It’s a big week in reporting season, with more than two-fifths of the market by capitalisation reporting results this week.
To recap expectations across the market, consensus expectations for 2015-16 financial year (FY16) earnings are for an 8% decline in company profits, driven by a slump of about 50% in resources earnings and a 2% fall in bank profits, leaving earnings in the rest of the market up just 1%.
After yield heavyweights Commonwealth Bank and Telstra last week kept final payouts steady, this week some of the big beasts of the resources sector take the reporting season spotlight.
This week the market hears from BHP Billiton (full-year, Tuesday), its iron ore rival Fortescue Metals (full-year, Monday 22 August) and oil and gas heavyweights Woodside Petroleum and Santos deliver half-year results on Friday. Also, on Thursday energy utility Origin Energy reports.
Just to get it out of the way upfront, BHP Billiton will report a shocker tomorrow – which should not surprise anyone after the record US$5.7 billion ($7.8 billion) loss the big diversified miner reported in its interim results in February – its first loss in 16 years. At the time BHP slashed its interim dividend from 62 US cents to 16 US cents (22 cents a share).
BHP recently announced a provision worth between US$1.1 billion–US$1.3 billion ($1.5 billion–$1.7 billion), relating to the Samarco dam disaster that occurred in Brazil late in 2015. This charge will be recorded as a one-off item in the June 2016 second-half result, along with direct costs of about US$100 million ($133 million) after tax, the company said recently. There will be a flurry of other charges taken through the profit and loss account too, to do with redundancies, closures and changes in carrying value of other assets, including the US onshore gas business.
For the full-year to June 30 2016, BHP’s revenue is expected to fall by about 40% to US$30.95 billion ($41.3 billion), and the net result to be a loss of about US$6.8 billion ($8.9 billion). Analysts expect underlying earnings (excluding one-off items) to come in at about US$1.1 billion ($1.5 billion), which would be the worst full-year result since 2001. (The most pessimistic forecasts for underlying earnings go as low as $US800 million, or $1.04 billion).
BHP ditched its “progressive” dividend policy – under which dividends would not go backwards – in February at the interim result. Analysts predict the full-year payout could be down by almost 80%.
In its recent production report BHP fell short of its FY16 iron ore production targets, but beat its full-year guidance for petroleum, copper and coking coal. The company flagged a 15% fall in oil and gas production in FY17, its second straight annual fall, as it cuts spending and reduces drill rigs at its US shale operations. But BHP also surprised investors by lifting its FY17 target for iron ore production.
BHP analysts expect the company’s profits to rebound, to about US$2.3 billion in the current financial year and increase to about US$7.7 billion by FY19. The company is betting big on copper and oil, with virtually all of its new US$900 million ($1.2 billion) exploration budget allocated to drilling for oil and exploring for copper.
BHP could well be at the bottom of its earnings cycle, and poised for rebound over the next couple of years, but it has lost its yield attractiveness, and analysts think on average that the stock should trade at $21.54, which is 4.1% higher than the current share price.
Iron ore producer Fortescue Metals reports next Monday (August 22) and will show off the benefits of ten consecutive quarters of falling costs, thanks to ongoing productivity and efficiencies. Fortescue recently announced a cash production costs in the June quarter of US$14.31 per wet metric tonne, down 35% in 12 months. Fortescue has done a great job operationally in reducing costs and also its treasury team has done brilliantly with a combination of paying down, buying back and refinancing the company’s debt.
Reducing costs and interest expense means Fortescue makes money when the iron ore price is more than US$28.40 a tonne: it is currently US$60.37. Fortescue’s break-even cost has come down from US$44 a tonne 18 months ago, and US$84 a tonne in 2013: it has been a great performance. The market expects strong earnings growth from FMG, but analysts reckon the stock is over-priced, with a consensus target price of $4.33 on FMG, or 5.6% lower than the market price.
On Friday, Woodside and Santos divulge half-year results, with Woodside’s half-year profit likely to be down by about 50%, and Santos tipped to report a first-half loss, after lower oil and gas prices hit first-half revenues.
Woodside reported a 10% rise in oil and gas output in the June quarter, while revenue fell 8% year-to-year due to weaker oil prices, but the company said it expected third-quarter revenue to improve, on higher realised LNG contract prices.
Brokers expect Woodside’s full-year revenue to fall by about 20% to US$3.6 billion, with net profit sliding by almost half, to about US$597 million. Investors will also be waiting to see production guidance for FY17 and whether (read, how much) they will need to tip-in to cover a cost blowout at its Wheatstone LNG project.
Santos’ interim report, which will mark the first time the company reports in $US, is expected to show a US$130 million net loss, down from a US$30 million profit last year, and a suspended dividend.
Analysts see Woodside having upside of at least 5.9%: that’s how much higher the consensus target price of $29.12 is above the current share price, at $27.50. They are even more bullish on Santos, with implied upside of 10.7% in the consensus target price of $5.24.
Australia’s biotech heavyweight CSL reports full-year results on Wednesday and analysts expect it to deliver a profit of about $US1.3 billion ($1.7 billion). The shares have gained 20% in the past year despite negative earnings revisions, largely on the back of optimistic FY17 expectations. Hence, the FY17 guidance given on Wednesday will need to reassure investors that promises will be delivered. Before the reporting season, CSL was marked by broker UBS as a “potential negative surprise” candidate.
Energy heavyweight Origin Energy reports full-year results on Thursday and is expected to show a healthy recovery from loss in FY15 to profitability. The faster-than-expected ramp up of APLNG has been a good story for Origin, with the second train expected to begin production in the current half-year.
The outlook commentary from origin will be crucial. Origin has floated the idea of demerging its more volatile commodity-based gas business from its utilities business – further news on that would be a bonus.
It is also a big week for insurers with IAG and Medibank Private reporting full year results on Friday and QBE and AMP delivering interim results on Wednesday and Thursday respectively. IAG was also on UBS’ list of potential negative surprise candidates.
Market darling Domino’s Pizza should report another strong set of numbers on Tuesday, but the stock’s stellar run has pushed it to $79.61, and to forward multiples of 78.4 times expected FY16 earnings and 56 times expected FY17 earnings: with little in the way of dividend to support it, those are very expensive multiples, and Domino’s will probably have to post a better-than-expected result to keep the market happy. The stock’s analysts have a consensus target price of $61.69 on Domino’s, or almost 20% below the market price of $76.91.
Travel group Webjet (Thursday) is also expected to show a robust result but again, the analysts’ consensus target price is 12% below the market price. However UBS rates Webjet as a potential expectations-beater.
Treasury Wines (Thursday) should be strong, with momentum improving in Asia, and aged care operator Aveo should also impress on Friday, as should accommodation group Mantra and recovering former blue chip Lend Lease (which analysts believe is trading almost 18% below the consensus target price.)
On Monday, we hear from two mid-caps with likely good stories to tell, trans-Tasman media and entertainment company APN News & Media and Tasmanian baby and toddler food maker Bellamy’s. Both have good upside on analysts’ consensus target price, of 18.9% and 27.8% respectively.
Full-year earnings per share (EPS) and dividend per share (DPS) expectations for companies reporting this week (analysts’ consensus figures from FN Arena):
Tuesday August 16
BHP Billiton (BHP) (reports in US$)
FY16 EPS change: –84.7% to 5.5 US cents
FY16 DPS change: –77.3% to 28.2 US cents
FY17 EPS change: +772.7% to 48 US cents
FY17 DPS change: +18.1% to 33.3 US cents
Challenger (CGF)
FY16 EPS change: +14.4% to 62.7 cents
FY16 DPS change: +6.7% to 32 cents
FY17 EPS change: +4.3% to 65.4 cents
FY17 DPS change: +6.3% to 34 cents
Domino’s Pizza (DMP)
FY16 EPS change: +32.2% to 98.1 cents
FY16 DPS change: +31.9% to 68.3 cents
FY17 EPS change: +40.2% to 137.5 cents
FY17 DPS change: +42.8% to 97.5 cents
InvoCare (IVC)
FY16 EPS change: –1% to 49.6 cents
FY16 DPS change: +7.9% to 41 cents
FY17 EPS change: +8.7% to 53.9 cents
FY17 DPS change: +9% to 44.7 cents
Mirvac Group (MGR)
FY16 EPS change: –36.4% to 10.5 cents
FY16 DPS change: +5.3% to 9.9 cents
FY17 EPS change: +33.3% to 14 cents
FY17 DPS change: +5.1% to 10.4 cents
SG Fleet Group (SGF)
FY16 EPS change: +22.8% to 20.5 cents
FY16 DPS change: +23.6% to 13.4 cents
FY17 EPS change: +30.7% to 26.8 cents
FY17 DPS change: +29.9% to 17.4 cents
Shopping Centres Australasia (SCP)
FY16 EPS change: –36.7% to 14.5 cents
FY16 DPS change: +6.1% to 12.1 cents
FY17 EPS change: –2.1% to 14.2 cents
FY17 DPS change: +5% to 12.7 cents
Wednesday August 17
Arrium (ARI)
FY16 EPS change: from –75.3 cents in FY15 to 0.2 cents
FY16 DPS change: from 3 cents in FY15 to nil
FY17 EPS change: +750% to 1.7 cents
FY17 DPS change: none expected
Charter Hall Retail REIT (CQR)
FY16 EPS change: –22.2% to 33.9 cents
FY16 DPS change: +2.2% to 28.1 cents
FY17 EPS change: –8.6% to 31 cents
FY17 DPS change: +2.5% to 28.8 cents
Crown Resorts (CWN)
FY16 EPS change: +16.7% to 61.7 cents
FY16 DPS change: +31.9% to 48.8 cents
FY17 EPS change: +8.9% to 67.2 cents
FY17 DPS change: +0.6% to 49.1 cents
CSL (CSL) (reports in US$)
FY16 EPS change: –8.5% to 267.5 US cents
FY16 DPS change: –6.5% to 115.9 US cents
FY17 EPS change: +19.1% to 318.5 US cents
FY17 DPS change: +24.3% to 144.1 US cents
Dexus Property Group (DXS)
FY16 EPS change: –16.1% to 56.7 cents
FY16 DPS change: +5.8% to 43.4 cents
FY17 EPS change: –0.9% to 56.2 cents
FY17 DPS change: +3.2% to 44.8 cents
Primary Health Care (PRY)
FY16 EPS change: –31.8% to 18.2 cents
FY16 DPS change: –39.5% to 12.1 cents
FY17 EPS change: +15.4% to 21 cents
FY17 DPS change: +11.6% to 13.5 cents
QBE Insurance Group (QBE)
Half-year
Sonic Healthcare (SHL)
FY16 EPS change: +15% to 104.1 cents
FY16 DPS change: +7.7% to 75.4 cents
FY17 EPS change: +6.6% to 111 cents
FY17 DPS change: +6% to 79.9 cents
Stockland (SGP)
FY16 EPS change: –20.5% to 30.6 cents
FY16 DPS change: +2.5% to 24.6 cents
FY17 EPS change: –1% to 30.3 cents
FY17 DPS change: +4.1% to 25.6 cents
Vicinity Centres (VCX)
FY16 EPS change: –26.1% to 18.9 cents
FY16 DPS change: +5.3% to 17.8 cents
FY17 EPS change: +0.5% to 19 cents
FY17 DPS change: +1.1% to 18 cents
Thursday August 18
Ainsworth Game Technology (AGI)
FY16 EPS change: –27.3% to 16 cents
FY16 DPS change: –3% to 9.7 cents
FY17 EPS change: +23.8% to 19.8 cents
FY17 DPS change: +24.7% to 12.1 cents
AMP (AMP)
Half-year
Asciano (AIO)
FY16 EPS change: +69.7% to 44.3 cents
FY16 DPS change: +21.2% to 20.3 cents
FY17 EPS change: +2.9% to 45.6 cents
FY17 DPS change: –3% to 19.7 cents
Aventur Retail Property Fund (AVN)
Listed October 2015
FY16 EPS expected: 12.4 cents
FY16 DPS expected: 10.3 cents
FY17 EPS change: +47.6% to 18.3 cents
FY17 DPS change: +53.4% to 15.8 cents
Bradken (BKN)
FY16 EPS change: from –141.1 cents in FY15 to 21.8 cents
FY16 DPS change: –40% to 6.6 cents
FY17 EPS change: –29.4% to 15.4 cents
FY17 DPS change: from 6.6 cents in FY16 to no dividend
Brambles (BXB) (reports in US$)
FY16 EPS change: +5.8% to 42 US cents
FY16 DPS change: –5.7% to 26.4 US cents
FY17 EPS change: +9% to 45.8 US cents
FY17 DPS change: +7.2% to 28.3 US cents
Capitol Health (CAJ)
FY16 EPS change: –83.9% to 0.4 cents
FY16 DPS change: from 1.3 cents in FY15 to no dividend
FY17 EPS change: +275% to 1.5 cents
FY17 DPS change: no dividend expected
Collection House (CLH)
FY16 EPS change: –18.6% to 14 cents
FY16 DPS change: –14.3% to 7.8 cents
FY17 EPS change: +21.4% to 17 cents
FY17 DPS change: +15.4% to 9 cents
GPT (GPT)
Half-year
Investa Office Fund (IOF)
FY16 EPS change: –10.3% to 26.2 cents
FY16 DPS change: +2.3% to 19.7 cents
FY17 EPS change: +1.1% to 26.5 cents
FY17 DPS change: +0.5% to 19.8 cents
IRESS (IRE)
Half-year
Origin Energy (ORG)
FY16 EPS change: from –49.5 cents in FY15 to 22.2 cents
FY16 DPS change: –67.4% to 16.3 cents
FY17 EPS change: +69.4% to 37.6 cents
FY17 DPS change: –23.3% to 12.5 cents
SAI Global (SAI)
FY16 EPS change: +47.8% to 27.5 cents
FY16 DPS change: –1.2% to 16.3 cents
FY17 EPS change: +5.1% to 28.9 cents
FY17 DPS change: +9.2% to 17.8 cents
Sydney Airport (SYD)
Half-year
Tatts Group (TTS)
FY16 EPS change: +5.6% to 18.4 cents
FY16 DPS change: +6.1% to 17.5 cents
FY17 EPS change: +3.3% to 19 cents
FY17 DPS change: +1.7% to 17.8 cents
Treasury Wines (TWE)
FY16 EPS change: +145.4% to 29.2 cents
FY16 DPS change: +36.4% to 19.1 cents
FY17 EPS change: +29.8% to 37.9 cents
FY17 DPS change: +35.6% to 25.9 cents
Webjet (WEB)
FY16 EPS change: +15.7% to 25.4 cents
FY16 DPS change: +4.4% to 14.1 cents
FY17 EPS change: +45.3% to 36.9 cents
FY17 DPS change: +42.6% to 20.1 cents
Whitehaven Coal (WHC)
FY16 EPS change: from –33.3 cents in FY15 to 1.6 cents
FY16 DPS change: no dividend in FY 15, no dividend expected FY16
FY17 EPS change: +312.5% to 6.6 cents
FY17 DPS change: no dividend expected FY17
Friday August 19
360 Capital Industrial Fund (TIX)
FY16 EPS change: –4.2% to 22.8 cents
FY16 DPS change: +0.5% to 21.6 cents
FY17 EPS change: –0.9% to 22.6 cents
FY17 DPS change: steady at 21.6 cents
360 Capital Office Fund (TOF)
FY16 EPS change: –2.2% to 18.1 cents
FY16 DPS change: steady at 17 cents
FY17 EPS change: –2.2% to 17.7 cents
FY17 DPS change: steady at 17 cents
Abacus Property Group (ABP)
FY16 EPS change: –7.7% to 23.5 cents
FY16 DPS change: –0.6% to 16.9 cents
FY17 EPS change: +20% to 28.2 cents
FY17 DPS change: +23.1% to 20.8 cents
Amaysim Australia (AYS)
Listed July 2015
FY16 EPS expected: 10.9 cents
FY16 DPS change: 8.1 cents
FY17 EPS change: +32.1% to 14.4 cents
FY17 DPS change: +33.3% to 10.8 cents
ARB Corporation (ARB)
FY16 EPS change: +1.7% to 58.8 cents
FY16 DPS change: +4.5% to 30.3 cents
FY17 EPS change: +9% to 64.1 cents
FY17 DPS change: +12.2% to 34 cents
Ardent Leisure (AAD)
FY16 EPS change: +43.6% to 10.6 cents
FY16 DPS change: +0.8% to 12.6 cents
FY17 EPS change: +18.9% to 12.6 cents
FY17 DPS change: +4.8% to 13.2 cents
Aveo (AOG)
FY16 EPS change: +52.6% to 17.7 cents
FY16 DPS change: +62% to 8.1 cents
FY17 EPS change: +0.6% to 17.8 cents
FY17 DPS change: +13.6% to 9.2 cents
Cover-More (CVO)
FY16 EPS change: steady at 8.1 cents
FY16 DPS change: –13.7% to 6.3 cents
FY17 EPS change: +23.5% to 10 cents
FY17 DPS change: +17.5% to 7.4 cents
DUET Group (DUE)
FY16 EPS change: +221.5% to 10.9 cents
FY16 DPS change: +3.4% to 18.1 cents
FY17 EPS change: +6.4% to 11.6 cents
FY17 DPS change: +2.8% to 18.6 cents
Evolution Mining (EVN)
FY16 EPS change: +4.3% to 14.3 cents
FY16 DPS change: +15% to 2.3 cents
FY17 EPS change: +54.5% to 22.1 cents
FY17 DPS change: +34.8% to 3.1 cents
GBST Holdings (GBT)
FY16 EPS change: –1.9% to 22.5 cents
FY16 DPS change: +4.8% to 11 cents
FY17 EPS change: +12% to 25.2 cents
FY17 DPS change: +6.4% to 11.7 cents
Insurance Australia (IAG)
FY16 EPS change: +16% to 36.2 cents
FY16 DPS change: +15.9% to 33.6 cents
FY17 EPS change: –2.5% to 35.3 cents
FY17 DPS change: –11% to 29.9 cents
Lend Lease (LLC)
FY16 EPS change: +8.4% to 121.8 cents
FY16 DPS change: +14.1% to 61.6 cents
FY17 EPS change: +5.5% to 128.5 cents
FY17 DPS change: +5.5% to 65 cents
Mantra Group (MTR)
FY16 EPS change: +90.8% to 16.6 cents
FY16 DPS change: +2% to 10.2 cents
FY17 EPS change: +10.8% to 18.4 cents
FY17 DPS change: +20.6% to 12.3 cents
Medibank Private (MPL)
FY16 EPS change: +44.2% to 15 cents
FY16 DPS change: +109% to 11.1 cents
FY17 EPS change: steady at 15 cents
FY17 DPS change: steady at 11.1 cents
Mount Gibson Iron (MGX)
FY16 EPS change: from –83.6 cents in FY15 to 3.6 cents
FY16 DPS change: from 4 cents in FY15 to no dividend expected
FY17 EPS change: from 3.6 cents in FY16 to –0.9 cents
FY17 DPS change: no dividend expected
The Reject Shop (TRS)
FY16 EPS change: +48.4% to 73.3 cents
FY16 DPS change: +40.7% to 42.2 cents
FY17 EPS change: –22.5% to 56.8 cents
FY17 DPS change: +26.3% to 53.3 cents
SEEK (SEK)
FY16 EPS change: +15.1% to 66.4 cents
FY16 DPS change: steady at 36 cents
FY17 EPS change: –8% to 61.1 cents
FY17 DPS change: +14.2% to 41.1 cents
Monday August 22
APN News & Media (APN)
FY16 EPS change: from –1 cent in FY15 to 36.3 cents
FY16 DPS change: from no dividend in FY15 to 7.6 cents
FY17 EPS change: +3.9% to 37.7 cents
FY17 DPS change: +94.7% to 14.8 cents
Bellamy’s (BAL)
FY16 EPS change: +280.6% to 37.3 cents
FY16 DPS change: +245% to 10 cents
FY17 EPS change: +79.6% to 67 cents
FY17 DPS change: +100% to 20 cents
BigAir Group (BGL)
FY16 EPS change: +85.7% to 5.2 cents
FY16 DPS change: +41.7% to 1.7 cents
FY17 EPS change: +1.9% to 5.3 cents
FY17 DPS change: steady at 1.7 cents
Data #3 (DTL)
FY16 EPS change: +30.6% to 9 cents
FY16 DPS change: +20.6% to 7.6 cents
FY17 EPS change: steady at 9 cents
FY17 DPS change: +7.9% to 8.2 cents
Fortescue Metals (FMG) (Reports in US$)
FY16 EPS change: +196.7% to 30.2 US cents
FY16 DPS change: +38% to 6.9 US cents
FY17 EPS change: +6.6% to 32.2 US cents
FY17 DPS change: +20.3% to 8.3 US cents
GWA Group (GWA)
FY16 EPS change: +190% to 17.6 cents
FY16 DPS change: +151% to 13.8 cents
FY17 EPS change: +4% to 18.3 cents
FY17 DPS change: +1.4% to 14 cents
Industrial REIT (IDR)
FY16 EPS change: –7.8% to 16.8 cents
FY16 DPS change: –2.5% to 15.8 cents
FY17 EPS change: +7.7% to 18.1 cents
FY17 DPS change: +3.8% to 16.4 cents
NIB Holdings (NHF)
FY16 EPS change: +26.6% to 21.9 cents
FY16 DPS change: +24.3% to 14.3 cents
FY17 EPS change: +9.1% to 23.9 cents
FY17 DPS change: +11.2% to 15.9 cents
Sandfire Resources (SFR)
FY16 EPS change: –14% to 38 cents
FY16 DPS change: –20.8% to 10.3 cents
FY17 EPS change: +2.4% to 38.9 cents
FY17 DPS change: +6.8% to 11 cents
Western Areas (WSA)
FY16 EPS change: from 15.1 cents in FY15 to –8.6 cents
FY16 DPS change: –98.6% to 0.1 cents
FY17 EPS change: from –8.6 cents in FY16 to 4.5 cents
FY17 DPS change: +1500% to 1.6 cents
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