The August reporting season has now entered its second week and our stock pickers are keeping a close eye on the company earnings results – and how the market reacts to the news. This theme runs through their stock selections this week.
Michael McCarthy from CMC Markets likes James Hardie Industries (JHX). The share price has tumbled over the last three months on the back of construction downturn fears and a stubborn Australian dollar – which has been hovering around US 80 cents.
However, McCarthy thinks these factors are “more than priced in”. He says the quarterly earnings report (released tomorrow) could be the catalyst for “a significant share price re-rating.”
At the time of writing, shares in JHX were trading at around $18.70, down from a 52-week high of $23.19 and above a 52-week low of $17.80. See the one-year chart below:
Source: CommSec
Prime Value’s ST Wong is also eyeing a stock that’s taken a recent dip.
Despite the stock being sold down on last week’s fourth quarter results, he anticipates a better FY18 for the global manufacturer of CPAP masks and machines, ResMed.
“There was some disappointment over the softer-than-expected mask sales in the US”, notes Wong.
“However, a number of issues ResMed faced over the past six months appear to be short term. FY18 should look better”.
Source: CommSec
In the dislikes list this week are Wesfarmers (WES) and Pioneer Credit (PNC).
“While acknowledging the stronger track record of the WES management team, I see crosswinds for many of their exposures”, explains McCarthy.
“The FY result on August 17 could see further de-rating – target price $34.50”.
That price is well below the current 52-week low of $39.50 – see the 12-month chart below.
Source: CommSec
Wong has nominated Pioneer Credit (PNC) for his dislikes list. He suspects that the recent run up in share price has a lot to do with the market’s anticipation of a good corporate earnings result.
“Prudent to take some profits”, he says.
The financial services provider will report their annual results to 30 June 2017 on August 24.
Source: CommSec
Our Super Stock Selectors is a survey of prominent analysts, brokers and fund managers. Each week we ask them to name a stock they like, and one they don’t like. We purposely ask for ‘likes’ and ‘dislikes’ instead of recommendations, so it provides an idea of what the market is looking at, rather than firm buys or sells.
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.
