Why the Sonic Healthcare Share Price Sank Today

What Happened to the Sonic Healthcare Ltd Share Price?

Shares in pathology giant Sonic Healthcare Ltd [ASX:SHL] fell by more than 1.7% today. It was a weak session for the Aussie stock market.

Investor sentiment on Sonic has shifted sharply in the past few months. The SHL stock price has done an 18% up and 17% down round-trip since the start of June.

Why Did This Happen to SHL Shares?

Sonic’s profit for the year ending 30 June 2015 fell 5.6% to $363 million. That’s despite a 7.3% rise in revenue.

The slump follows an earnings downgrade in July and a big contract loss last week.

Despite that gloom, Sonic CEO Colin Goldschmidt said the company is ‘poised for strong revenue and earnings growth.’

Sonic did raise its dividend by one cent to 41 cents per share. Overall, the picture looked ugly to investors, who marked down Sonic’s share price today.

What Now for Sonic Healthcare Ltd?

Sonic remains a well-run company. It should find a way to weather the tough Aussie laboratory market.

You should be aware that this business may be at risk. Governments here and abroad are seeking to strip costs out of their healthcare systems. That means profit growth could become harder for Sonic Healthcare and its competitors. That makes it hard to recommend a Sonic share purchase here.

For deeper analysis on the Aussie stock market and global economy, keep an eye out for my essays in Money Morning — Australia’s biggest free daily financial e-letter.

Cheers, Tim Dohrmann
Editor, Money Morning

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