Global markets were higher overnight as Wall Street indexes hit record levels, with technology stocks continuing to lead the charge while healthcare shares also received a boost. The S&P 500 market index (the largest 500 companies listed in the US) hit a new record high of 2600 for the first time.
We note that the Tech sector has been in the leadership position for some time and Tech stocks have produced remarkable earnings growth, with the sector also standing to benefit from expected tax reforms.
Closer to home, the ASX experienced gains yesterday which were quite broad based. On the NZX the market was more of a mixed bag, with a big move higher in A2 Milk (+5.3%) following a positively received AGM where the company said both revenue and net profit jumped in the first four months of the current financial year. On the flipside, both Fisher & Paykel Healthcare and Kathmandu gave up recent gains following updates which did not match what the market was expecting.
Stock in Focus: Fisher & Paykel Healthcare Glass (FPH:NZ / FPH:AX)
Shares in Fisher & Paykel Healthcare gave up some if its recent gains yesterday (-4.5%) after reporting its first half financial year results.
FPH increased first-half profit 4% to $81.3 million, widened its margins, and lifted its forecast for full-year earnings to the top end of its range. The latest earnings included $12.2 million of patent litigation costs over disputes with rival Resmed compared with $2.4 million of costs a year earlier, and excluding those, profit would have risen 13%, it said. First-half revenue lifted 8% to $458.4 million.
While the numbers looked solid, the market was expecting better given share price levels. Taking a bigger picture view, the result reinforces the company has strong growth potential, and recent weakness in the NZ dollar should provide an additional earnings boost looking forward. While litigation remains an overhang on the share price, as we touched on last week, so far FPH appear to be coming out on top.
We currently have a BUY rating on FPH.
Members should look out for a full update on FPH to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was higher on Tuesday (ASX 200 index +0.30%) led by the heavyweight miners. Banks were mixed, although Macquarie Group was particularly well supported, climbing to within striking distance of $100 per share. In stock news, GrainCorp shareholders were unimpressed after the grains handler reported a four-fold increase in annual profits, but flagged a more downbeat earnings outlook.
The New Zealand market was more or less flat yesterday (NZX 50 index -0.02%) led lower by Kathmandu Holdings and Fisher & Paykel Healthcare following trading updates, while A2 Milk Co met investor hopes at its annual general meeting. In other news, Arvida Group reported a decline in first-half profit on lower valuation gains and higher employee costs after a pay equity deal. Net profit fell to $14.5 million in the six months ended Sept. 30 from $19.4 million a year earlier for the retirement village company.
3 Things Markets Will be Watching this Week
1. The US Federal Reserve Chair makes a speech on Wednesday, with minutes from the last meeting released on Thursday
2. US Politics with Tax Reform taking centre stage.
3. The Reserve Bank of Australia releases minutes from its last meeting on Tuesday
Have a Great Day,
Team