Lightning in a bottle! 7 stocks that delivered cracking results

Chris Conway

Livewire Markets

Having been an equity analyst previously, I can tell you that reporting season is a combination of excitement and terror. Any analyst knows that if you nail reporting season, you set yourself up nicely for the next six months. And I have seen it cut both ways. I’ve seen perfect calls, huge share price rallies, pats on the back and champagne corks popping. I’ve also seen analysts carried out of the research room on stretchers.

Having a good reporting season requires making accurate predictions about the stocks you have under coverage, both in terms of how they are going to report and what their share price will do over the coming 12 months.

Lightning in a bottle

If you are bullish leading into a result and the company beats expectations, it can be like capturing lightning in a bottle. In some cases, you might be able to capture the bulk of the next six months of share price movement in a matter of days. So the stakes are high and, as you would have seen on the Livewire platform, there is plenty of time and energy spent dissecting how analysts fared during the season – for some great insights, check out this article by my colleague Hans Lee, who scored a select group of brokers’ picks across six factors;

  • Share price reaction (day of)
  • EPS beat/miss
  • Revenue beat/miss
  • Profit beat/miss
  • Dividend hike/cut

Where is the love?

This wire takes a slightly different approach. Today I am looking at seven companies that didn’t get any love from brokers heading into the season, at least in terms of expectations of a bumper report. To be fair, some of the brokers had bullish ratings on the stocks listed below but didn’t highlight them as ones to watch in their pre-reporting season coverage. 

In any event, these stocks managed to shoot the lights out – both in terms of our little scoring system and the share price reaction since. 

Breaking it down

Before we dive into each stock and what has happened since, it’s worth acknowledging where these come from at a sector level. One stock is from the consumer discretionary space, which is a sector that has been belted in recent times amid higher interest rates. One would forgive analysts for not looking in this part of the market for standout beats heading into the season. There simply wasn’t likely to be many (and there wasn’t), and any beat would have been off low expectations.

Three stock comes from the tech/medi-tech segments of the market. Again, tech has been one of the worst performing sectors for quite some time, so it was not a particularly fertile ground to look for standout reports.

The surprising result is that three of the seven companies came from the materials sector. With commodity prices at record highs for much of the past 12 months, one might have expected these stocks to attract more attention, analysis, and love. Admittedly these stocks were on the smaller end of the spectrum, so perhaps analysts were focused on the big boys.

Temple & Webster (ASX: TPW) 

Revenue was up 30% but profit fell 14% for the once market darling. Morgan Stanley retained its OVERWEIGHT rating following the result, citing sales growth slowing faster than expected but liking the margins. The target price was raised from $6 to $7. Most other brokers retained a neutral rating, although Credit Suisse upped its target price from $4.91 to $6.14.

Altium (ASX: ALU) 

Earnings were 13% ahead of consensus, with EBITDA guidance 7% ahead of consensus. Macquarie upgraded from underperform to NEUTRAL and upped its price target from $25.20 to $31.40. Ord Minnett maintained its ACCUMULATE rating but upped its price target from $32 to $34.

Wisetech (ASX: WTC) 

Profit and the final dividend were ahead of expectations, whilst FY23 guidance for 21% revenue growth and 25% EBITDA were also ahead of forecasts. Despite the good results, the broker reaction was a mixed bag; Morgan Stanley maintained its OVERWEIGHT rating and upped the target price from $50 to $62. Macquarie maintained its UNDERPERFORM rating but raised its target from $42 to $46. Ord Minnett downgraded to ACCUMULATE from buy but raised its target from $52 to $64. And finally, Citi downgraded to SELL from neutral but upped its target by 3%, to $52.70. As I said, a mixed bag.

ProMedicus (ASX: PME) 

I must declare my bias here. This was one of my favourite stocks when I was an analyst. That takes nothing away from the fact that the company delivered during reporting season. Revenue up 37.7%, profit up 44%, improved margins and a strong pipeline of business. Despite the good showing, the only movement post results was a downgrade from Bell Potter from buy to HOLD, although the target price remained $55.

Pilbara Minerals (ASX: PLS) 

PLS was an interesting one. FY22 earnings missed forecasts, whilst FY23 costs are expected to be 11% above consensus. Meanwhile, the share price rallied hard post results. All whilst the broker coverage was mixed; Credit Suisse downgraded to UNDERPERFORM from neutral and reduced the target price from $2.40 to $2.30. Macquarie maintained its OUTPERFORM rating and $5.60 target price. Citi downgraded from buy to NEUTRAL with no change to the target price. Ord Minnett upgraded from hold to BUY and raise the target price from $3.50 to $4.10. Whilst UBS initiated coverage with a SELL rating and $2.60 target price. Another stock with a diverse coverage set.

Iluka Resources (ASX: ILU) 

There were some big numbers in Iluka’s results; profit up 186%, underlying EBITDA up 70.5%, and the interim dividend more than doubled to 25cps. Despite the eye-watering numbers, there wasn’t a lot of love from the brokers. Ord Minnett maintained a HOLD rating but upped its target price from $10.50 to $11.10. Morgan Stanley maintained an EQUAL-WEIGHT rating but lowered its target price from $11.40 to $10.90. The big move came from Credit Suisse, which downgraded to NEUTRAL from outperform and lowered the target price from $10.48 to $10.00. Macquarie stayed bullish with an OUTPERFORM rating and upped the price target from $12.10 to $12.60.

Whitehaven (ASX: WHC) 

Coal prices have been roofing it for a while now and WHC has taken full advantage. Revenue was up 216%, EBIT was up an astonishing 1396%, whilst the company posted a record net profit after tax of $1.95 billion. The other metric that stood out was the net debt of $800m+ last year, is now a net cash position of $1.03 billion. What a difference a year can make! Almost all brokers maintained their ratings, which were largely bullish going into the results, but upped price targets as follows;

  • Morgans from $6.70 to $8.60
  • Macquarie from $6.80 to $9.20
  • Credit Suisse from $7.60 to $8.90
  • Morgan Stanley from $8.50 to $9.00

Citi was one of the few brokers less impressed with Whitehaven’s results, downgrading the stock from buy to NEUTRAL and cutting the target price from $7.85 to $7.40. And that diversity of opinion, ladies and gentlemen, is what makes a market.

The final word

Reporting season is hard work. There will be some analysts and investors out there who crushed it, some that will need to work hard in the next six months to make up lost ground, and some that saw the season go by and wondered what all the fuss was about. As noted in this wire from my colleague Ally Selby, the general consensus was that the season was nowhere near as bad as anticipated. It is worth remembering that there will always be opportunities to generate returns, even opportunities that the broking/research world doesn’t highlight. As always, it pays to be well-read and to do your own research. 

Catch all our August 2022 Reporting Season coverage

The Livewire Team is working with our contributors to provide coverage of a selection of stocks this reporting season. You can access all of our reporting season content by clicking here.

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Chris Conway
Managing Editor
Livewire Markets

My passion is equity research, portfolio construction, and investment education. There are some powerful processes that can help all investors identify great opportunities and outperform the market, and I want to bring them to life and share them...

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