Global markets were mixed overnight as shares fell on Wall Street as US President Donald Trump’s threats to shut down the government if Congress does not fund a wall on the southern border revived concern about the administration’s ability to move ahead with plans for tax reform.
It was another hectic day yesterday in terms of earnings announcements across Australia and New Zealand. Included in companies that reported on Wednesday which are under research coverage were Air New Zealand, A2 Milk, Healthscope, Woolworths and Coca-Cola Amatil which we touch on below.
Stock in Focus: Healthscope (HSO.AX)
Shares in private hospital operator Healthscope tumbled as the company released full year earnings that were treated harshly by the market.
Looking at some of the details, it was a mixed year for Healthscope, with higher revenues (up 4%) more than offset by higher costs (which saw net profit fall -9%), as well as a $55 million impairment on the company’s medical centre division, which it is selling at a large discount. There were also signs of margin pressure coming from insurers, with Healthscope noting “costs have increased greater than health fund price increases in some areas of the business”.
We have focussed on the longer-term drivers for HSO given the aging population dynamic creating demand for the private health sector.
We are currently BUY rated on Healthscope and are unlikely to change our recommendation particularly given the sharp share price reaction.
Members should look out for our full update on Healthscope to be released in our next weekly report.
Australia & New Zealand Market Movers
The Australian share market lost ground on Tuesday (ASX 200 index -0.22%) as investors savaged the likes of insurer IAG and Healthscope, which ended the session down significantly after revealing annual profit figures. The market was also unimpressed by Coca-Cola Amatil's earnings release with operating earnings down -4.3% mainly on the back of weakness in the Australian Beverages division largely to a challenging trading period which saw competitive pressures in the cola and water categories.
The biggest name reporting on a hectic day of earnings was supermarket owner Woolworths, which reversed early gains to end the session down slightly as it reported a dip in net profits thanks to large losses at Big W.
The New Zealand market was slightly higher yesterday (NZX 50 index +0.16%) led by A2 Milk Co reaching a record and Air New Zealand gaining on their respective annual earnings while Sky Network Television extended its decline. A2 Milk shares jumped to a new record as it tripled its annual profit to $90.6 million and said it would use some of its accumulated cash to buy back shares, and may pay a special dividend. Revenue rose 56 percent to $549.5 million, ahead of the $545 million it forecast in June, which was its second lift in sales guidance.
Air New Zealand's shares were a touch higher after it said its full year earnings fell 21 percent to $527 million in an increasingly competitive market. Earnings were still the second highest ever as the airline continues to benefit from lower jet fuel prices and the country's ongoing tourism boom.
3 Things Markets Will be Watching this Week
1. Corporate profits will be in focus as earnings season continues across Australia and NZ.
2. The geopolitical situation as tensions remain high between the US and North Korea.
3. US politics as investors are concerned around the Trump Administration’s ability to pursue its pro-growth agenda.
Have a Great Day,
Team