Our Algo Engine generated a buy signal in Downer EDI back in June at $6.60, with the stock price now pushing $8.00, most of the good news is priced in.
The FY18 earnings were announced on Thursday and the numbers were in line with consensus expectations. The highlight is the forward guidance of 13% growth.
FY18 NPATA came in at $296 & FY19 guidance now sits at $335m. This places Downer EDI on a forward yield of 4%.
Downer EDI will report earnings on Thursday and any weakness in the share price ahead of the result, provides a buying opportunity.
We expect Thursday’s result to exceed market consensus, supported by positive industry trends. As displayed in CIMIC’s recent earnings result.
Downer goes ex-dividend $0.12 on the 11th of September.
Downer EDI
Our Algo Engine generated a buy signal in Downer EDI at $6.75.
With the stock now trading at $7.50 we recommend locking in gains, as the stock is now trading at our initial “sell” price target.
We continue to like the long-term fundamentals for Downer and CIM and will revisit these names on the next retracement & algo buy signal.
Downer EDI
Our ALGO engine triggered a buy signal in Downer EDI on June 25th at $6.74.
Since then, the stock has reached an intra-day high of $7.30 on July 10th.
Recent broker notes have been bullish on the Engineering and Construction sector citing a high backlog of domestic infrastructure work.
The strong results for Cimic Group last week underscore this uptick in construction activity, in general.
More specifically, DOW got a lift last week after announcing it had won a 5-year support and maintenance contract with Chevron Australia.
We believe DOW is well placed to benefit from the dual tailwinds of increased infrastructure spending and a ramp up in capital spending from the mining sector.
DOW will report full-year results on August 16th. The forecast is for NPAT to increase to $295 million and the dividend per share to rise to 14.4 cents.
We see solid chart support in the $6.90 area and initial upside resistance just over $7.65.
Downer EDI
Our Algo engine generated a recent buy signal in Downer EDI and we’re encouraged by the fundamentals supporting solid future earnings growth.
The outlook for DOW’s base business is positive, with a favorable
backdrop across virtually all of Downer EDI’s markets including infrastructure, renewables, resources, health & government projects.
FY18 guidance to be achieved with 10%+ eps growth expected in FY19.
Based on FY19 forecasts we anticipate $11.5b in revenue, EBIT $500m and DPS $0.29, placing DOW on a forward yield of 4.1%.
ASX:DOW
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