In this briefing:
1. Aussie Reporting Season Update: February 2019
- The Banks remain under earnings pressure from several fronts, with weak credit growth, falling net interest margins and rising compliance costs following the Banking Royal Commission. The CBA and BEN results highlighted these headwinds and how borrowers are migrating from high margin interest-only loans to lower margin principal and interest loans. Away from Banks, the insurance sector has navigated its way through several weather events relatively successfully, with IAG and SUN delivering in this space.
- Fears that declining house prices would rattle the consumer have generally been misplaced, at least thus far. The JBH and SUL results showed how well-managed businesses have been able to shift the product mix to maintain margins. Similarly, the DHG result showed that even with declining listings it’s possible to lift earnings in the face of these headwinds. However, the BAP result was clearly impacted by the weak consumer.
- In the infrastructure capex space, CIM produced a solid result, but DOW failed to meet analysts’ expectations even if the work pipeline is still growing. Higher integration and stamp duty costs took the gloss off the TCL result even though the longer-term growth opportunities look solid.
- Growth stocks trading on high PE multiples such as CSL and TWE delivered strong earnings growth, but this wasn’t enough to satisfy investors. These stocks sold- off after delivering solid half-year results. RMD was a clear miss on revenue, with the market questioning management’s decision to investment away from its core business.
- Cost pressures felt in the US operations of AMC and BXB appear to be easing. BXB is investing to defend earnings, while AMC is seeing new opportunities in its Bemis acquisition and coffee pod manufacturing. TLS continues to face pressure from the NBN and competition in mobile. The new 5G network is expected to deliver some relief on margins.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
