Global markets were higher overnight, with the US market (S&P 500 index +0.7%) rising for the 5th day in a row after another day of strong earnings.
The earnings season is easing concerns that persistent COVID cases and rising costs could derail corporate America’s profit recovery. While supply chain shortages and cost increases affected specific stocks, neither that nor weak economic data were enough to pull markets down as markets climb "a wall of worry". Major US market indices the Dow and the S&P 500 now sit less than 1% away from their respective all-time highs.
Johnson & Johnson shares rose +2.3% after beating third-quarter earnings expectations by 25 cents per share, while Procter & Gamble slipped -1.2% despite also providing a earnings beat – adding rising costs were eating into margins. So far, 82% of S&P 500 companies that have reported earnings have beat expectations, according to FactSet.
European Markets (Stoxx 600 index +0.4%) were also up overnight, with utilities trading strongly, while food and beverages business fell as investors digested profit results.
EBOS (EBO:NZX / EBO:AX)
EBOS has been one of our top BUY calls and its shares were up +1.4% yesterday as the company continues to deliver.
EBOS held an upbeat AGM, saying sales for the first quarter jumped +10% from the same corresponding period last year as it navigates through a tricky environment. EBO also announced the acquisition of MD Solutions, an Australian distributor of medical devices and consumables – with no detail on size but it is consistent with and complementary to the Pioneer Medical and Sentry Medical acquisition completed recently. EBOS management have a great track record of making valuable bolt-on acquisitions.
We remain upbeat on the company, due to its defensive nature and solid balance sheet (~$400m of headroom to spend) to drive growth via increased investment or acquisition. The stock also remains attractively priced compared to peers and we remain BUY rated.
Australia & New Zealand Market Movers
The Australian market was a touch lower yesterday (ASX 200 index -0.1%).
Commodity stocks led the market lower with iron ore prices trading softer, as power restrictions in key steel making hubs weighed down on sentiment. BHP fell 2% after reporting a slump in iron ore output for the 2021 financial year due to train shortage and heavy maintenance schedule will result in lower exports than the previous year.
Tech shares were stronger, offsetting losses and taking a positive lead from Wall Street.
CSL was up +0.6% after it is head of research told investors the company had weathered extremely difficult conditions with clinic trials for one of its drug candidate pushed out due to the covid-19 pandemic and had some promising projects underway totaling $1 billion in the 2021 financial year.
Cochlear rose +1.9% after maintaining its profit guidance for the 2022 financial year to be up 10% to 20% higher than the previous year.
The New Zealand market was up on Tuesday (NZX 50 index, +0.5), as investor jitters eased.
A2 Milk led the market +3.9% as well as a number of large caps also performing strongly like Mainfreight (+2.0%) and Fisher and Paykel (+1.8%).
PGG Wrightson was up +3.5% after saying its had a strong current in the current financial year and anticipate 2022 operating earnings (EBITDA) to come in at $53m – inline with last year.
Fletcher Building held their AGM which gave its shareholders some confidence that despite the current lockdowns will be able to achieve earnings margin for 10% in the 2023 financial year, up from 8.2% in 2021, while the 2022 first half result will experience softer margins and being impacted by the current lockdowns.
Freightways fell -0.8%% after the courier and information management firm agreed to buy chilled transport firm ProducePronto for up to $14m.
3 Things Markets will be Watching this Week
- Key events this week include third quarter economic growth data (GDP) out of China and CPI (inflation) prints across Europe
- US Third Quarter Earnings Season kicks into gear this week.
- Locally, NZ CPI (Inflation) data is due as well as quarterly updates from listed companies, while the latest lock down restriction updates will be closely followed.