Earnings Rally | Crown’s Concerns Ease

27 October 2021

Global markets were higher overnight, with the US market (S&P 500 index +0.5%) at a new high on the back of strong earnings results. Investors were also upbeat on consumer confidence data which showed an unexpected rebound in October as inflation concerns were offset by improved labour markets, and 14% month on month increase in new house sales for the month of September.

Technology shares were mostly higher ahead of their earnings, except Facebook which was the only major tech name to report and slipped -3.9%.  Despite an earnings beat, Facebook's revenue and monthly active users missed market expectations and the bears also highlighted Apple’s privacy rules squeezed advertising revenue. United Parcel Service saw its shares jump +6.9% after the shipping firm posted strong beats on profit and revenue across all business segments. 3M dipped -0.1% despite beating expectations on the top and bottom lines.

Nearly 30% S&P 500 companies have reported earnings so far and more than 80% of them beat Wall Street expectations, according to CNBC calculations.

European Markets (Stoxx 600 index +0.8%) were higher with travel and leisure stocks leading gains as most sectors and major bourses were firmly in positive territory. Swiss bank UBS jumped +1.3% posting its best quarterly profit since 2015. Drugmaker Novartis rose +1.1% reporting higher profits and strong sales forecasts for its best-selling pharmaceuticals. Reckitt Benckiser leapt +5.8% after the cleaning products maker beat sales estimates and raised forecasts.


Crown Resorts (CWN:ASX)

Crown shares were up +8.7% yesterday, after the final report of the royal commission into Crown’s suitability to run Crown Melbourne found the company “unfit” but didn’t recommend stripping the embattled operator’s casino licence, with Crown keeping its licence for 2 more years under close scrutiny from an external monitor.

The 8-month royal commission uncovered what Commissioner Ray Finkelstein described as “disgraceful” conduct. However, the company’s recent reforms have inspired hope it could be suitable to run Crown Melbourne in the future. Operations tightly monitored by QC Stephen O’Bryan as part of condition of the licence. The commission’s report also recommended James Packer reduce his 37% shareholding to <5%.

While relieving investors’ concerns, we still remain HOLD rated on Crown at the current juncture. 


Australia & New Zealand Market Movers

The Australian market was flat yesterday (ASX 200 index +0.03%), with casino stocks leading the charge led by Crown.
Tech stocks were the strongest performers following a strong lead from Wall Street overnight.
Ampol shares were flat after reporting tis adjusted earnings jumped +75% from last year to $102m – benefiting from improved margins.

The New Zealand market was lower on Tuesday (NZX 50 index -0.1%).

Dairy stocks lead the decline – Synlait (-2.6%), A2 Milk (-0.6%), and Fonterra (-0.3%)  after Fonterra announced record high diary price pay-out to their farmers at $8.40/litre, which is an expense for these businesses and results in higher costs.

Shares in Tourism Holdings jumped 3.5% after it announced it had sold two non-core businesses to ASX-listed Camplify Holdings for $7.7m. SkyCity Entertainment climbed +2.2% after S&P Global Ratings said it was confident the casino operator’s earnings would recover once Auckland level 3 restrictions ease.

3 Things Markets will be Watching this Week

  1. Key events this week include third quarter GDP print in the US and Eurozone, and CPI (inflation) releases Eurozone and Australia.
  2. 3rd quarter Earnings from Tech giants Alphabet, Microsoft, Amazon and Apple are set to report this week, along with Dow components Caterpillar, Coca-Cola, Boeing and McDonald’s.
  3. Locally, quarterly updates from ASX listed companies, AGM’s from Woolworths, Chorus, JB Hi-Fi, Star Entertainment, Challenger, Freightways, Air NZ, Carsales.com and SkyCity. A highly anticipated Investor Day will be held by a2 Milk on Wed while ANZ, Macquarie Group and Resmed will report earnings over the week.
Global markets were higher overnight, with the US market (S&P 500 index +0.5%) at a new high on the back of strong earnings results.

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