US markets (S&P 500 Index -1.3%) fell on Friday, to end the week down -0.8% as investors became more cautious around the higher interest rate backdrop.
Global bond yields rose Friday (with the US 10 year yield back at close to 3%), weighing on equities after minutes from the Fed’s July meeting were released indicating that despite the recent news that US inflation “may” have peaked, the central bank stated they would continue to hike rates in the near term.
Meme stock Bed, Bath and Beyond crashed -40.5% lower, triggered by a major investor Ryan Cohen dumping his entire stake, the move dampening sentiment amongst retail traders. All sectors were lower except for energy, with consumer discretionary, financials, and tech stocks leading losses.
European markets (Stoxx 600 Index, -0.8%) were lower on Friday, hit by German PPI (Producer Inflation) data surging and UK consumer confidence tanking down to a new record low.
Looking ahead this week will be one of the busiest weeks of earnings for the Australian and New Zealand markets. US second quarter GDP data is due on Thursday (US Time) and will be the major event this week offshore.
Fisher & Paykel Healthcare (FPH:NZX)
Fisher and Paykel healthcare slumped -6% on Friday after its revenue and profit warning for the first half of 2023 financial year (ending September 2022) was much worse than feared as covid related boost in demand quickly fades away.
Revenue for the half is expected to be $670m, and net profit after tax to be approximately $85m to $95m. Fore revenue this represents a +17.9% increase from its pre-pandemic half-year result of $570.9m, and a -26% drop from the same corresponding period last year. 2023 revenue and NPAT guidance of $670m and $85m-$95m respectively, implies a -26% and -60% decline for the year, compared to consensus estimates of $758m (-11.6%) and $145m (-38%).
As highlighted earlier we anticipate the next year or two could be challenging for Fisher and Paykel Healthcare – but the update indicates the near-term earnings hole will be larger than anticipated. Gross margins are also tightening on a lower scale of operations (as fixed costs don’t drop) and general cost inflation.
Taking into account deflated near-term earnings outlook for 2023 and 2024 financial year Fisher and Paykel does trade at a rich valuation compared to its past, and for that reason is still prone to more volatile moves.
We still believe in the quality of the stock and organic (without covid) growth outlook remains healthy and we still rate FPH as BUY for patient investors with longer-term investment horizons at current levels.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index) was flat on Friday, to end the week up +1.2%.
It was a mixed day of trade with losses from real estate, healthcare and financials offset by strong gains from energy and materials, as the price of oil made a strong rebound, while other commodities reported modest price rises.
TPG Telecom slumped -12.4% after missing key earnings expectations due to weak revenue. Cochlear shares rose +2.2% after its result was inline with guidance, and guided for continual growth.
The New Zealand market (NZX 50 Index, -1.1%) fell on Friday, dragged down by market heavyweight Fisher and Paykel Healthcare, which saw most of the market edge lower.
Genesis Energy shares slipped -1.2% on its result which came in at the top end of guidance, thanks to strong hydro generation, offset softness from its Kupe oil and gas field.
Restaurant Brands fell -2%, after warning it would report a weaker than expected result next week, citing costs pressures are hurting margins.
Things Markets will be Watching this Week
Monday
Australia: Earnings from Ampol, Cooper Energy, OoH! Media, and Star Entertainment.
New Zealand: Earnings from Freightways, Steel & Tube, and Property for Industry.
Tuesday
Global: US new home sales
Australia: Earnings from Ansell, Boral, Endeavour Group, Kogan, Scentre Group
New Zealand: Earnings from Heartland group, and Summerset.
Wednesday
Global: US Pending homes sales data, and Eurozone consumer confidence.
Australia: Earnings from Coles, Domino’s Pizza, G8 Education, Qantas, Tabcorp, and WiseTech Global.
New Zealand: Annual shareholder meeting by Fisher and Paykel Healthcare and earnings from Meridian Energy, Ebos and Spark.
Thursday
Global: US second quarter GDP and initial jobs claim data.
Australia: Earnings from Appen, Ardent Leisure, Blackmores, Costa Group, Flight Centre, and Pilbara Minerals
New Zealand: Retail sales data, and earnings from Air NZ, Sky City, and Sky TV.
Friday
Global: Japan CPI (inflation) data.
Australia: Earnings from Next DC, Ramsay Healthcare, and Wesfarmers
New Zealand: ANZ consumer confidence report, Earnings from Port of Tauranga, Tourism Holdings, and Delegat Group.