AGL.ASX reported FY16 result of NPAT $700m which was in-line with the guidance range of $650-720m. Dividends for FY16 were $0.68 and we should see that increase to $0.77 in FY17 and EPS growth increase by 8 – 10%. This will place AGL on a forward yield of approximately 4%.
We continue to like AGL.ASX as a buy-write.
CPU.ASX reported FY16 earnings of US$0.55 per share in line with guidance and down almost 8% on the same time last year. The result was impacted by a higher tax rate which masked what looks to be a moderate improvement in the underlying business and this is reflected in managements FY17 guidance of a return to 1 – 3% EPS growth.
Based FY17 expected earnings it places CPU.ASX on a 3.6% dividend yield and we still have questions around certainty of earnings growth out into FY18 and FY19.
CBA.ASX delivered NPAT of $9.45b an increase of 3% on the same time last year. Fully franked final dividend of $2.22 per share.
Fy17 EPS growth outlook for 3% placing CBA on an FY17 forward yield of 5.5%.
Best risk reward strategy from here with CBA is to sell European calls at the $75.71 level into Sept for a $2.10 credit, which will keep exposure to the Aug dividend and deliver $4.32 of cash flow from each CBA share, whilst providing some downside protection. For help on this one, please email me leon@investorsignals.com
ANZ.ASX ANZ’s 3Q16 update – earnings trends looked a little soft with a pickup in NPAT growth required in 4Q16 to reach consensus forecasts.
Asset quality trends also looked a little disappointing. FY17 forecast EPS growth 2% which places the stock on a forward yield of 6%.
From a technical perspective it’s worth noting the banks have now taken out the most recent highs of the long established down trend that has been in place since May 2015.
The next round of buy signals in the banks will be worth closer consideration.
Bendigo (BEN.ASX) 2H16 result confirmed that underlying operating conditions remain challenging. Revenue grew by 2% compared to the 1H16 and the outlook remains challenging with subdued volume loan growth and ongoing pressure on margins from competition and lower interest rates.
FY17 outlook is for cash earnings of around $450m on EPS of $0.96 and dividend payout of $0.67 placing the stock on a forward yield of almost 6.8%.
No signal present.
Leading up to last Friday’s July Non-Farm Payroll (NFP) report, the USD was being offered against all the other major G-7 currencies. After the June Headline NFP number beat expectations by over 150,000 last month, many forecasters were expecting a large correction in the number of new jobs created this month. Most FX traders understood that the risk to the USD was asymmetrical and that an “as expected” reading would be USD negative.
Instead, the robust NFP report allowed the Greenback to recoup the losses it experienced earlier in the week, the SP 500 reached an all-time new high close at 2176.00, US 10-yr bond yields hit a 3-week high of 1.60% and Fed Funds futures went from pricing a 57% chance of a 2016 rate hike to a 71% chance by the NY close.
With the US economy posting an additional 255,000 jobs and average hourly earning increasing by 0.3%, it’s reasonable to expect that US interest rate policy will continue to move toward normalization while its peers continue to add to direct stimulus and unconventional easing measures. In addition, the forward outlook to the US labor market is improving with a jump in the participation rate, as well as, the total weekly hours worked.
In short, by almost every metric, the US employment climate stands in sharp contrast to the dismal outlooks for the UK, Japan, most of Europe and Canada. That said, it’s our base case that seasonal factors effecting daily trade flows and a lack of any first-tier data this week could temper advances in the USD in the near-term.
The impact of lower trading volume is best illustrated in the SP 500. Despite never trading lower than 1% below all-time high levels last week, the daily trading volume was consistently close to 25% below the 50-day moving average. With this in mind, we expect the USD, US Stocks and US Treasury rates to trade with an upward bias but with less momentum.
James Hardie (JHX.ASX) reported 2Q16 update and we see nothing here to stop the “buy on the dip” approach. We already hold this name (in client accounts) from lower levels and have sold the Nov $23 call options. For clients not holding this name, keep an eye out for our buy signal, I think we’re not too far away from an entry signal being triggered.
The stock trades on 25X forward FY17 earnings and we’re looking for EPS growth or around 15%. US housing data continues to look strong.
FY17 revenue in USD$1.9b, with EBITDA likely to be around USD$490m and USD$0.45 in dividends.
In AUD terms we’re looking at around 3% forward dividend yield.
Brambles (BXB.ASX) has pulled back from the recent high and now presents a buying opportunity. Leg into this trade in two positions and wait for a rally back to $13. Look to sell the $13.50 November call options to enhance the return from collecting the option premium and the upcoming $0.14 dividend on the 9th of September 2016.
Suncorp’s (SUN.ASX) FY16 earnings result was below consensus with core earnings of $1.1b. Total FY16 GI margins were down on the same time last year. Banking profit of $390m was ahead of consensus.
FY17 outlook for $1.2b profit with 2- 3% EPS growth and dividends per share (DPS) of $0.76 placing the stock on a forward yield of 5.8%
No signal present.
Rio (RIO.ASX) RIO reported strong operating results, with underlying earnings of US$1.56bn. EBITDA of US$5.4b & 1HFY16 dividend declared of US$0.45.
FY17 outlook is for similar numbers and we expect RIO to trade in a range of $45 t0 $55.
No signal present.
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453