Global markets were slightly higher overnight as the US Dow Jones index hit another record high on the back of solid quarterly profit results from key industrials Caterpillar and 3M.
It is a big week for US earnings and the results so far confirm the strength of the US economy as well as stronger global growth. Once again, we point out that given the high level of the market the current US earnings season as important as ever in terms of supporting company share price valuations.
The Aussie Telecommunications space has been fiercely competitive in recent times, driven in part by TPG’s ambitious expansion plans, which saw us downgrade our recommendation on Aussie Telco giant Telstra in mid-April. Telstra recently held its AGM which we discuss below.
Stock in Focus: Telstra (TLS:AX)
Telstra continues to be a topic of debate in the Australian market, with the market divided as to whether it is “as bad as it gets” for the dominant player in the Aussie Telecommunications space.
At the company AGM, Telstra highlighted it is facing challenges but is taking steps to mitigate losses and aims to grow the business by delivering better customer experiences, driving further value from its core business, and by building new growth businesses close to its core. Telstra also reaffirmed that its total dividend in the 2018 year is expected to be 22 cents per share.
TLS said its current productivity program has already taken $250 million of underlying core fixed cost out of the business this year and is on track to deliver $1.5 billion of annual savings. TLS also believe the arrival of 5G internet will create growth opportunities in untapped areas such as driverless cars, drones, connected homes, artificial Intelligence, machine learning, smart cities, and smart agriculture.
Interestingly, the company stated that it sees TPG Telecom Ltd (TPM:AX) as a formidable competitor in the mobile market.
Members should look out for our full update on TLS to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market moved slightly higher on Tuesday (ASX 200 index +0.06%) as the ASX consolidated around the five-and-half-month high it hit late last week as a two-week run of gains slowed.
The New Zealand market managed to end Tuesday in very small positive territory (NZX 50 index +0.01%) with gains and losses across the market largely offsetting each other. The market digested the details of the governing deals made by the incoming Labour government, with A2 Milk hitting a fresh record while retirement village stocks fell further.
In stock news, Fletcher Building shares are in a trading halt ahead of tomorrow's annual meeting as a review of its Building + Interiors (B+I) business unit hangs over the company's 2018 earnings outlook. Fletcher also said it expects to announce a new CEO prior to market opening tomorrow.
3 Things Markets Will be Watching this Week
1. Quarterly US corporate profit announcements, with the level of the market making the current earnings season as important as ever.
2. Australian inflation data is published on Wednesday.
3. The European Central Bank makes an interest rate decision on Friday.
Have a Great Day,
Team