Reporting season gears up significantly this week and there are plenty of companies announcing earnings. Some of the blue chip stocks to report include Cochlear, CSL, Wesfarmers and Woodside. Here is what to expect from some of the greats and we’ll have another instalment in our Thursday report.
Tuesday August 14
1) Cochlear (COH)
Global hearing-aid leader Cochlear reports on Tuesday and the market will be looking for a solid sales lift on the 32,554 units Cochlear sold in 2017: growth of 8% or better would be a good result. The launch of the latest Cochlear N7 unit boosted US sales by 15% in the first half of the financial year and should help to boost overall unit sales. Cochlear is a big offshore money earner – more than 90% of revenue – so it benefits from a falling Australian dollar as it translates overseas profits back into its home currency. Cochlear’s outlook statement for FY19 will be closely watched, as it is one of the stocks thought to have most potential for good news.
Market consensus is looking for a net profit of about $248.3 million, which would represent a lift of about 11% on the $224 million net profit struck in FY17. At the earnings per share (EPS) level, the collation of analysts’ estimates by FN Arena expects EPS of 433 cents – up 11.1% from 389.7 cents in FY17 – flowing into a fully franked dividend of 306.2 cents, up 13.4% on the 270 cents dividend of FY17. Thomson Reuters’ collation has a consensus EPS estimate of 433.3 cents, with a fully franked dividend of 306.1 cents.
2) Whitehaven Coal (WHC)
Queensland-based coal producer Whitehaven Coal did not get the memo from the Australian activist community that “coal is dead” – and if it did, it put it in the bin. Whitehaven produces both coking (steelmaking) coal and thermal (electricity) coal. With thermal coal prices reaching seven-year highs, and demand still strong, Whitehaven Coal has told the market to expect a “record set of financials” this year. Prices for Whitehaven’s thermal coal surged 18.1% in the June quarter to US$98 a tonne, up from an average of US$83 in the same quarter last year, on the back of strong demand in Asia,
Market consensus expects net profit of about $558 million, up about 38% on FY17’s net profit of $405.4 million. Last year the coal miner used its profit surge to pay down a big chunk of debt, while simultaneously rewarding shareholders with a 20-cents per share distribution, made up of a 14-cent capital return and a 6-cent unfranked dividend. This year, Thomson Reuters is looking for EPS of 53 cents, up 13.5%, and an unfranked dividend of 29 cents, almost five times higher than the 6 cents paid last year. FN Arena expects 53.4 cents in EPS and a dividend of 32.3 cents.
Wednesday August 15
3) CSL (CSL)
Wednesday will see one of the most eagerly awaited results, with Australia’s global biotech heavyweight CSL reporting. CSL is definitely one stock where the market sees a good chance of a company surprising on the upside and outperforming its guidance. It thinks this is mainly because of evidence of strong global demand for CSL’s products, in particular, demand in its Seqirus influenza business. Management attributed a May upgrade forecast to better-than-expected sales from Idelvion (CSL Behring’s haemophilia B therapy) and Haegarda (its hereditary angioedema therapy), and a strong performance from Seqirus because of the severe northern hemisphere influenza season.
In May, CSL upgraded its guidance for FY18, with the company now forecasting FY18 net profit to be in the range of approximately US$1,680 million–US$1,710 million (at constant currency). Market consensus is a bit higher than that, at US$1.72 billion, which would represent a 28.6% rise on FY17’s net profit of US$1,337.4 million. In EPS terms, FN Arena’s consensus estimate is for 380.3 US cents, up 56.6% on FY17’s 242.9 US cents, flowing into an unfranked dividend of 165.8 US cents, up almost 22% on the 136 US cents paid in FY17. In A$ terms, Thomson Reuters is looking for EPS of 513 cents and a dividend of 229.5 cents.
CSL could be a case where too much good news is already baked into the current share price: investors will be hoping that the company’s FY19 outlook statement justifies the bullish outlook.
4) Insurance Australia Group (IAG)
Insurance heavyweight IAG came out of the Hayne Royal Commission relatively unscathed, and the focus of investors is now firmly on the FY18 result and the expectation that funds from the sale of businesses in Thailand, Indonesia and Vietnam will be returned to shareholders. IAG is tipped to announce a capital return this week, with a $750 million share buyback considered the most likely form, although a share consolidation and a franked special dividend could also be revealed. In profit terms, market consensus is looking for net profit of about $1.09 billion, compared to $929 million in FY17. The market will also be watching for an improved insurance margin – it was 14.9% last year.
Thomson Reuters projects EPS of 46 cents, with a 34 cent fully franked dividend, up one cent. FN Arena is looking for EPS of 44.2 cents, with a dividend of 33.1 cents.
5) Wesfarmers (WES)
Retail giant Wesfarmers also reports on Wednesday. Following a spate of asset sales, Wesfarmers now has a war chest of more than $3.5 billion: the market is expecting further indication of what the company is likely to do with the funds, especially any capital return plans.
Operationally, the market is definitely hoping that the bad news from the Bunnings UK and Ireland debacle is fully revealed. Coles could also disappoint, although the Bunnings Australia/New Zealand, Kmart and Officeworks businesses are expected to show continued strong performance.
The market is looking for net profit of about $2.79 billion, down from $2.87 billion in FY17. FN Arena puts the analysts’ EPS consensus forecast at 228.9 cents, with a fully franked dividend of 218.2 cents, down from the $2.23 paid last year. Thomson Reuters expects EPS of 245.2 cents, and a dividend of $2.20.
6) Woodside Petroleum (WPL)
Australia’s largest oil and gas producer comes out with half-year results on Wednesday: Woodside uses the calendar year as its financial year. The market is expecting an interim net profit around the US$744 million mark, up significantly on last year’s half-year net profit of $US507 million ($650 million).
Woodside has already reported that sales revenue for the first half was 27% higher at $US2.39 billion for the six months, as sales volumes increased just over 7% to almost 44 million BOE (barrels-of-oil equivalent) and the average realised price for LNG and oil rose. The company has previously forecast output this year of between 85 million and 90 million BOE, after an 11% decline last year to 84.4 million BOE.
The market is also hoping to hear more details of the preliminary LNG tolling (processing) agreement between the North-West Shelf partners on handling gas from Woodside’s huge Browse gasfield, which boosts the likelihood of Browse finally being developed, more than five decades after discovery.
Thursday August 16
7) Origin Energy (ORG)
Power “gentailer” Origin Energy reports full-year results on Thursday, and will show a much better number than last year’s $2.2 billion net loss. This year the market is expecting net profit of about $972.7 million, a big improvement on FY17’s underlying earnings (stripping out the impairment charges), which came in at $550 million.
Like the financial services stocks, Origin has been under heavy regulatory and political pressure in light of rising power prices as well as a community backlash. The Australian Competition & Consumer Commission (ACCC) has recommended that the Australian Energy Regulator (AER) set a simple default retail price for electricity in each distribution area in the National Electricity Market (NEM): this is seen as being behind the recent flat share price performance of Origin, but broker consensus appears to believe that the company is in a better position than major listed rival AGL.
Origin has begun receiving distributions from its investment in the APLNG export gas plant, which is also distributing gas into the domestic markets. APLNG sustained record production in the June quarter. FY17 underlying EPS was 31.3 cents, while reported EPS after the impairments was a loss of 126.9 cents. For FY18, FN Arena is looking for EPS of 52.7 cents, with a dividend of 4.4 cents. Thomson Reuters expects EPS of 59.4 cents, with no dividend.
8) Telstra (TLS)
Telstra also reports full-year FY18 results on Thursday, and while the headline net profit number expected by analysts’ consensus is somewhere around $3.4 billion – compared to $3.9 billion last year – many investors will go straight to any news about next year’s dividend. Last year, Telstra said it would cut its full-year dividend from 31 cents in FY17 to 22 cents a share, almost a 30% haircut for the telco giant’s army of retail shareholders. But with Telstra’s earnings under severe pressure from the NBN’s rapid erosion of its traditional fixed-line phone and internet businesses, and from intensifying competition in mobile – most notably the upcoming fourth mobile network from TPG Telecom – investors are wondering, despite the $11 billion in payments from NBN, where Telstra’s earnings growth is coming from to even keep the dividend at that level in FY19. Bell Direct, for example, sees the dividend going as low as 16 cents, although not necessarily all in one hit.
The analysts’ estimates collated by FN Arena expect Telstra’s EPS to come in at 27 cents in this result – down 17% from the 32.5 cents reported in FY17 – and a fully franked dividend of 22 cents. Thomson Reuters’ estimates collation looks for EPS of 28.6 cents, with a dividend of 22 cents.
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