia.

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