Four stocks to watch following the end of August's earnings period.
This issue of Investor Spotlight is brought to you by IG, with Kyle Rodda, Market Analyst and ausbiz presenter.
In this piece, we take a look at how the market reported and take a look at four stocks that moved off the back of their results.
How did the ASX 200 do this reporting season?
Generally speaking, the ASX 200 delivered better than expected results during the reporting. Due to how corporates release their effects on the ASX, not every company delivered a half or full-year update during the period. However, an overwhelming majority did, with 166 reporting. Based on numbers derived from Reuters data, profits grew by 56.5 per cent over the year, while dividends dipped by a modest 1.7%. According to an analysis performed by FN Arena, 30 per cent of companies reported better than expected results, 40 per cent posted in line with expectations, and the remainder missed estimates. By August and the reporting season end, the ASX 200 finished a slim 20 points higher.
Four stocks to watch following report season
Here are four stocks that delivered eye-catching results for the period, and maybe ones to watch going forward.
Whitehaven Coal (WHC)
Whitehaven Coal was one of the market's stand-out performers in August. Largely due to surging coal prices, Whitehaven also handed down its full-year earnings during the month and delivered a much stronger than expected set of financials. Profits beat consensus by more than 10 per cent. While the dividend was lower than expected at $0.48, commitment to further buybacks offset some of that disappointment. Whitehaven also delivered an upbeat assessment of business going forward, stating it expects elevated thermal coal prices to continue as energy shortages bite parts of the world.
Whitehaven’s technicals show very bullish price-action, with price action going parabolic in recent months. The stock hit a new record high in the month of August, breaking resistance at the previous all-time high around the $7.30 level. The trend looks skewed to the upside for Whitehaven shares. However, the weekly RSI is at extreme oversold readings, suggesting buying the stock here might come with unattractive risk and reward at current levels.
Whitehaven Coal weekly chart
A2 Milk (A2M)
The market rewarded A2 Milk’s full-year results, with the company another one of the best performers during the earnings period. A2 Milk’s profits came in at $123 million for the full year, exceeding the $110 million consensus estimate. Revenues also beat by a solid 3%. The company’s English label product drove the success, though the growing China segment continued to perform solidly with revenue growth of 12% and growing market share, all despite demand headwinds in the country. Guidance came in line with expectations but market participants welcomed the strategic outlook from the company’s management in its earnings call.
A2 Milk’s share price is showing signs of bottoming currently. The price is potentially building a rounding base, with the weekly RSI trending higher and above the 50-point mid-line, suggesting upside momentum. Resistance at $5.00 has been broken and the share price has consolidated above the 50-week moving average. An investor may wish to wait for signs of consolidation above $5.00 before buying in. The next level of resistance is around the $6.00 level, with major resistance at $7.40.
A2 Milk weekly chart
Altium smashed estimates for its full-year results and was one of the ASX 200’s biggest one-day rises on the day of its earnings with a nearly 20% rally. Underlying profit was 10 per cent higher than the market had been expecting, driven by strong growth in the business’ Design software and Octopart products. Guidance was also stronger than expected, with FY23 forecast to deliver earnings growth between 15 and 20 per cent, which is four per cent higher than markets’ estimates going into the reporting period. This comes despite the company flagging weaker subscriber growth and headwinds in China.
The share price of Altium has been stuck in a long-term range. However, a recent break-out has pushed short-term momentum to the upside, with price testing resistance at $38 per share. A break of that level might see further buying pressure push the stock into the $40s once again. While technical support might come from the confluence of major weekly moving averages just below $35 per share.
Altium weekly chart
Wisetech’s FY22 results saw its stock launch from its recent lows, despite delivering a set of numbers largely in line with expectations and providing guidance within existing forecasts. Such was the bearish sentiment towards the stock, that the numbers drove a significant 12% gain on the day of the result, supported by the company announcing a new partnership with UPS. The stock ended the month of August 16 per cent higher and near a new record high.
Wisetech’s August surge has propelled its share price towards resistance at $60 per share. A break to new record highs might see new buyers emerge and push the stock higher. A failure to make a decisive break at that level could drive a pullback in the company’s stock. The 50-week moving average is a level that’s previously acted as strong support and might offer attractive risk and reward to an investor wanting to buy into the primary uptrend.
Wisetech weekly chart
12 September 2022