Global markets were mixed overnight as the US market sold off, with stocks struggling for direction. A rally early was short-lived as comments from White House economic adviser Larry Kudlow initially calmed nerves over the outcome of this week’s high-level trade talks with China.
Stock in Focus: Coca-Cola Amatil (CCL:ASX)
Shares in CCL have continued on their run this year, climbing higher after delivering a sound result for the 2019 first half.
Soon after CCL shares pulled back slightly as the container deposit scheme impacting the Australian business will likely be introduced into New Zealand by 2022, as the New Zealand government are in early discussions. For the first half of the 2019 financial year CCL’s revenue rose +5% from last year to $2.427 billion, with strong growth across most major divisions, except Australia where revenue was almost flat. Most business divisions performed well delivering strong earnings growth, whilst Australia’s earnings fell as it struggled with the adoption of container deposit scheme in Queensland. The market reacted positively towards management’s guidance for 2020 financial year, adamant their investments and plans in place should see the struggling Australian business return back to modest growth, with the overall objective to achieve mid-single digit earnings growth in 2020.
While CCL is facing headwinds in its core Australian business, management are confident in turning the business around. At current valuations we believe CCL shares are now fairly priced.
We currently have a HOLD rating on CCL.
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Australia & New Zealand Market Movers
The Australian market started the week higher (ASX 200 Index +0.71%) with tech stocks leading gains, while major banks and resource stocks lagged. In stock news, Fortescue has confirmed it is bidding to develop Guinea’s massive Simandou iron ore deposit and is believed to be one of only two left vying for the right to develop blocks 1 and 2 of the iron ore deposit. The Guinean government is due to pick a winner in the contest within the next month.
The New Zealand market rose in quiet trading on Monday (NZX 50 Index +0.76%) with gains led by Fonterra Shareholders' Fund units which hit a four-month high as investors and suppliers take some confidence in the dairy processor's new strategy. Outside the main index, PaySauce rose after saying it more than doubled third-quarter revenue to $401,000.
3 Things Markets Will be Watching this Week
- Trade War related news-flow will remain a feature with negotiations between the US & China set to restart.
- Minutes from the last US central bank meeting will be released, as well as a speech by chairman Jerome Powell.
- Australian business conditions & confidence figures are released on Tuesday.
Have a Great Day,