This week we move into the third week – and the second major week – of FY14 profit-reporting season, with some heavyweight stocks stepping up to the plate.
Rio pleasantly surprises
The highlight of last week was Rio Tinto shrugging off concerns about an over-supplied iron ore market, more than doubling its reported half-year profit to US$4.4 billion, with underlying earnings coming in at US$5.1 billion ($5.5 billion), well above expectations of US$4.56 billion. The big miner lifted its dividend by 15%.
The stellar performance was all the more meritorious given falls in the prices of its main commodities, which lopped nearly US$1.4 billion from the bottom line. That was more than offset with extra production, plus much more efficient than expected cost-cutting – the aggressive cost-cutting and productivity improvements at Rio are flowing straight through to the bottom line – and its performance puts BHP under pressure to announce a similar belter of a result on Tuesday week.
Some good news, some bad
This week we hear from several companies nominated by analysts as potential bearers of bad news, with Newcrest, Fairfax Media and Computershare all considered likely to disappoint.
Conversely, Commonwealth Bank, Crown Resorts, Echo Entertainment, UGL, Domino’s Pizza, Suncorp and CSL are all reporting this week, and the market is expecting potential good news from them.
JB Hi-Fi has kicked off the week this morning with a fairly strong result, with net profit up by 10.3% to $128.4 million for the 12 months ending June, slightly ahead of consensus forecasts, which were looking for profit of about $127.7 million. Earnings per share (EPS) rose 9.1% to 128.4 cents a share, ahead of the 127.1 cents expected. Total sales rose by 5.3% to $3.48 billion. Along with all key measures rising, the share price will be supported by an on-market buy-back. However, in an example of the often seemingly perverse reactions of the stock market in reporting season, JB Hi-Fi shares have been slammed on the basis of disappointing July sales and a soft outlook for the first half of the current financial year.
On Wednesday, Commonwealth Bank is expected to lift earnings per share (EPS) by at least 10%, to 525.8 cents, and boost its dividend by 9.4%, to just under $4. That would put CBA on track for a record profit of about $8.6 billion. Analysts predict a second-half dividend of $2.17, up from $2 last year.
The bank’s capital levels will be closely watched, as will margins, costs and the level of bad and doubtful debts.
On Thursday, Telstra is expected to show a 9.4% rise in EPS, and a full-year dividend lifted 5%, to 29.4 cents. The market has also pencilled-in a share buy back from Telstra, of about $2 billion worth of stock. The Mobiles division – which makes up half of Telstra’s equity value – is expected to be the main driver of the result.
Wesfarmers also reports on Thursday, and analysts are expecting a boost of just under 7% to EPS, and a significantly strengthened dividend (+13.5%). The coal division is struggling, but as Deutsche Bank puts it, Coles and Bunnings now account for more than 75% of Wesfarmers’ forecast earnings. A capital return is also expected from Wesfarmers in the near future, if not at this result, at the FY15 interim.
In any case, as bionic ear maker Cochlear showed last week, even a seemingly poor result – FY14 net profit plunged 29%, on the back of 15% growth in sales – will be accepted by the share market if (a) it was expecting it, and (b) the company in its outlook statement gives the market good reason to believe that a turnaround is on the way. Cochlear was able to point to product launches and product approvals that provide basis for this optimism.
Here is a heads-up of major company results to look out for this week, with consensus market expectations:
Tuesday 12 August
UGL (UGL)
Consensus earnings per share (EPS): 65.1 cents, +197%
Consensus dividend per share (DPS): nil, versus 39 cents in FY13
Wotif.com (WTF)
Consensus earnings per share (EPS): 20.3 cents, –15.8%
Consensus dividend per share (DPS): 24.6 cents, +7%
Domino’s Pizza (DMP)
Consensus earnings per share (EPS): 51.8 cents, +26.7%
Consensus dividend per share (DPS): 37.1 cents, +20%
Wednesday 13 August
Computershare (CPU) – reports in US$
Consensus earnings per share (EPS): 58.4 cents, +106.4%
Consensus dividend per share (DPS): 26.6 cents, –7.6%
Carsales.com (CRZ)
Consensus earnings per share (EPS): 40.4 cents, +13.8%
Consensus dividend per share (DPS): 32.9 cents, +16.2%
CSL (CSL) – reports in US$
Consensus earnings per share (EPS): 277.6 cents, +13.8%
Consensus dividend per share (DPS): 111.9 cents, +9.7%
Commonwealth Bank (CBA)
Consensus earnings per share (EPS): 525.8 cents, +10%
Consensus dividend per share (DPS): 398.3 cents, +9.4%
Echo Entertainment (EGP)
Consensus earnings per share (EPS): 17.2 cents, +70%
Consensus dividend per share (DPS): 7.5 cents, +25%
Primary Healthcare (PRY)
Consensus earnings per share (EPS): 31.1 cents, +4%
Consensus dividend per share (DPS): 20.2 cents, +15.4%
Southern Cross Media (SXL)
Consensus earnings per share (EPS): 11.6 cents, –14.7%
Consensus dividend per share (DPS): 7.5 cents, –16.7%
Suncorp (SUN)
Consensus earnings per share (EPS): 91.4 cents, +138%
Consensus dividend per share (DPS): 93 cents, +69%
Thursday 14 August
Telstra (TLS)
Consensus earnings per share (EPS): 33.6 cents, +9.4%
Consensus dividend per share (DPS): 29.4 cents, +5%
Crown Resorts (CWN)
Consensus earnings per share (EPS): 86.7 cents, +59.7%
Consensus dividend per share (DPS): 37.8 cents, +2.2%
Dexus Property Group (DXS)
Consensus earnings per share (EPS): 8.1 cents, –25.7%
Consensus dividend per share (DPS): 6.2 cents, +3.3%
Fairfax Media (FXJ)
Consensus earnings per share (EPS): 6.4 cents, versus loss of 0.7 cents in FY13
Consensus dividend per share (DPS): 3.6 cents, +80%
Platinum Asset Management (PTM)
Consensus earnings per share (EPS): 33.7 cents, +47%
Consensus dividend per share (DPS): 31.9 cents, +45%
Wesfarmers (WES)
Consensus earnings per share (EPS): 209.4 cents, +6.9%
Consensus dividend per share (DPS): 204.4 cents, +13.5%
Friday 15 August
Magellan Financial Group (MFG)
Consensus earnings per share (EPS): 49.1 cents, +12.6%
Consensus dividend per share (DPS): 37 cents, +362%
Sirtex Medical (SRX)
Consensus earnings per share (EPS): 45.4 cents, +34.3%
Consensus dividend per share (DPS): 17.4 cents, +74%
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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