Week Ahead – Earnings Season | Summerset

12 July 2021

Global stocks were higher on Friday (S&P 500 index +1.1%). Another week, more new highs in the US as we move into earnings season which kicks off with major banks JP Morgan & Goldman Sachs tomorrow night. According to FactSet, second-quarter earnings by S&P 500 companies are projected to be up 63.6% from a year earlier, which would be the highest annual growth rate since the fourth quarter of 2009. During earnings season the focus for investors usually shifts back towards individual companies versus broader macroeconomic news. 

Bank stocks led the market helped by 10-year US treasury yield lifting 7 basis points to 1.36% as well as optimism around the major banks reporting quarterly results later this week, with JP Morgan (+3.6%) and Goldman Sachs (+3.2%).  Other reopening plays were higher, Royal Caribbean (+3.6%), Wynn Resorts (+2%), American Airlines (+2.7%), and United Airlines (+2.9%), as concerns around the virus appeared to be subdued. Pizer shares were up +1% as it announced its was working a booster vaccine which would act as a third jab to target the Delta variant. 

European stocks were higher on Friday, with the Stoxx 600 index up +1.3%, as investors looked for bargains amidst Thursday's sell off – with cyclicals leading the gains.
Closer to home, an extension of the current lockdown in NSW beyond Friday looks likely following the announcement of a further 77 new cases in the 24hrs to 8pm Sat night, a reminder that COVID risks remain for travel related stocks.
Given smoking hot economic data in NZ released last week and with cost and pricing pressures continuing to rise, this Wednesday's RBNZ announcement will be closely watched, with all major banks now forecasting an OCR rate hike in November. 


Summerset (SUM) shares are up higher today after reporting record second quarter sales for both new sales (154) and resales (116).

This is also the best half year result in the company's history with demand extremely strong for both new sales and resales, and the wait list for people looking to enter into a Summerset Village up +8%. The result was “Nearly 50% higher than our best pre-Covid total sales”. 
However, Summerset is guiding towards unusual seasonality this year, with both new and re-sales being weighted towards the first half versus previous years when it has been second half weighted. Additionally, Summerset expect a higher proportion of lower priced serviced apartments and care suites this year versus last. 

We remain comfortable with our BUY rating on Summerset as on of our favoured retirement village operators due to its stronger growth potential – especially over larger peer Ryman. 

Australia & New Zealand Market Movers

The Australian market was lower on Friday  (ASX 200 index -0.9%) as it was caught up with the global sell-off session prior, adding to news NSW was forced to extend their lockdown amidst rising covid-19 cases.

Losses were broad based with Tech shares down the most, Afterpay down -5%, Wisetech sliding 2.9%, Xero sipping -1.8%.
Financials were weaker with Macquarie leading losses amongst the big banks down -1.9%.  Most blue chip stocks also weaker. 
Viva Energy surged +5.1% after it flagged a strong first-half result, driven by a rebound in petrol and diesel sales.
Myer shares were up +5.8%, as Solomon Lew plans to shake up the board, following him increasing his ownership stake from 10% to 15%.

The New Zealand market fell on Friday (NZX 50 index -0.5%) as markets were spooked by covid delta variant, which saw investors to sell risk assets and shift towards bonds.

Heartland ground and Sky TV both led losses down -2.4%, while Kathmandu Holdings (linked to borders and stores in Australia reopening) was down -2%  Freightways recorded the biggest jump up +1.8%. 

3 Things Markets will be Watching this Week

  1. Key events this week include inflation prints in US, Eurozone, UK and NZ. US quarterly earnings season also gets underway. 
  2. Covid-19 related development globally, and particularly in NSW.
  3. Australian employment data and Wednesday's RBNZ meeting.
Global stocks were higher on Friday (S&P 500 index +1.1%).

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