US Banks Lead Bounceback  | Elders

24 May 2022

Global markets were higher overnight, US Markets (S&P 500 Index, +1.9%) bouncing up as it tries to stage a recovery from this recent sell-off.

All sectors traded higher in a broad-based recovery, financials leading gains. JP Morgan jumped +6.2% after it announced it expects to reach key return targets sooner than expected thanks to higher interest rates, Wells Fargo and Bank America also performing strongly on the news.

Retailers also performed better recovering from their harsh sell off late last week, and well as gains across tech shares particularly mega-caps. EA shares rose +2.3% after a report that they were seeking a potential sale of merger.

European markets (Stoxx 600 index, +1.3%) closed higher, with most sectors trading in the green, Europe’s banking and mining stocks leading gains.

Elders Group (ELD:ASX)

Elders group soared +8.9% after delivering a strong half year result and lifted their full year earnings guidance for the 2022 financial year. Half year earnings (EBIT) jumped +80% from last year to $132.8m and 28 cent per share interim dividend which is up +40% from last year.

Management guided that 2022 full year earnings (EBIT) to rise +30% to 40% from the previous year, an upgrade from its previous guidance of +20% to 30% higher announced earlier this year.

We remain BUY rated as ELD business is likely to remain defensive amidst economic uncertainty, with room for upside. Given the recent rally and adjusting for its earnings growth outlook, Elders is still attractively priced (10.9x price to earnings ratio) based on sound organic growth from existing business with further upside from any acquisitions made (supported by a healthy balance sheet). As always, investors should be wary that there is always unavoidable weather and pricing related risk involved.

Australia & New Zealand Market Movers

The Australian market ended flat yesterday (ASX200 index, +0.05%) after rising covid cases in Beijing offset earlier gains as investors fret over the possibility of extending lockdowns for the second largest economy. 

Materials and tech shares were the best performers, despite a fall in commodity prices alter in the session.  Childcare providers, education and aged care stocks were generally stronger following Labours election victory set to increase spending across these sectors, G8 Education climbed +2.6%.

The New Zealand market (NZX 50 index, +0.4%) was up on Monday helped by another day of decent earnings.

AFT Pharmaceuticals was the best performer up +14% after reporting a strong profit thanks to a new painkiller used to covid treatment. Property stocks were generally stronger following Kiwi Property Group’s (3.5%) result which was inline with expectations which had relieved some investors, adding that it would establish a standalone CBD office co-investment platform.

Tourism Holding rose +2.2% after guiding 2022 full year loss would be less than what the market had anticipated following a recovery in RV rental demand across its countries of operations. 

3 Things Markets will be Watching this Week

  1. Geopolitical risks remain elevated given the Russia/Ukraine conflict.
  2. RNBZ monetary policy decision
  3. Local earnings from Kiwi Property Group, Arvida, Fisher & Paykel Healthcare, Pacific Edge, Mainfreight, Tower Insurance, Elders, and Select Harvest.
Global markets were higher overnight, US Markets (S&P 500 Index, +1.9%) bouncing up as it tries to stage a recovery from this recent sell-off.

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