Global markets higher on Friday as shares on Wall Street were bolstered by a tech sector-paced rally.
The local earnings season continues this week with a number of Australian & NZ companies reporting profit figures. Last week was the biggest week for half-year profit reports in Australia and showed that earnings estimates for 2017-18 and 2018-19 are largely intact, bucking the trend for starting with high expectations and adjusting those forecasts as growth disappoints.
Another focus in the days ahead is expected to be testimony that new Federal Reserve chairman Jerome Powell gives to US legislators and specifically on whether any comments he makes on inflation point toward a faster pace of interest rate hikes; a key reason why US stocks were routed earlier this month.
Stock in Focus: Next DC (NXT:AX)
The NXT share price jumped +10% to a record high on Friday following the release of the data centre operator’s half-year results. We were impressed by the results which reinforces our view that NXT is one of the top growth plays on the ASX as a beneficiary of the explosion of data investment theme.
Looking at some of the detail, For the six months ended December 31, NEXTDC posted underlying earnings (EBITDA) of $33.6 million on revenues of $77.5 million. This was a 41% and 32% increase, respectively, on the prior corresponding period. The strong growth in revenue and earnings was driven by a sizeable increase in demand for the company’s data storage. Pleasingly, this growth looks likely to continue in the future and has led management to also upgrade its full-year guidance both at the top and bottom line.
We currently have a BUY rating on Next DC.
Members should look out for a full update on Next DC to be released in an upcoming weekly report.
Australia & New Zealand Market Movers
The Australian share market rallied on Friday (ASX 200 index +0.82%) to cement a third straight session of gains and a weekly advance. In terms of sectors, miners were the strongest performers while the Banks were also well supported.
In stock news, Tassal expects a record annual profit after bigger and heavier salmon helped the fish farmer lift first-half profit to a record $28.4 million. Interestingly, Woolworths boss Brad Banducci said he is more worried about food delivery services like Uber Eats than he is about Amazon, and says the country's largest supermarket will lose customers if it doesn't address demand for "ultra-convenience”.
The New Zealand market was higher on Friday (NZX 50 index +0.42%) as retirement village operator Summerset Group beat its full-year guidance and revealed a big uplift in net tangible assets, stoking optimism Metlifecare will show a similar improvement when it reports next week. On the flipside Comvita fell saying it expected a below-average honey season for 2018.
In terms of stocks under our coverage, NZ’s largest listed wine maker Delegat Group saw its shares rise after it lifted operating profit +9% in the first half of the financial year due to the favourable impact of foreign exchange rates and increased in-market pricing and as the company said it is upbeat about the full year.
3 Things Markets Will be Watching this Week
1. Local AU/NZ companies continue to report profit figures as earnings season is likely to dominate news flow.
2. New US Federal Reserve Chair Jerome Powell makes a speech to US legislators this week.
3. Important US economic data is released on Thursday (AU/NZ time), including GDP and inflation figures.
Have a Great Day,
Team