At the heart of what The Switzer Report has always set out to do is a desire to give our subscribers insights from professionals who have the jobs to assess and analyse the profit potential of companies, because it will be earnings that will be the long-term driver of the share prices of these publicly listed businesses.

And while the most recent reports on profits can be rewarded by the stock market, there’s a hell of lot of importance placed on the future of a company and that’s why outlook statements can make or break a share price in reporting season.

We saw a classic case of how important the future of a company can be when Origin Energy reported a profit of $1.4 billion, which was a 32% boost on last year’s effort. However, it still lost 9.4% on the trading day! Why? Well, the CEO warned that the outlook for 2025 looked weaker for electricity profits amid smaller retail margins and higher coal procurement costs.

There are many variables that can help or hinder future share prices. The case of Magellan’s (MFG) 14.99% jump last week to $10.73 is another case in point. The market was surprised about its announcement that it had snared 29.5% of Vinva Investment Management, which is a high performing fund manager business.

Apart from giving MFG a boost in its share price, the decision has led to headlines such as this from the AFR: “Meet the mysterious investment legend who might save Magellan.”

While I’m not an MFG shareholder, I am a shareholder in Associate Global Partners (AGP), which has a distribution deal with Vinva, whose fund had an average return of 18.5% over the last three years, when I was introduced to them a few months back.

It explains why the leadership of MFG could see the potential of this business and why they wanted to piggyback off these guys’ market insights. (I also liked the news because I have been putting some of my financial planning clients into Vinva, while telling them that I have a link to the company, which of course doesn’t include any remuneration from the fund manager.)

And so, in the spirit of looking for insights on companies that many of us hold or are thinking about holding, here’s the research work of Raymond Chan, that he sent to me ahead of the Boom, Doom, Zoom webinar he joined with me last Thursday. This is really ‘hot off the press’ thinking by Raymond and his colleagues in research at Morgans!

1. Let’s talk Tyro (TYR)

Let’s kick off with the disappointing Tyro (TYR). Ray says in the first half result, TYR lowered its transaction value guidance to a range of A$43 billion to $44 billion (previously $45 billion to $47.5 billion) but lifted its bottom end of its EBITDA guidance range ($54 million to $58 million versus $52 million to $58 million previously). Moving forward, financial year 2025 transaction value guidance will be the key focus area.

“The market is concerned about a recent slowdown in top-line growth, with consensus predicting a -3% decline in transaction value from the first half to the second half of 2024.”

This is the latest from FNArena’s analysts, who see an average rise of 66% ahead. And here’s a more extensive look at what the experts think about Tyro.

2. The word on Megaport (MP1)

Next look at another once highly-regarded business that has been on the outer: Megaport (MP1). Here the anticipated gain in the coming year averages out at 28.4% on a consensus of analyst basis.

Below is the stock’s share price movement over the past year and it does look like it’s trying to build a base for another rise.

Megaport (MP1)

This how Ray sizes up the company. “MP1 is a stock that could experience a +/-20% swing in its results, with the following key points to monitor:

1. Financial year 2024 numbers: the revenue guidance for FY24 is between $190-195 million, with an underlying EBITDA of $56-58 million and capex of $20-22 million. We sit within this guidance range.
2. Financial year 2025 guidance: MP1 may hold off providing FY25 guidance until its October ASGM to assess sales momentum.

iii. Sales Momentum: Sales growth is taking longer than expected, and most investors do not expect acceleration until late calendar year 2024. Any signs of an acceleration will be well received.

This is the extensive view of analysts about MP1.

3. The big Australian: BHP

BHP reports on August 27. This is a company we at The Switzer Report think looks like a buy at current share prices.

This is Ray’s take on the big miner: “We think there is minimal risk going into BHP results since volume and price details were released in its quarterly production report. The key focus will be on BHP’s dividend, as the company might adjust its payout in anticipation of new investment projects (CAPEX) and various Samarco civil claims. We expect a dividend of US0.57 (or annualised just 4.5%).”

A survey by FNArena tips a consensus rise of 13.7% and six out of six analysts give the stock the thumbs up, with Citi seeing an 18.72% rise ahead.

4. Let’s go to Rio!

On Rio Tinto, which has reported, this is what Ray reported: “We’re turning a bit more positive on RIO on valuation grounds. RIO is a high-quality business in great shape, extracting high margins and with a solid balance sheet. We expect some group level growth over the next few years, driven by the copper business, while the flagship Pilbara business remains dependent on sticking to its tight mine replacement schedule. RIO was recently upgraded to Add.”

Six out of six analysts tip a 16.3% rise ahead and Morgan Stanley thinks the share price could top 24%!

5. What about Fortescue (FMG)?

Fortescue (FMG) has less enthusiastic supporters, with only an 8.8% rise tipped by the consensus. While Macquarie sees a 17% fall, six others see it with a higher share price. I’d argue that if the share price of BHP and Rio head northwards, so will FMG’s.

All I’d say is that I love quality companies when the market has a short-term hate session on a business. Last year CSL, Macquarie, Xero and Resmed were on the outer and have since bounced back.

Important informati on: 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. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.