Richard Coppleson recently highlighted the slow-burn effect that profit upgrades and downgrades can have on stock prices for weeks after the news. So we surveyed Livewire users for the most notable results so far this season, a few of which have slipped under the radar...
The much anticipated cut to the dividend didn’t stop the Telstra result from being the most popular among Livewire users so far. The rationale was around the clarification of the company’s position. As one respondent put it: ‘It derisks the company, and allows better reinvestment. Telstra should rally from here like BHP did’.
Morgans upgraded their call on the stock to Add after the results: “We have reduced our share price target on lower medium term earnings, but with what is hopefully the bear case now apparent, we think the risk swings to the upside”: (VIEW LINK)
You can see what Livewire contributors were saying about Telstra ahead of the results, including some contrarian calls from the buyside: (VIEW LINK)
#2) MNF Group
MNF group was the next most selected result. The view from our users was neatly summarised as: “Growth in revenue, NPAT and Operating cash flow. No debt. Outlook positive. Dividend increase”. Simon Shields from Monash Investors Limited also highlighted the company as the result that stood out for him, in a recent Q&A with Livewire. Commenting on the company’s numbers, he told us:
"By way of contrast, MNF grew organically in each of its three divisions: domestic retail, domestic wholesale, global wholesale. Over the year revenue grew by 19%, EBITDA and NPAT by 34% and EPS by 29%. The dividend was up 18%. There was an upbeat outlook statement albeit without metrics. As usual, MNF will wait until the AGM in late October to provide guidance. The stock rose on the result. Strongly growing, scalable, asset light businesses typically trade on lofty multiples. By such standards, MNF’s price at 22x consensus FY18 EPS is modest. Broker coverage of the stock is increasing, and this will help the market understand the business better, leading to a greater multiple over time": (VIEW LINK)
Skincare products company BWX has jumped 10% from its intraday lows on the day of its announcement last week, and is climbing higher. The stock featured in a recent Buy Hold Sell, with Tony Waters of QVG Capital giving it a BUY, focusing on the significant opportunities for the brand portfolio in the US and European markets. (VIEW LINK)
Challenger Financial Group was another popular result for users, with comments like: ‘solid results & promising prospects in view of the Japanese links’. Bell Potter’s first impression reported that: "We are currently forecasting 15% growth, but believe there is a strong possibility that guidance will be upgraded during the year given AMP and BT platform launches have yet to occur". (VIEW LINK)
Rob Tucker of Chester High Conviction Fund also included Challenger as a stock leveraging the aging population part of the fund’s megatrends strategy: (VIEW LINK)
Retail iconoclast, Kogan.com was another stock that users singled out. The stock has jumped 25% in the few days since its results, and is now up 92% since its IPO last year. User commentary includes observations such as “stunning expansion and increase in profitability in the retail sector, despite its competitors reporting Amazon threats”.
Canaccord Genuity ran the IPO, and recently reported that: "Kogan’s fundamentals profile is one of an impressive business. The strong and improving return on equity (+25%) and return on invested capital (+70%) illustrate the value accretive nature in which management is deploying capital. The company reports $42m in balance sheet capacity ($32m cash, $10m debt) enabling the group to fund growth initiatives as they arise. Following the roll-forward of our DCF-based valuation and positive earnings revisions over the short/medium term, our price target has been revised to $3.17ps (previously $2.43ps). We reiterate our BUY recommendation." You can access the research here.
In this short video with Tom Piotrowski, Russell Kogan discusses the results and the road ahead: (VIEW LINK)
Profit warnings and upgrades in 2017
You can read Coppo’s analysis on the long-term effect of stock prices from profit revisions here: (VIEW LINK)