BHP – Valuation & Technical Review
BHP FY17 revenue is expected to be $40b, EBIT of $12b and reported profit of $7.5b.
The earnings translate into EPS of $1.40 and DPS of $0.78 placing the stock on a 3.8% yield.
AMP – Earnings Outlook
AMP FY16 normalised profit $486m. AMP announced a $500m on market buyback.
FY18 reported profit is likely to remain flat on FY17 numbers and AMP’s ability to deliver against cost out in FY17 and continued cost discipline in future periods is the key to sustaining group EPS growth.
FY18 profit is likely to remain in the range of $900m – $930m, EPS $0.35 and DPS of $0.29 placing the stock on a forward yield 5.7%.
We remain cautions on AMP until the technical picture becomes more supportive. Support may begin building above $5.00.
AGL Shares Spike Higher
AGL reported a 3.7% rise in underlying profits of $389 million to December 31st. This figure was inline with analysts’ forecasts.
However, shares of the energy retailer jumped to an all-time high of $24.05 at today’s open as company officials gave positive guidance into 2017 as retail power prices are expected to climb higher.
AGL said its full year underlying profit would reach the upper half of its forecast range of $720 to $800 million, up from $700 million last year.
The company also raised its half year dividend to 41 cents per share from 32 cents per share last year.
Suncorp
Suncorp shares have traded over .5% higher to $13.20 today after announcing a 1.3% increase in its half year profit results.
The company reported a net profit after tax of $537 million for the six months up to December 31, which is up from $530 million a year ago.
This represents top-line growth of 4.3% and, based on forward guidance, will raise its fully-franked interim divided by 10% to 33 cents per share.
This 33 cent dividend represents a payout ratio of 72% of cash earnings.
CIM reported FY16 NPAT
CIM reported FY16 NPAT of $580m, slightly ahead of consensus.
We like CIM’s leverage to the infrastructure space and the recent acquisition of UGL is a positive.
Over the course of FY18, we see revenue at $17b, EBIT $1.b, EPS $2.30 and DPS $1.30, placing the stock on a forward yield of 3.5%.
RIO delivers a solid 2016 result
RIO has delivered a solid CY16 earnings result of US$5.1b. A highlight of the result was the increased shareholder returns, with RIO announcing a final dividend of US$1.25ps
Revenue of US$35b, EBIT of US$7.8b and DPS of US$1.70 placing the stock on 3.3% yield.
Looking out over 2017, we expect a relatively flat market for iron-ore prices which will translate into only moderate EPS gains for RIO (5-10%). We assume revenue of US$38b and EBIT at US$9.5b, EPS $3.20, DPS US$2.50, which will place the stock on a forward yield of 4%.
Share buy backs and capital returns will help underpin the story here with RIO.
We see both RIO and BHP fully valued at current prices. With short term volatility likely ahead for Iron-ore prices, we recommend taking profits or selling covered calls to enhance the yield.
CAR Reported 1H EPS
CAR Reported 1H EPSg of 5%, is the current 22x P/E sustainable?
Assuming an acceleration from 5% EPS growth to 10% EPS (big ask) in the next 12 months it will place CAR on a 3.5% yield. We’ve seen other high PE stocks negatively rerate such as TPG and I think some caution and close watching of the earnings trend in CAR is required.
Global tech players such as eBay, gumtree, facebook etc are becoming more active in CAR’s business space. This may be part of the reason EPS growth is dropping off.
XJO – Index Update
The XJO is holding support at 5600 points and maintaining a bullish short-term price structure.
We’re cautious due to stretched equity valuations, political risks in the Euro zone, debt stability in China and low revenue growth in many industry sectors.
To mange these concerns we’ve tilted portfolios to defensive assets and become aggressive with our covered call overlay. The bulk of our portfolio returns will come through dividends and option premium over the next short while.
Furthermore, we’re just not convinced the reflation trade the market has positioned around, will actually materielize in FY17.
ETF Watch – Crude Oil Falls On Increased Storage Data
West Texas Crude Oil prices dropped over 2.5% overnight as weekly stockpiles rose much greater than expected.
The American Petroleum Institute (API) reported crude oil in storage rose by 14.2 million barrels. That surge in storage was more than 5 times analysts’ forecast and the second largest increase in the history of the data series.
The front month futures contract traded as low 51.30, which is over 5.5% lower than last week’s high close of $54.40.
Some market commentators are pointing to increased US shale production and decreasing global demand as a headwind for crude prices going forward. The next key price support will be found at the psychologically important $50.00 level.
MQG re-affirmed full year guidance
Macquarie re-affirmed FY17 earnings will meet market expectations. This places FY17 revenue at $10.3b and cash earnings flat on FY16 at $2.1b.
FY17 EPS will be $6.10 and DPS $4.30, placing the stock on a forward yield of 5.3%.
We see Macquarie tracking sideways at best and downside risks increasing from a pickup in macro volatility.
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