A fairly choppy session for Australian stocks today with early weakness being largely offset from afternoon buying in the resource names - BHP and RIO both up 1.48%, however it was Fortescue that saw most love adding 2.39% to $5.15 after being very resilient during last week’s market weakness. Reporting kicked up another gear today and this week we see more companies come to market with results. Obviously last week was dominated by global equity / bond mkt volatility so reporting took a backseat, however in aggregate, we saw around half the companies that reported beat, half miss and slightly more upgrades than downgrades as a consequence. By the end of this week these trends will become more valid.
Update on market volatility & our positioning with James Gerrish – CLICK HERE
On the market today, the resources sector was best on ground adding +0.89% while the broader finished down -17pts or -0.30% to 5820 – however up from the session lows in early trade.
A good spread of companies reported today, with more to come throughout the week;
JB Hi Fi (JBH) $25.86 / -8%: probably the headline act today and the stock was down -8% to $25.86 despite delivering numbers that were inline in terms of earnings and dividend (1H NPAT of $151.7m versus ~$150m consensus) and a dividend of 86cps which was higher than expected, however the underlying metrics were not as strong, and the outlook was less upbeat. The main issue is around margins, with JB clearly maintaining sales momentum but discounting is underpinning it – and that’s a trend the mkt didn;t like. That put pressure on the overall EBIT margin which was 6.12% vs 6.91% a year ago with the Good Guys being the main culprit printing 3.82% v 5.42% a year ago. So maintaining / growing sales is one thing but having to discount to get them was clearly front and centre in terms in the mkts reaction today + its had a big run leading into the result.
JB Hi Fi Daily Chart
Bendigo Bank $11.00 / -2.05%; missed slightly in terms earnings today ($232m v $235m expected) while the dividend of 35cps was inline with expectations. The stock underperformed the sector down ~2% probably a result of bad debts ticking up in their commercial book. Overall, a reasonable result from BEN but nothing to get excited about + importantly nothing that is likely to prompt outperformance of the sector in the coming months.
Bendigo Daily Chart Ansell (ANN) $23.86 / -3.87%; result was inline + they upgraded guidance which would normally be a positive, however it’s more a result of external factors like lower US tax rate and the impact of the share buy-back over and above actual strong performance in the business. No one holds ANN for the divi however that was a slight miss (20.5 v 23cps), while they also talked about cost pressures from rising inputs which was another negative. The stock was down -3.87% to $23.86. We like ANN closer to ~$20.
Amcor (AMC) $14.38 / +0.56%; another result that was broadly in line with expectations however a few headwinds playing out for AMC that were clearly obvious. As with ANN, rising input costs are obvious while some patchy demand from some emerging markets facing businesses was also a theme. Some swings and roundabouts which point to a lower quality of result (lower tax rates etc) however guidance was reasonable which got the stock up off the session lows to close up +0.56% to $14.38
REPORTING THIS WEEK
Have a great night
James & the Market Matters Team
The above is an extract from the Market Matters Afternoon Report. To gain access to all reports for the next 14 days, including our picks into the market drop, CLICK HERE
James is a Portfolio Manager within Shaw and Partners heading up a team that manages direct equity and option portfolios. He is also the Primary Contributor to Market Matters, a daily investment report that offers real market insight.