The Match Out: ASX edges higher with nearly 50% of earnings done & dusted, Financials rebound, BlueScope (BSL) suffers on guidance miss

James Gerrish

Market Matters

A reasonable session at the index level today with some support emerging for the banks into weakness while BHP rose ahead of their results due out tomorrow. Overall, more misses than beats today as many of the reporting companies fell sharply, although overall, with 40% of companies having now reported, we still observe that beats are outnumbering misses (just), yet forward estimates are being cut for both FY23 & 24, reflecting the view that the economy has peaked and is now likely to slow, which will, of course, have an impact on earnings. In other words, it’s going to get tougher from here!

  • The ASX 200 finished up +4pts/ +0.06% at 7351
  • The Financials sector was best on ground (+0.94%) while Staples (+0.09%) and Industrials (+0.06%) were the only other sectors in the black despite the index closing higher.
  • Energy (-0.97%) and Real-Estate (-0.95%) the weakest links.
  • Charter Hall (ASX: CHC) -6.06% fell sharply after reporting 1H23 operating earnings of $239.9m, -9.1% YoY while they stuck with FY23 guidance while the market was very much positioned for an upgrade.
  • Nib Holdings (ASX: NHF) -11.59% missed earnings expectations by ~5% despite meeting at the revenue line, margins were a touch soft. The stock has rallied into the result, so justifiably sold off today. .
  • a2 Milk (ASX: A2M) -8.59%, had reasonable sales for the period but guided to lower-than-expected EBITDA for FY23, the market was expecting margin expansion while the company now says they’ll be flat for the period.
  • BlueScope (ASX: BSL) -9.99% fell on a weaker 1H23 result while guidance was also lowered and now represents about a ~17% downgrade v consensus.
  • Adairs (ASX: ADH) +1.69% edged higher despite flagging supply chain costs which impacted 1H23 earnings, a theme that is expected to continue in the 2H, although shares had fallen ahead of the result.
  • Bendigo & Adelaide Bank (ASX: BEN) +1.87% delivered a strong result as the market expected given they had outlined momentum in their 5-month trading update released in Dec.
  • Altium (ASX: ALU) -0.94% fell ahead of their results due out shortly, consensus is for ~$120m in revenue (+18%) and a Net Profit After Tax (NPAT) of $31.4m, up 38% on PCP. Guidance will be key, with the market currently expecting FY23 revenue of $262m.
  • Inghams (ASX: ING) +11.68% rallied on a duo of broker upgrades.
  • QBE Insurance (ASX: QBE) +3.68% built on Friday’s strong result with some follow-through buying today.
  • What had Whitehaven’s (ASX: WHC) CEO Paul Flynn in this morning – obviously Coal prices are going to dictate the short-term moves in the stock, however operationally they are doing very well – he’s a very strong operator in our view – no BS, calls it how he sees it.
  • Iron Ore was ~1% higher in Asia today supporting Fortescue (ASX: FMG) +1.44%.
  • Gold was flat in Asian trade today, settling at $US1842 at our close.
  • Asian stocks were flat to higher. Japan’s Nikkei the underperformer, currently in line with Friday’s close, while China is up 1%.
  • US Futures are flat. The US market is closed tonight for the President’s Day holiday.
  • Reporting Tomorrow: ARB Corp (ASX: ARB) | Alumina (ASX: AWC) | BHP Group (ASX: BHP)* | Costa (ASX: CGC) | Coles (ASX: COL) | Estia (ASX: EHE) | G8 Education (ASX: GEM)* | HUB 24 (ASX: HUB) | Iluka (ASX: ILU)* | Ingenia (ASX: INA) | John Lyng Group (ASX: JLG) | Monadelphous (ASX: MLD) | Seek (ASX: SEK) | Tab Corp (ASX: TAH)

ASX 200 Chart

BlueScope Steel (ASX: BSL) $17.84

BSL -9.99%: The main focus this reporting season has been 2H guidance and BSL was no exception, they are now guiding for 2H22 earnings before interest & tax (EBIT) in the range of $480m - $550m which compares to consensus of $620m, a downgrade of ~17% at the midpoint thanks to softness in US demand and unfavourable China seasonality. The guidance is fairly surprising given the recent trajectory of steel prices, clearly BSL seeing something that most aren’t.

A2 Milk (ASX: A2M) $6.49

A2M -8.59%: the milk products company struggled today after disappointing outlook comments at their 1H result. Revenue of $783m was in line with expectations while Net Profit After Tax (NPAT) was around 5% below consensus, coming in at $74m vs $77m expected. Asian revenue was strong, up 54%, despite the total Chinese market volume falling 11% on slowing birth rates. China label infant formula revenue climbed 43.5% in the half. Revenue from the US market jumped 61.8%, in contrast, the ANZ segment fell ~25%. The company maintained revenue guidance of low double-digit growth, in line with expectations, however, EBITDA margins are expected to remain flat, dropping down to a ~5% miss to consensus. Shares were trading near 18-month highs ahead of the result, so the slight miss triggered a more significant fall in the share price today.

Adairs (ADH) $2.41

ADH +1.69%: shares in the homewares and furniture retailer bounced today, despite what most would call a difficult result. Revenue for the first half was in line with expectations at $324m, however, costs were well above expectations and earnings before interest & tax (EBIT) missed by ~10%. The company flagged an additional ~$5m in warehousing costs in the half, while heavy discounting, particularly in the e-commerce brand Mocka, to clear elevated inventory also weighed on margins. The company maintained FY revenue guidance but lowered EBIT guidance by 5% at the midpoint to $70-80m. While shares traded higher today, ADH is currently down ~15% this month.

Bendigo & Adelaide Bank (ASX: BEN) $9.79

BEN +1.87%: edged higher today on a decent update, although much of it had been flagged at the December trading update. Since then, shares have rallied ~7% and todays update should see them remain supported. Pre-Provisioning Operating Profit (PPOP) of $435m was ahead of consensus of $398m , while cash net profit after tax (NPAT) of $295m was inline. An interim dividend of 29c was announced, in line with expectations. BEN trades at an Est P/E ~11x, which is slightly below its long term historical avg., and a P/NTA of 0.8x, which is also slightly below its historical avg.

Broker Moves

  • Integral Diagnostics Raised to Outperform at Macquarie
  • Inghams Raised to Outperform at Macquarie; PT A$2.97
  • Deterra Cut to Neutral at Macquarie; PT A$5
  • Integral Diagnostics Raised to Neutral at Credit Suisse
  • Temple & Webster Cut to Neutral at New Street Research; PT A$4
  • Inghams Raised to Add at Morgans Financial Limited; PT A$3.15
  • Integral Diagnostics Raised to Accumulate at CLSA; PT A$2.95
  • Perenti Raised to Buy at Jefferies; PT A$1.35

Major Movers Today

Have a great night

The Market Matters Team

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James Gerrish
Portfolio Manager
Market Matters

James is the Lead Portfolio Manager & primary author at Market Matters, a digital advice & investment platform with over 2500 members that offers real market intel & portfolios open for investment. He is also a Senior Portfolio Manager at Shaw and...

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