Global markets were lower overnight following the resumption of a sell-off across US Technology stocks, with the latest round of selling being triggered by a record fine against Google’s parent company Alphabet from the European Union. On the flipside, mining stocks were well supported following a rebound in the price of iron ore. Investors also digested a speech in London by US Federal Reserve Chair Janet Yellen, in which she signalled there will be more interest rate hikes ahead.
Closer to home, the NZ market hit a fresh all-time high yesterday, while the ASX slightly lower. One of the stocks hitting headlines was Tegel (TGH.NZ / TGH.AX) which we discuss below.
Stock in Focus: Tegel (TGH.NZ / TGH.AX)
Chicken producer Tegel announced its full-year earnings results yesterday, with a 0.8% increase in its operating earnings (to $75.6m), 5.4% growth in revenue (to $614m) and 7.1% growth in poultry volumes. The result saw the share price initially jump over +4% before losing momentum over the course of the day.
Overall it was a decent result given the circumstances in our view – although at the lower end of the revised $75m-to-$85m forecast range the company guided to in December. The issue for TGH is the low levels of the chicken price, which has meant that strong sales growth and volumes gains are not translating into earnings.
In terms of outlook, management said that based on the current market conditions, TGH expects to deliver an increase in earnings for the year ahead (without giving more explicit guidance).
Further, we would point out that it appears chicken prices have recovered and at the very least stabilised over the last few months. The true turnaround for TGH will come when chicken prices normalise and the share price now looks to us to have bottomed.
We remain firmly BUY rated on TGH as a medium term investment, sign up for a FREE trial below to access our reports on TGH and other AU/NZ stocks.