By Chris Becker
Earnings reports started up again yesterday and are now accelerating with over 100 companies on the All Ords reporting this week. On Tuesday, the avalanche continued, but it was mainly small and microcaps that we follow (and sometimes prefer) at the FARM.
Ansell Ltd – (ANN) the health and safety protection provider, reported FY net profit in line with estimates at $130million, with final sales up slightly higher than expected. In addition to the raised dividend (but still at a poor 2.5% yield), guidance for FY13 earnings per share (EPS) was higher than expected.
The stock closed up over 3% on the day, with the weekly price chart showing strength:
The consensus price target is still quite high at $15.01, with 3 Buys, 8 Holds and 2 Sells. FARM considered the stock “Core” quality before the earnings release, with an acceptable to moderate Risk Score.
carsales.com Ltd – (CRZ) had a ripper year, with net income coming on way above estimates at nearly $72 million vs $67 million expected. Sales were slightly higher as well, which gave a big boost to the EPS at 30.5 cents instead of the 28.6 cents expected.
Macro Investor recently reviewed CRZ with an “Investment Grade” rating, and giving it a low Risk Score with “Hold” market condition as it remains in a bull trend.
The stock climbed over 8% for the day, which looks well overbought – heres the weekly price chart showing strength:
Price is now well over consensus target at $6.39, with most brokers having a hold on the stock, at 5 Buys, 11 Holds and 3 Sells.
Goodman Fielder (GFF) the food products provider, was next off the line, and posted a net loss for the year, claiming “domestic market conditions in FY13 to remain similar…in challenging environment”. The loss – at $147 million – was in line with estimates and no dividend was declared.
It seems the market had priced in the result anyway, as the stock climbed 8% on the day after a long downtrend in recent months:
The consensus price target is right on the current price at 55 cents, with 3 Buys, 7 Holds and 3 Sells. FARM considered the stock “Avoid” quality before the earnings release, with an moderately high Risk Score.
Dominos Pizza (DMP) another favorite at the FARM (although we prefer fresher food to eat) reviewed in one of our pre-launch editions, said they expected to deliver a 15% jump in profit next year, posting a FY12 profit of nearly $27 million – some 25% higher than last year. This is a growth stock de jeur…
Revenue was up over 7% as 62 new store openings continued to be rolled out and success in recessionary Europe proving the resilient nature of the company’s products. Online sales continue to be a big – and smart – segment for the company to tap into, which will increase productivity.
The market liked the news pushing the stock up nearly 3%:
Even so, the consensus price target is still above the current price at $10.43, with 4 Buys, 5 Holds and 2 Sells -but Credit Suisse has recently cut the company to “Neutral” from Buy.. FARM considered the stock “Investment Grade” quality before the earnings release, with a “Hold” and relatively low Risk Score.
GWA Group (GWA) the building fittings manufacturer saw a 37% drop in net profit, with revenue down 6% for FY12. The market was expecting this, as it just missed its income estimates for the year, coming in at nearly $40 million on expectation of $40.1 million, with sales also slightly below expectations.
The dividend also disappointed at 8.5 cents per share, but at over 11% yield is still impressive, as the company announced a new policy of paying out 80-95% of its NPAT as dividends. Is this a sign of lack of expansion opportunities? The MD claimed the poor result was due to the winding back of the extraordinary government stimulus following the GFC.
The earnings drop had already been baked into the price over the last couple of months, but the market still sold off GWA by over 4%:
The consensus price target at $2 has nearly been reached and there’s not much love for the company, with 2 Buys, 8 Holds and 1 Sells. FARM considered the stock “Investment Grade” quality before the earnings release, but with an “Avoid” position signal due to its high Risk Score and negative Macro driver.
Finally we look at microcap mining services company Boom Logistics (BOL) which reported a record net profit of nearly $20 million , after a nearly $40million loss last year. The result saw the stock soaring – up 26%:
What makes BOL different to other mining services companies is its position in the “OpEx” basket – it mainly provides maintenance solutions, and is not as exposed to the capital expenditure boom which has peaked.
The consensus price target is at 39 cents, and although there’s not much coverage of the stock, most analysts rate it well, with 4 Buys, 1 Holds and 0 Sells. FARM considered the stock “Avoid” investment quality before the earnings release due to its previous run of losses, but had a “Buy Full” position signal, but a small allocation due to its moderate Risk Score.
Full valuations and analysis of these and all results for this week will be posted in the next edition of Macro Investor in the “Stocktake” section, with daily updates continuing here!
Chris Becker is an investment strategist at Macro Investor, Australia’s leading independent investment newsletter covering stocks, trades, property and fixed interest. Each week Macro Investor publishes tables on the top ten most undervalued and overvalued stocks on the ASX. A free 21-day trial is available at the site.
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The author owns Cochlear (COH) shares for his family superannuation fund, and the Macro Investor model portfolios have positions in some of the stocks mentioned above.