Global markets were mixed overnight, as US markets (S&P 500 index +0.1%) eked out a marginal gain late in the session, after spending most of the day in the red as Russian-Ukraine risks weigh on markets.
On the economic data front, US retail sales surged +3.8% in the month of January, better than the 2.1% expected after a -1.9% decline in December, as retailers brought sales forward ahead of Christmas due to supply concerns.
In stock moves, Alphabet shares rose +0.8% after revealing plans to build out more private advertising solutions, hurting competitors Meta (-2.0%), Snap (-3.4%), and Twitter (-2.0%). Air BnB rose +3.6% after its forecast better than expected first quarter revenue citing strong travel demand and longer stays. Weak results or guidance from Roblox (-26.5%), Viacom CBS (-17.8%), and Shopify (-16%) saw all experience heavy falls.
European Markets (Stoxx 600 index -0.1%) edged lower as Britain joined the US stating that they are not yet convinced around Russia’s intention to pull-out of troops on Tuesday.
UK and Canadian CPI inflation data were both stronger than expected, continuing the recent global theme of positive inflation surprises, although China’s inflation report yesterday was a rare exception to this rule. UK headline inflation of +5.5% year on year took it to a fresh 30-year year high, Canada’s CPI blasted up through + 5% and the average of the core measures rose to +3.2% ear on year, both at 30-year highs.
Upstart (UPST:NASDAQ)
Upstart shares surged +35% overnight, after delivering a solid 2021 fourth quarter result which smashed expectations across all key metrics – with revenue coming in at $304.8m, up +252% from the previous year, and earnings per share of $0.89, well ahead of expectations of $0.51. On top of strong result, Upstart guided 2022 full year revenue to come in at $1.4 billion representing +61% revenue growth from 2021 full year result. Upstart mentioned the Auto Loans market is still relatively untapped, and their potential move into Business loans which is a $644 billion segment, almost as large as Auto Loan industry.
Due to Upstart’s strong profitability and cash generation, they announced a $400m of share buyback – adding to the strong share price movement.
We have a BUY rating on Upstart, as high growth Fin-tech stock with strong growth potential. However due to its still “lofty” valuation we still maintain a “High-risk” caveat given market as any earnings beat going forward can still be punished by the market at current levels – like it has in the past.
CSL (CSL:ASX)
CSL shares rose +8.5% on their 2022 half year result. While the result was weak for CSL’s standards with revenue rising only +4% to US$5.9 billion, and net profit slipping -5% from last year down to US$1.722 billion, the market had beaten down the stock heading into the result. The weaker result driven by ongoing covid restrictions making plasma collection challenging effectively weakening margins.
However, looking ahead CSL guided net profit of US$2.15 billion to $2.25 billion, a slight upgrade from their December trading update (the profit now including the $90m to $100m Vifor Pharma acquisition costs).
While plasma collection volumes were challenging, they were up +18% from the previous year, and are now recovering which is encouraging the major source of share price lift.
At current levels we remain BUY rated on CSL, taking into account a full recovery in plasma collection soon and the Vifor acquisition – 2023 earnings guidance presents relative value trading at ~27x 2023 earnings (well below its recent average).
Fletcher Building (FBU:NZX / FBU:ASX)
Fletcher Buildings led the NZX yesterday rising +6.7%, with their 2022 half year result coming in better than expected despite Auckland being in full level 4 lockdown for 5-weeks (meaning no construction activity). First half earnings (EBIT) came in at $289m up +2.8%, and group revenue rose +1.9%, with growth across most of the group except for Residential and Land Development.
Most encouraging was margins which improved in the second quarter, and Fletcher guided 2022 full year earnings will come in at $750m, and it is on target to achieve earnings margin of 10% in 2023 financial year.
We are BUY rated on Fletcher, set to benefit from elevated construction activity even in light of some house price pressure, consent levels are still supportive and FBU are set to pay an attractive net dividend of ~6% from 2023 onwards.
EBOS (EBO:NZX / EBO:ASX)
EBOS shares rose +3.4% after delivering another solid result, which was slightly ahead of expectations, with total revenue coming in at A$5.25 billion and underlying net profit after tax of A$109.3m, both up +13% and +14% respectively. There was strong performance across the business with Healthcare earnings up +17% and Animal care up +15%. EBOS remains comfortable with their outlook and expect the Life Healthcare acquisition to be completed by the end of the 2022 financial year.
We remain BUY rated on EBOS, as solid healthcare stock delivering stable double-digit growth, able to be partially immune to rising inflation. However, given their recent strong share price performance we believe there should be some share price consolidation over the near-term and we expect modest gains over the medium-term.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX200 index +1.1%), buoyed by strong earnings from a number of companies, which was partially offset by weak commodity prices weighing down on Energy and Materials sectors.
Treasury Wines Estate soared +11.7% after reporting its half year results showing it was executing on its strategy to shift earnings away from China, and focus on higher margin, higher value labels.
Vicinity Centres surged +11% after reporting a +7.7% increase in interim earnings shaking off covid disruptions and provided upbeat guidance. Corporate Travel rose +7.6% after doubling its interim revenues.
It wasn't all positive movements, with Santos falling -2.8% despite tripling its profit as production guidance disappoints. Australia’s third largest iron ore miner Fortescue’s fell -2% after paying a reduced divided as sever price penalties on lower quality iron ore dragged earnings lower than expected.
The New Zealand market (NZX 50 index +1.4%) was up on positive global sentiment and strong earnings release
Gains were broad-based across the market with the biggest stock on teh market, Fisher and Paykel up +4.4%.
3 Things Markets will be Watching this Week
- The Latest US Fed meeting minutes, US housing and retail sales data.
- GDP data from Eurozone.
- Locally earnings season heads into full steam, with names reporting including Contact Energy, Sky City, Boral, Jb Hi Fi, Telstra, Ansell, BHP Billiton, EBOS Limited, Fletcher Buildings, Skellerup, Vicinity Centres, CSL Limited, Goodman Group (Australia), Fortescue Metals, Wesfarmers, Woodside Petroleum, Crown Resorts, QBE Insurance and Cochlear.
