Healthy US Retail Earnings| Infratil 

16 November 2022

New Zealand Market Movers 

The New Zealand market (NZX 50 Index, +0.1%) ended flat on Tuesday, while Communication Services (-0.6%) and Real Estate (0.4%) took a hit, with Kiwi Property Group (-2.8%) and Investore Property (-1.3%) leading losses for the latter. 

On the economic front, Westpac has noted in its latest Economic Overview that a ‘soft landing’ for the New Zealand economy is looking less likely as inflation stays persistently high, forcing the Reserve Bank to New Zealand to rise its Official Cash Rate to a peak of 5% by next year. The bank expects growth to effectively stall by 2024 but are hesitant to call a recession as the country should benefit sizably from international travel picking up. 

Australia Market Movers 

The Australian market (ASX 200 Index, -0.1%) slipped marginally lower on Tuesday due to a softening in oil prices (+1.9%), which have since recovered overnight. 

Commonwealth Bank (+1.3%) rose after reporting earnings of A$2.5 billion for three months to September 30 (compared with A$2.2 billion in the previous corresponding period), helped by both lending growth and higher interest rates. Other banks stocks were mixed, including NAB (-2.5%), ANZ (-0.2%), and Westpac (+0.5%). 

Europe Market Movers  

European markets (Stoxx 600 Index, +0.2%) advanced marginally on Tuesday, after the release of the US PPI data. Technology (+1.4%) led sectorial gains, while Telecommunication (-1.0%) led losses. 

US Market Movers 

US markets (S&P 500 Index +0.9%) advanced on Tuesday after the market digested another report that suggest that inflation in the US has peaked and is now slowing. The US Producer Price Index, a measure of wholesale inflation, rose +0.2% month-over-month in October of 2022, below market forecasts of +0.4%. 

Retail stocks lifted after earning reports from Walmart (+6.5%) and Home Depot (+1.6%). Walmart reported revenue of $152.8 billion for the three months to October 31, beating estimates by $6 billion as a result of the retailer pulling in higher income but budget conscious customers. Home Depot reported third-quarter revenue of $38.9 billion, beating estimates by $1 billion. 

Elsewhere, Paramount (+5.1%) surged in response to Warren Buffet’s Berkshire Hathaway taking a larger stake in the media company.  Taiwan Semiconductor (+10.5%) and the building materials manufacturer Louisiana-Pacific (+7.8%) also rose after receiving the Buffet bump. 

Stock In Focus:  Infratil (IFT.NZX) 

Infratil (0.2%) rose after releasing its Interim results for six months ended 30 September 2022. Key takeaways include a 11% rise in proportionate operating earnings (EBITDAF*) to $275.6m over the previous corresponding period. Infratil CEO Jason Boyes noted that “despite the volatile global macro-economic environment, Infratil’s portfolio performed well, benefiting from the relative protection of infrastructure assets and inflation linked pricing”. 

We believe there are strong tailwinds and growth potential for many of IFT’s businesses – with Vodafone, Canberra datacentre, Qscan and Pacific Radiology businesses all set to provide positive cashflow and earnings growth. We remain optimistic about IFT’s growth potential – which should outweigh interest rate risks that affect other more defensive, lower-growth companies. Mostly helped by $1.4 billion in liquidity likely to be deployed in acquisitions or expansions to drive further growth.    

*Earnings before interest, tax, depreciation, amortisation, fair value movements of financial instruments, investment costs, realisations and impairments. 

What Markets will be Watching this Week (UTC +13) 

Elders earnings 

AU RBA Meeting Minutes 

GB Unemployment Rate SEP 

Infratil earnings 

US Producer Price Index MoM OCT 

GB Inflation Rate YoY OCT 

Walmart earnings 

Home Depot earnings 

US Retail Sales MoM OCT 

AU Unemployment Rate OCT 

Nvidia earnings 

TJ Maxx earnings 

Target earnings 

Alibaba earnings 

Applied Materials earnings 

Ryman earnings 

Saturday earnings 

The New Zealand market (NZX 50 Index, +0.1%) ended flat on Tuesday, while Communication Services (-0.6%) and Real Estate (0.4%) took a hit, with Kiwi Property Group (-2.8%) and Investore Property (-1.3%) leading losses for the latter. 

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