Global markets were mostly higher overnight, with US markets hovering around record highs. Citi bank was one of the first companies to report quarterly earnings which looked sound, although the share price was basically unchanged.
US earnings season gets into full swing this week, and company announcements will come under scrutiny because of the slowing Chinese growth, with a particular emphasis on what impact companies anticipate from the US-China trade tensions. Given markets are at all-time highs, this makes corporate announcements even more important. Ironically though, a weak earnings season could see markets hold up in any case given it will put more pressure on the Fed to cut interest rates.
Stock in Focus: Delagat Group (DGL:NZX)
Delegat Group (DGL) continued its strong run in 2019, reaching all time highs as market sentiment continues to remain positive for New Zealand’s largest listed winemaker. Despite announcing a weaker harvest for 2019 with volumes down -11% from last year due to unfavourable weather conditions, DGL said they have adequate inventory to maintain sales guidance.
DGL released another solid interim result for the 2019 financial year, delivering record operating net profit after tax of $31.4m, up +17% from last year. This was boosted by record global case sales volume of 1.58m, up +14% from last year lifting operating revenue. The standout being UK, Ireland and Europe region where case sales volume grew +31% from last year thanks to a new distribution listing with a major UK independent co-operative.
While DGL shares are not cheap we believe the valuation is justified given the company's solid operational performance and track record – which has seen us experience strong returns since as buyers of the stock since 2016.
We currently have a BUY recommendation on DGL.
Members should look out for a full update on DGL to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market sold off on Monday (ASX 200 index -0.65%) as Australasian stocks were largely weaker as investors fretted over the slowest pace of quarterly growth in China for 27 years. China showed annualised growth for the world's second largest economy had slowed to 6.2%, down from 6.4% in the previous two quarters, but in line with expectations. AMP shares went into free-fall after saying the planned A$3.3 billion sale of its life unit was highly unlikely due to stipulations required by the Reserve Bank of New Zealand.
Elders has gone into trading halt as it has made an offer for unlisted private wholesale buying group Australian Independent Rural Retailers, to be funded via a $137m equity raising and the issue of $79m new shares to AIRR shareholders.
The New Zealand market dipped to start the week (NZX 50 index -0.33%). Trustpower, the country’s fifth-largest energy retailer warned on Friday that a mild, dry June quarter could push full-year earnings toward the lower end of guidance. Hydro generation in the quarter was 28% lower than a year earlier, while demand was also soft, news which also saw other power generators sell-off. In other news, Infratil has lifted its 2020 full-year earnings guidance by $20 million as it expects to complete the acquisition of Vodafone NZ a month earlier than expected. Infratil also announced its Longroad Energy investment secured financing for a wind farm in Texas.
3 Things Markets Will be Watching this Week
- US Corporate earnings season gets into gear this week.
- Chinese economic growth and activity data are amongst the highlights this week. In the US, retail spending and the Federal Reserve’s Beige Book will be keenly observed ahead of the next interest rate decision.
- In Australia, the June employment report will hog the headlines towards the end of the week.
Have a Great Day,