Exxon Q4 Results

Posted on | by Todd | Leave a Comment on Exxon Q4 Results

Shares of Exxon Mobil hit a 4-month low of $83.10 after the company missed Q4 earnings and revenue expectations.

The company announced earnings of 41 cents per share on revenue  of $61.1 billion. This compares to expectations of 70 cents per share on revenue of $61.4 billion.

The year-over-year data was mixed as Exxon earnings fell from 67 cents per share, but revenue rose from $59.8 billion against this time last year.

An upstream asset impairment charge of $2 billion, related to dry gas operations in the Rocky Mountain region, impacted Q4 as well as full-year earnings.

From a technical perspective we’re in a lower high structure with the next significant level of support near $80.00

Chart – Exxon

Apple Q1 Results

Posted on | by Todd | Leave a Comment on Apple Q1 Results

Shares of Apple are up 3% to $125.00 as Q1 earnings and revenue beat expectations. The firm also announce that they sold a record 78.4 million iPhones over the three month period.

Earnings were announced at $3.36 per share on revenue of $78.4 billion. The street was expecting earnings of $3.22 per share and revenue of $77.3 billion.

To put these sales and earnings numbers into perspective: Q1 2017  iPhone sales generated 69% of the company’s total revenue. This compares to 2.5% in Q1 2008.

One of the few negative aspects of the report was the forward guidance. The firm announced a modest cut to Q2 revenue to $51.5 billion from $53.8 billion expected.

As the market absorbs this report and lower forward guidance, we see price support back on the old resistance near $118. A break below $118 will validate our recent Algo Engine short signal. With price trading above our breakout range, we’re on the sideline for the time being with this trade.

Chart – Apple

Ansell – Buy Signal

Posted on | by Leon Hinde | Leave a Comment on Ansell – Buy Signal

Ansell has purchased Nitritex, a UK-based manufacturer of premium clean-room and healthcare Life Sciences consumables. The deal is relatively small at US$60m and will be  near-term earnings accretive.

The transaction adds to income generated outside the US and extends to the Ansell’s expertise across the Life Sciences segment.

We’re buyers of Ansell on the current price pullback. Value exists in the $22.50 – $23.50 range.

FY17 revenue $1.65b, EBITDA of $285m, net profit $170m, EPS $1.10 and DPS $0.46 places the stock on 2.5% forward yield.

We expect underlying business growth into FY18 and FY19 of 6% – 9%.

Chart – ANN

 

European Economic Growth for 2016

Posted on | by Leon Hinde | Leave a Comment on European Economic Growth for 2016

European economic growth for 2016 rose to  1.7%. Inflation is running at  1.8%, which is nearing the ECB’s target of 2% and the jobless rate fell to 9.6%; the lowest figure since May 2009.

This is the first time since 2008 that we’ve seen EU growth prospects tracking near the rate of the US. By any comparison, the economic recovery in G7 countries is still at very low levels and fragile global conditions remain.

Equity market valuations are stretched, and subdued revenue growth will likely lead to analysts’ EPS targets being reduced by 50% for 2017 to reflect actual current growth rates.

Our Algo Engine triggered a short signal in the iShares Europe ETF back in May at $55.75 and the index collapse by 18% within a few months following. Six months on and the index has recovered back to $52 and whilst we don’t have a new short signal present, we’re still cautious that another near term top is now in place.

Chart – iShare ETF (Europe)

Tabcorp – 2nd of February

Posted on | by Leon Hinde | Leave a Comment on Tabcorp – 2nd of February

Tabcorp reports earnings on the 2nd of February.

We assume Tatts merger is completed by middle of this year and generates cost savings post integration of $100m plus.

FY18 revenue $5.2b, EBIT $800m, DPS $0.25 places the stock on a forward yield of 5%.

We’re buyers of TAH at $4.70 and selling call options post the earnings result.

 

Chart – TAH

 

 

 

Sonic Healthcare – Buy Signal

Posted on | by Leon Hinde | Leave a Comment on Sonic Healthcare – Buy Signal

SHL has strengthened its German footprint with the purchase of two laboratories from Medical Laboratory Bremen for A$90 million.

The deal is EPS accretive in the first year with margin expansion & synergy gains achievable in the near term.  We expect Sonic to deliver 7 – 9% EPS growth in FY17 and FY18.

FY17 revenue $5.2b, on EBIT  of $920m, Net Profit $$480m, EPS of $1.20 & DPS $0.78, places the stock on a forward yield of 3.6%.

We like Sonic as a core portfolio position, however the low yield and moderate EPS growth encourages the use of a covered call to enhance the cash flow and boost the overall investment return.

Chart – Sonic Healthcare

 

 

SP 500 Technical Picture

Posted on | by Todd | Leave a Comment on SP 500 Technical Picture

The SP 500 index is at a critical juncture based on two technical price indicators. The daily chart shows that the 30-day moving average (2265.00) has now converged closely to the Daily Parabolic switch point (2263). The low of the day in the SP 500 futures today was 2263.25.

The significance of this convergence is that it often time signals a change in medium-term directional momentum. In this case, the SP 500 hasn’t posted a close below the 30-day moving average since November 7th at 2130.00.

Considering how the SP 500 price has now extended beyond forward expectations of inflation and 12-month EPS levels, a decisive break of 2263.00 will likely trigger range extension to the downside. The December 30th low of 2225.00 is the first level of downside support.

US Markets – Dow Jones Index Leaders

Posted on | by Leon Hinde | Leave a Comment on US Markets – Dow Jones Index Leaders

Goldman Sachs was down 2.5% overnight and was among the worst performers within the Dow Jones index of 30 companies. We see support at $230 and resistance at $245. As a gauge to the likely direction of US financials over the March quarter, we think it’s worth keeping an eye on the directional break of Goldman Sachs trading range.

Chart – Goldman Sachs

We’re also watching the negative lead from General Electric as the stock trades 10% below the recent high formed on the 20th of December.

Chart – GE

S&P500 earnings need to grow by 10 – 12% over the next 12 months to support the Dow Jones at 20,000. If average EPS tracks at the same rate achieved in 2014, 2015 & 2016, of approximately $120 per share, an argument could be made that the true value for the Dow Jones sits back at 16,500 to 18,000.

Chart – Dow Jones

AGL Outlook

Posted on | by Todd | Leave a Comment on AGL Outlook

Several market commentators have focused on AGL as an Utility Stock ready to make a strong move higher; we aren’t as confident.

While the AGL stock price has rallied over 25% during the last 12 months, the source of these continued gains are based on increased earning expectations as the increase in electricity costs roll through to both consumers and business users.

Further, AGL bulls are relying upon improved fundamentals within the electricity market to support elevated prices.

Our view is that the expected jump in earnings and dividends per share will be hard to attain and that a sideways trading pattern between $20.00 and $22.50 is a more likely outcome over the medium-term.

Chart – AGL

QBE Higher On Merger Talks

Posted on | by Todd | Leave a Comment on QBE Higher On Merger Talks

Shares of QBE have jumped over 5% in early trade, posting a new 15-month high of 12.97, on rumors that the firm was in formal merger talks with insurance giant Allianz.

According to an article in a German newspaper, the CEO’s of the two companies met before Christmas and Allianz made an informal offer of $15.00 per share for QBE.

This offer price represents a 20% premium to QBE’s closing price on Friday. Aside from this merger rumor, the stock has had a steady increase since early November as US bond yields have move higher.

Without any further clarification about the merger talks, we would expect technical resistance to be seen in the  $13.25 area.

Chart – QBE