Global markets rallied overnight as strong earnings on Wall Street from JPMorgan, UnitedHealth and Johnson & Johnson allayed concerns about the fallout from a prolonged US-China trade war on Corporate America.
Analysts are forecasting the worst quarterly profit performance in about three years for US companies, with industrials among those most at risk from the trade dispute, so the bar has been set relatively low.
Stock in Focus: EBOS (EBO:NZX / EBO:ASX)
Ebos Group shares were a touch higher after the health and animal care products maker extended its reach into medical devices with an A$34 million acquisition.
EBO announced the acquisition of two Australian medical device businesses for $34m – LMT (Life. Movement. Technology) and National Surgical. The two businesses provide medical devices and services for orthopaedic, spine, neuro, plastics and sports medicines and generate combined revenue of ~$40m. While no material impact on earnings is expected in the near term, it illustrates that EBO is willing to extend its reach into adjacent sectors, and we back managment who have a great track record of bolt-on acquisitions.
At current levels the stock looks fairly priced as a defensive healthcare play, especially in an expensive market. In our opinion the valuation is justified with earnings growth expected to accelerate over the near-term with further upside from additional acquisitions with its excess capital.
We currently have a BUY rating on EBO,
Members should look out for a full update on EBO to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was higher on Tuesday (ASX 200 Index +0.14%) as a series of weak guidance statements from retailers and media companies capped gains. Southern Cross Media shares took a battering following an early morning trading update with earnings guidance 27% below expectations. Shares in furniture retailer Nick Scali were also punished after the company advised the market of "difficult trading conditions"
The New Zealand market was in positive territory yesterday (NZX 50 Index +0.17%) as Fisher & Paykel Healthcare extended its run after raising earnings guidance. Retirement village stocks were also stronger after Real Estate Institute figures showed house price inflation picked up in September. Meridian Energy increased after its September operating metrics showed more hydro generation at higher average wholesale prices in the month compared to a year earlier.
3 Things Markets Will be Watching this Week
- US earnings season for the 3rd quarter kicks off this week, with the major US Banks the first to report quarterly profits.
- Minutes from the last RBA meeting are released on Tuesday
- A host of Chinese economic figures are published on Monday.
Have a Great Day,