The Australian company reporting season for August is coming to a close and it has been one of the most important for years. We are getting the first real look at the impact of COVID-19 on company profitability and for some companies, the impact has been significant. For others however, the impact was non-existent or far less significant than share price movements would suggest. As a result, this period has been a lucrative one for some investors and unsuccessful one for others. Some of what has been reported also has implication for stocks moving forwards.
Our team at Emerald Equities has been providing reporting updates on individual companies to our members. We prepare their updates before the market opens and give commentary on the results relative to what was expected by analysts.
Many analysts will provide you reports in the days after the report date, but our aim is to provide investors with the information to make a decision on the day of report. Should they require more information, they can login to our Emerald Equities members site for just about any data point they would require. Click here to sign up.
Here are a couple of the examples that we provided to members on the mornings of the reports:
19th August:
CSL.AX – CSL Limited – Results for the Full Year Ended 30 June 2020
CSL today announced FY20 results. Total revenues rose by 7.2% to $US9.15 billion, while profits rose by 9.6% to $US 2.1 billion. As a result the company will pay a final dividend of $US 1.07 per share, up from the $US 1.00 final dividend in FY19. Earnings per share jumped by more than 9 percent as well. Chief Executive Paul Perreault described the report as ‘an exceptional result’.
The results are indeed very strong, but they are also bang-on what was expected by analysts. The business is forecasting FY21 profits to be between $US2.1 and $US2.265 billion.
Despite CSL’s current high price, Emerald Equities believes that the consistency of strong performance throughout all market conditions serves to justify the valuation on the stock.
24th August:
FMG.AX – Fortescue Metals Group Ltd – FY20 Full Year Results
Fortescue today announced FY20 results. Revenues jumped by 29 percent to $US 12,820 million, while profits jumped 49 percent to $4,735 million. The company will pay a fully franked final dividend of $A1.00 per share, up from the $A0.86 final dividend in FY19. Chief Executive Elizabeth Gaines stated that ‘In FY20, the Fortescue team delivered a year of records while working together through the unprecedented disruption caused by the COVID-19 pandemic.’
Fortescue exceeded their guidance in terms of total tonnage of iron ore shipped. The results are in-line or slightly better than what was expected by analysts. The strong dividend in particular could cause investors to snap up the stock.
Emerald Equities views Fortescue as cheap even at current levels.
Each of these stocks opened higher and continued higher on the day of their reports.
We will be running a special reporting season wrap webcast at 2PM AEST on Thursday 3rd of September, where we will go into more detail about some of the themes of this reporting season. This webinar is open to all, so Make sure to attend to for information on how to position your investments for FY21.
You can sign up to view this free webcast by clicking here
(Disclosure: the author and/or entities associated with Emerald Equities have interests in the companies mentioned in this article).
Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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