Global markets were higher on Friday as the US Market index (S&P 500) registered a fifth straight week of gains as investors brushed aside worries over the progress of US-China trade talks and as Walt Disney shares rose on a solid result.
To date, 89% of the companies in the S&P 500 have reported 3rd quarter results and in terms of earnings, the percentage of companies reporting above estimates (75%) is above the five-year average. In aggregate, companies are reporting earnings that are 3.8% above the estimates, which is below the five-year average.
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Stock in Focus: NZ King Salmon (NZX:NZX / NZK:ASX)
NZK shares edged higher after their AGM where they reiterated their guidance for the 2020 financial year which was unchanged since their 2019 full year result release a few months earlier.
NZK expect operating earnings guidance for the 2020 financial year will be between $25m to $28.5m, in line with the 2019 result. The guidance is underpinned by 2020 harvest volumes being around 8,000MT, improving slightly from the current year’s expected harvest volumes – which assumes elevated mortality rates due to warmer waters persisting with increased capital expenditure to improve capacity, and increased automation equipment used to help regulate cooler water at warmer sites (possibly mitigating mortality rates). The real positive being NZK remain upbeat towards receiving consent to relocate farms to cooler deeper water, however any decision won’t be made until after the 2020 election.
While NZK has a great business and product in high demand which it is able to sell at a premium price, weather events such as this are largely an unavoidable risk for companies such as NZK. Unfortunately, the warmer water temperatures are creating a setback to NZK’s harvest levels and profitability – and given risks surrounding the company we continue to remain HOLD rated.
We currently have a HOLD rating on NZK.
Members should look out for a full report on NZK to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was a touch lower on Friday (-0.04%) as gains in riskier assets on optimism the US and China could reach an interim trade deal was offset by declines in defensive stocks. Energy producers and tech stocks were the biggest gainers on Friday, while property trusts and utilities dropped. Goldminers suffered steep losses as the price of the precious metal dipped to a three-month low of under $US1470 an ounce, with the gold stocks making up five biggest losers among the ASX200. In stock news, News Corp was down after the media giant said first-quarter revenue dropped 7.3%.
The New Zealand market was higher on Friday (+0.76%) as Fletcher Building and Mercury NZ rose on the back of their inclusion in the MSCI New Zealand Index. Pushpay Holdings also extended recent gains, while retirement village stocks were also strong on the back of continued signs of property market strength.
3 Things Markets Will be Watching this Week
- Trade related news-flow is likely to continue to sway investor sentiment.
- Global quarterly corporate earnings season enters its final stages.
- The Reserve Bank of New Zealand makes an interest rate decision on Wednesday.
Have a Great Day,