Corporate Results Monitor

FNArena's All-Year Round Australian Corporate Results Monitor.

Currently monitoring March-July 2019.

Figures shown as at 23 July 2019

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Previous Corporate Results Updates

Company Result Upgrades Downgrades Buy/Hold/Sell Prev Target New Target Brokers Commentary
ALQ - ALS LIMITED BEAT 0 2 1/4/1 8.27 7.83 6

ALS ltd's underlying FY profit beat guidance and most broker forecasts and margins improved in Life Sciences for the first time in six years. A recovery for Life Sciences is timely given the tailwind of a rebound in mining capex the company has been enjoying is now beginning to abate. The Geochemical business has slowed and management is cautious on the outlook. This leads to two broker downgrades. Macquarie (Buy) is backing the Life Sciences recovery while others fear it may have been a one-off.

ANZ - ANZ BANKING GROUP BEAT 0 3 0/6/2 28.20 27.86 8

On the numbers alone, ANZ Bank's underlying result beat most expectations. However, three ratings downgrades -- one to Sell -- leaving no Buys tells the tale. Institutional banking performed better than expected, impairments were lower than expected and cost reductions are well received. But trends in retail banking are weak and ANZ is at the forefront. Housing credit fell, delinquencies rose sharply, margins are declining and ANZ faces the greatest risk of increased NZ capital requirements. Not all brokers are overly negative, but Hold is the best they can do.

ALL - ARISTOCRAT LEISURE BEAT 0 0 6/1/0 31.90 33.19 7

Aristocrat Leisure's result beat forecasts, with the commercialisation of land-based adjacent products in North America moving faster than brokers anticipated. Digital encountered some headwinds, as expected, and is expected to return to growth in the second half, with successful execution a catalyst ahead. The company appears to be experiencing the early stage of the next upgrade cycle, which should lead to re-rating. Only Morgan Stanley (Hold) remains cautious.

API - AUS PHARMACEUTICAL IND MISS 0 0 0/0/1 1.50 1.45 1

Australian Pharmaceutical's underlying interim profit fell short of Credit Suisse's forecast. Earnings quality is lacking, with negative cash flow affected by increased inventory and payment timing. Challenges in the base wholesale market remain and no formal guidance was provided. With no organic growth on the horizon, Credit Suisse sees the stock as overvalued.

AST - AUSNET SERVICES IN LINE 0 1 0/5/1 1.72 1.79 6

AusNet's numbers equally beat, met and missed forecasts for a net in-line. Distribution guidance of 5% growth met expectations, implying an attractive yield. The bulk of earnings is locked in to end-2020 but the company can't set guidance beyond a regulatory re-set. What the next government does on energy policy is anyone's guess. AusNet is growing non-regulatory assets and cutting costs which provides some offset. Valuation is fair for most but a little rich for Citi, who downgrades to Sell.

BOQ - BANK OF QUEENSLAND MISS 0 1 0/4/4 9.19 8.73 8

Bank of Queensland had already issued a profit warning, but still brokers have cut earnings forecasts further post interim result. The outlook is bleak, featuring slowing loan volume growth, market share loss and margin pressure. The bank will struggle to stay ahead of rising costs, and does not have the scale required to invest in new technology and cope with stricter regulatory scrutiny. The dividend cut is seen as prudent, but most brokers don't believe it is the last. One downgrade to Sell, and targets cut across the board.

BKW - BRICKWORKS BEAT 0 1 0/4/0 16.93 18.19 4

Brickworks' result beat forecasts thanks to positive property revaluations offsetting a -35% drop in building materials earnings as housing slows. Housing will continue to slow while property revaluations ease off, leaving the US investment and cross-holding with WH Soul Pattinson as earnings drivers. On balance, brokers are happy to maintain Hold ratings, as suggested by one downgrade.

CIM - CIMIC GROUP BEAT 0 0 0/2/0 48.33 50.63 2

Brokers saw a solid March quarter result from Cimic, slightly ahead of expectations. FY guidance is maintained. Post restructure Cimic is a leaner, more efficient cash generator highly leveraged to the Australian infrastructure pipeline and a strengthening global mining sector. Tender opportunities provide for strong growth opportunities for the next decade. Three Holds from four brokers nonetheless suggests the stock is well priced.

CKF - COLLINS FOODS BEAT 0 1 2/1/0 7.76 8.48 3

Collins Foods FY19 beat broker forecasts thanks to a strong performance from KFC Australia, led largely by an ongoing move into delivery service via aggregator platforms. Margins were also higher due to cost cuts. KFC Europe was soggy but promotional activity is being stepped up. Taco Bell provides an opportunity going forward along with more KFC stores adding delivery service. UBS and Deutsche Bank retain Buy while Morgans downgrades to Hold after a solid share price run-up.

CSR - CSR IN LINE 0 2 0/4/3 3.22 3.22 7

CSR's reported profit was largely in line with expectations, although cash flow was weak and no guidance was offered. Management is upbeat about current demand, expecting the housing downturn to be short-lived. Brokers disagree, believing the worst is yet to come. Increased input prices continue to weigh on aluminium, albeit energy price increases have eased. Share price strength ahead of the result and weak expectations lead to two downgrades, including one to Sell, leaving no Buy ratings.

CYB - CYBG BEAT 0 0 1/1/0 3.17 4.47 2

CYBG reported ahead of expectations on solid revenue growth. The net interest margin remains under pressure but did not fall by as much as feared. The bank will moderate mortgage growth to support its margin in a highly competitive environment. Upside risk is offered by any eventual rise in UK rates, which would require a resolution to Brexit.

DUB - DUBBER CORPORATION LTD IN LINE 0 0 0/1/0 0.46 0.75 1

Dubber Corp has released a first half result which is little changed in context from the quarterly update in January, Morgans notes. After years of technology build the company has turned the corner towards commercialisation and monetisation. Revenue was up 300% year on year. The broker has rejigged its valuation model, aligning Dubber with SaaS peers that trade at higher multiples. This means a big target increase but a solid share price rally keeps the broker on Hold. Investor confidence is the major swing factor, and the broker would like to see ongoing growth in recurring revenue and active users. As Dubber is not yet self-funding, access to capital is a key risk.

DLX - DULUXGROUP MISS 0 0 0/5/1 9.74 9.66 7

DuluxGroup's result missed all expectations but FY guidance is retained, suggesting a stronger second half. Growth in paint suggests the housing downturn is not impacting. It's all academic as all brokers assume the takeover by Nippon Paint will proceed.

ECX - ECLIPX GROUP IN LINE 1 0 4/1/0 1.05 1.44 5

A -46% drop in first half earnings was largely as expected for EclipX Group following multiple profit warnings. The good news is the core businesses of core fleet and novated leasing continued to perform well, highlighting the benefits of the company's plan to divest of its underperforming Right2Drive and Grays Online businesses which dragged down the result. The divestments will simplify EclipX, avoid debt covenant breaches and make the remaining entity more attractive to potential suitors. Credit Suisse upgrades to Buy.

ELD - ELDERS IN LINE 0 0 0/1/0 6.30 6.71 1

Morgans does not indicate whether Elders' -34% fall in first half profit, due to drought and flooding rain, was as expected. The broker does suggest unchanged FY guidance requires a strong rebound in the second half, with acquisitions doing the heavy lifting. The first half was also impacted by lower wool volumes and lower cattle prices.

FPH - FISHER & PAYKEL HEALTHCARE MISS 0 0 0/1/4 0.00 0.00 5

Four brokers went into Fisher & Paykel Healthcare's result with Sell ratings on valuation terms and nothing has changed following a disappointing release. Of most concern is slowing mask growth and loss of market share, leading to slowing revenue growth. A new product release may go some way to improving the performance, but this will need to be significant. Also, strong growth in hospital applications needs to be maintained if the company is to have any chance of reaching its revenue growth targets.

FSF - FONTERRA MISS 0 0 0/1/1 0.00 0.00 3

Fonterra's first half result fell short of expectations and while FY guidance has been downgraded a substantially better second half will be required. The issue for brokers is the company is currently undertaking a strategic asset allocation and portfolio review with a view to restructuring and while this might make for significant upside, brokers are not prepared to make any assumptions until more is known.

GDF - GARDA DIV PROP FUND IN LINE 0 1 0/1/0 1.29 1.35 1

Garda Diversified's first half results were in line and distribution guidance is reiterated. Morgans notes some good leasing activity during the half. The broker updates forecasts to account for new industrial developments and does not assume any divestments. Given the strong appreciation in the security Morgans downgrades to Hold from Add.

GNC - GRAINCORP MISS 1 0 2/1/0 9.56 9.39 4

Despite several drought-related profit warnings, Graincorp's result still fell well short of forecasts. While weakness in grains was expected, malt and oils disappointed. The grains division is being impacted by unfavourable trading positions so much hinges on a proposed derivative product, particularly if the proposed demerger of grains and other businesses goes ahead. Otherwise, a break in the drought is needed. One upgrade to Hold on share price weakness. Buy-raters see material upside if the drought does break.

IPL - INCITEC PIVOT MISS 0 0 4/4/0 3.68 3.65 8

Incitec Pivot's result fell short of most broker forecasts. FY guidance has also been reduced, yet will still be a challenge unless fertiliser prices can recover. External (drought, flood) and internal (unplanned outages) factors weighed on the first half and while immediate catalysts are lacking, brokers suggest FY19 may be a bottom. A focus on improving plant reliability is a positive, albeit not a major earnings driver, while the uncertain future of Gibson Island (desperately looking for cheaper gas) remains as an overhang for the stock.

JHX - JAMES HARDIE IN LINE 0 0 6/1/0 20.94 21.57 7

While James Hardie's FY result met expectations, six Buy ratings out of seven underscores very positive broker views looking ahead. Primary demand growth notably improved in FY19 from FY18 as the US housing market stabilised, leading to guidance of further improvement and increased margins. The latter is assisted by relief on input costs such as pulp prices. A cost reduction program underway will also provide support.

JHG - JANUS HENDERSON GROUP MISS 0 1 1/3/1 33.98 34.83 5

Janus Henderson's investment return trends reached the highest level in 18 months in the March quarter, but still funds flew out the door in numbers brokers found quite shocking. There is no sign of outflows abating in the near term. A share buyback and solid yield are enough to keep UBS on Buy, but the broker warns the flow trend must reverse. Macquarie downgrades to Hold, seeing no catalyst for a re-rating, with which other brokers concur.

KMD - KATHMANDU BEAT 0 0 1/1/0 2.64 2.30 2

Kathmandu's result came in ahead of forecasts, with trading figures for January showing improvement over a weak December. Macquarie retains Hold given the current uncertain retail outlook and currency headwinds impacting on costs. Credit Suisse is of a similar view, but maintains Buy given the Oboz business is not yet included in the numbers and offers attractive growth in the broker's view.

MTS - METCASH MISS 0 2 2/2/3 2.89 2.77 7

Brokers had expected improvement in food sales from Metcash given industry trends have improved of late, with food deflation easing and price wars subsiding. But the company failed to deliver, leading to a miss of forecasts. Hardware is also now under pressure as construction declines and Bunnings steps up the competition in trade sales. A split of broker ratings reflects a balance between those seeing further earnings declines ahead and those seeing value at the lower share price, particularly as a defensive consumer staple.

MYR - MYER BEAT 1 0 0/3/3 0.38 0.45 6

Myer's result met or beat forecasts. Lower costs led to higher margins as the sales trend improved. However the company was cycling a weak prior period and total sales still fell, despite a solid lift in online sales. While the result is an improvement, brokers remain focused on the current challenges for retail and the structural decline in bricks & mortar sales. One upgrade to Hold, but no Buys.

NAB - NATIONAL AUSTRALIA BANK IN LINE 0 0 3/4/1 26.80 26.53 8

National Australia Bank reported largely in line with expectations. The dividend cut was slightly more than expected, and the capital raising (via DRP) came as a surprise, but brokers agree getting capital issues out of the way can only be a positive, ending nervous speculation. While an increase in delinquencies is of concern, NAB's lower exposure than peers to retail banking supports a positive skew in ratings. What a new CEO might do from here is the next risk (or opportunity).

NHC - NEW HOPE CORP MISS 0 2 0/3/0 3.97 3.60 3

New Hope's result disappointed brokers due to elevated costs. The company has drawn down on its debt facilities for the first time since 2006 to fund the acquisition of a 30% tranche of Bengalla, to lift exposure to 80%. While Morgans thus suggests a lower dividend is prudent, Credit Suisse expects lower capital returns going forward. A share price run-up to the result sees Credit Suisse downgrade to Hold.

NWS - NEWS CORP BEAT 0 0 2/1/0 21.24 21.65 3

News Corp's result beat the three of five covering brokers who have responded to the release. Offsetting a weaker contribution by usual star, the company's REA Group stake, were lower costs for Foxtel and News & Info. Another challenging quarter is expected ahead before improvement is seen in FY20.

NUF - NUFARM MISS 1 1 6/1/0 7.65 6.44 7

Nufarm's result either met or missed forecasts but all brokers were surprised by the extent of lowered FY guidance. With the end of the domestic drought not yet in sight the balance sheet is stretched, leading to a suspension of dividend which clearly disappointed the market, as did news of the US glyphosate lawsuit progressing. Yet while sentiment may be weak, all brokers agree the day's share price fall on top of prior weakness leaves the stock at an attractive valuation. Hence one upgrade to Buy to make six from seven, with one downgrade to Hold.

OFX - OFX GROUP BEAT 0 0 0/2/0 1.73 1.76 2

Lower costs led to what appears to be a beat of broker forecasts for OFX Group. Deutsche Bank also describes revenue growth as solid and supported by investments. Competition in retail is increasing but the company intends to focus on higher loan-to-value corporate customers. Both brokers retain Hold, with Macquarie requiring a better performance to justify a re-rating.

ORI - ORICA BEAT 1 1 0/7/1 17.69 18.76 8

Orica's result exceeded all expectations, implying the company has left the difficulties of FY18 behind it. Earnings, cash flow and the dividend all beat forecasts. Management sees a strong second half as manufacturing and industry trends improve, but brokers agree the swing factor remains the ramp up of the Burrup plant, which is critical to valuation. At least there was no bad news on Burrup this time. One upgrade and one downgrade, both to Hold, implies caution.

PMV - PREMIER INVESTMENTS BEAT 0 0 3/2/1 18.64 18.03 6

Premier Investments' result surprised brokers as the traditional brands outperformed, when typically they've proven a drag. The company's star growth story Smiggle is now seeing a slowing of pace, leading Premier to again change tack and concentrate on wholesale and online expansion while closing 12 stores. Landlords were warned. Smiggle growth will be tempered during the transition and as to the success or otherwise of the new strategy, brokers are split.

PPH - PUSHPAY HOLDINGS IN LINE 0 1 2/0/1 3.47 3.27 3

New Zealand born Pushpay Holdings' financial update had analysts divided and not only because of the unexpected departure of the CEO and co-founder of the business. If one takes a positive view, there seems plenty of growth on the horizon, still, accompanied by even more leverage in the business model. At Ord Minnett, however, the attention is firmly focused on the operational risks that come hand-in-hand with such a young and immature business, hence the downgrade to (equivalent of) Sell post the FY19 update.

REA - REA GROUP MISS 0 0 2/2/1 86.48 83.01 5

Brokers were expecting a tough March quarter for REA given the housing downturn, and so it came to pass. A miss for associate businesses led to the result falling short. However, Macquarie (Buy) is not alone in describing the result as "very good" given despite a big fall in listing volumes, REA still managed to grow revenues and earnings. Guidance suggests another weak quarter in June. Thereafter ratings largely reflect just how only it is believed the housing downturn will last.

RMD - RESMED BEAT 1 0 5/2/1 15.08 16.45 8

ResMed's result beat all forecasts on improved market share in masks and operating cost reductions. One upgrade to make five Buy ratings reflects broker belief in ongoing growth ahead across products and in-home care through digital investment. Brightree remains a little disappointing but is driving higher re-supply. Macquarie (Sell) is the naysayer, suggesting the market is failing to price in the risk from competitor mask launches and, longer term, the potential for new technologies.

RHL - RURALCO IN LINE 0 0 0/1/0 4.40 4.40 1

Ruralco reported in line with guidance, which Morgans describes as a solid result in tough times. The company is benefitting from diversity in geography, products, services and channels to market. That said, management remains cautious over short term seasonal conditions. Morgans believes there is limited scope for the Nutrien takeover bid to be gazumped.

SHV - SELECT HARVESTS BEAT 0 0 0/1/0 6.65 7.25 1

Select Harvests has posted an "exceptionally strong" crop performance, UBS suggests, 11% above previously upgraded guidance, thanks to ideal conditions, new technology and risk mitigation investment in, for example, frost fans. The company does face higher costs for leasing and water, but this can be offset by strong performance and lower processing costs. US-China trade relations offer volatility in almond pricing but the broker makes no changes to price forecasts. Neutral retained..

SIG - SIGMA HEALTHCARE MISS 0 2 0/0/4 0.52 0.48 4

We'll call Sigma Healthcare's result a miss as while earnings were roughly in line with forecasts, guidance disappointed and brokers are concerned over ongoing capex on investment in new distribution centres. A cost reduction program may help offset but the loss of the Chemist Warehouse contract has yet to take effect and the stock is trading at a premium given a (rejected) takeover bid from rival Australian Pharmaceutical. To that end two brokers have downgraded, making four from four Sells.

SIL - SMILES INCLUSIVE MISS 0 1 0/1/0 1.01 0.14 1

Smiles Inclusive released an interim result that was worse than bad. Integration issues, practice underperformance and a lack of management oversight have brought loan covenants into question and the bank is now working with the company. CFO and CEO are gone. FY guidance is lowered. Morgans has downgraded to Hold from Add. Price target falls to 14c from $1.01.

SEA - SUNDANCE ENERGY BEAT 0 0 1/0/0 1.69 1.48 1

Morgans described Sundance Energy's quarterly financials as strong. The highlight was confirmation that the company and infrastructure provider Enterprise had cleared the bottleneck which constrained production growth. So far this year, the share price has only recovered half as much as the oil price. The broker suspects the discount has been triggered by investor conservatism regarding US/China trade tensions.The disconnect is not expected to be sustained, with Sundance Energy set to accelerate both production and earnings growth.

SM1 - SYNLAIT MILK MISS 0 0 0/0/2 0.00 0.00 2

Despite ongoing solid growth in infant formula, Synlait Milk's result fell short capital investment and operating expenditure that will lead to substantial profit reduction year on year. There is concern over margin pressures arising from the renegotiation of the a2 Milk contract which at this stage are hard to forecast. The outlook for volumes is positive. Longer term the diversification strategy makes sense, but in the short term, two Sells.

TNE - TECHNOLOGYONE IN LINE 0 2 0/2/2 5.61 7.21 4

A change in accounting standards made like to like comparisons of TechnologyOne's result a messy affair, but it appears the numbers were largely as forecast. An increased dividend was a highlight. Brokers are confident in FY guidance given solid growth in SaaS, albeit customer migration is reducing cash flow ahead of longer term benefits. Two downgrades reflect a general belief the stock had run too far, ahead of valuation.

TPM - TPG TELECOM BEAT 0 0 1/2/3 6.51 6.50 7

TPG Telecom's result met or beat forecasts on solid cost control and better earnings from the corporate division. Brokers point to structural headwinds ahead and rising wholesale costs in the second half. There is significant downside risk were the ACCC to reject the Vodafone merger proposal, which leaves only Morgan Stanley game to hang onto a Buy rating.

TPE - TPI ENTERPRISES MISS 1 0 1/0/0 1.77 1.31 1

TPI Enterprises' 2018 results were below expectations and guidance. Profit was affected by several negative items including lower capacity utilisation, softer manufacturing throughput and inadequate staffing. Nevertheless, the company appears to be making progress and was profitable in the fourth quarter. Morgans also expects volume gains to continue and further operating efficiencies to drive profitable growth. Rating is upgraded to Add from Hold as the broker considers the current trading levels attractive, for more speculative investors.

WBC - WESTPAC BANKING MISS 0 0 2/3/3 27.06 26.93 8

While Westpac's result came in slightly below forecasts, an even split of ratings highlights divergent views from here. Westpac is the most heavily weighted amongst peers to mortgages, yet retail banking actually exceeded expectations. Lower revenues and margin and fee pressure are nevertheless expected ahead. The main question remains one of capital, with the bank seemingly reliant on discounted DRPs while retaining its dividend. Brokers are not convinced the dividend will not be cut in the future.

XRO - XERO IN LINE 0 2 1/2/3 44.93 52.75 6

Xero's result met most analyst expectations. Growth in UK subscriptions of 48% was a highlight, albeit drawing attention away from a fall in subs growth elsewhere. The result represents a turning point as a maiden profit and positive free cash flow means the company is now self-funding. This seemed to rather over-excite the market, leading to two downgrades to Sell, and only Morgan Stanley (Buy) is left to wave the flag. Two brokers have lifted their price target near present share price level.

Total: 46

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08/08/2019NGIearnings result
15/08/2019QBEearnings result
01/08/2019RIOearnings result
26/07/2019RMDquarterly earnings
06/08/2019SCPearnings result
16/08/2019SGRearnings result
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