Australian Stock Market News – Woolworths, Flight Centre, Telstra shares and more

Australian Stock Market News - Michael Heffernan SkyNews

Michael Heffernan appearing on SkyNews - 25 August 2017

Australian Stock Market Commentary and Stock Tips - 25th August 2017

Australian Stock Market News: Market Highlights

Results are out! – Reporting season gets a high pass – miners’ strike liquid gold – Vegemite and cheese, a delicious combo - Make Mine Milk Mum, A2 that is – airports flying high – while Flight Centre travels really well on the ground – Woolworths and the elusive WOW factor.

That was the week that was

The last full week of the reporting season delivered an interesting variety of results.  My score board showed that of the companies that I watch more carefully than others, 80% delivered increased profits and dividends, as compared to last year.  A few stand outs in this regard were BHP; Fortescue; A2 Milk; and Bapcor.  On the other hand there were only a few disappointers, and these included Vocus; HealthScope and Brambles. 

“How do you solve a problem like Maria” aka Telstra–apologies Sound of Music

What we know: -Telstra delivered an ok profit result but shocked us with the sharp cut to dividends.  The result was that its share price fell from $4.30 to $3.90 in the aftermath of the announcement. 

Facts: - investors receive an unchanged 15.5 cent half year dividend on 28 September – and 22 cents this financial year – making a total of 37.5cents dividend if held for the next 13 months -  that’s a dividend yield of 9.6% fully franked on today’s share price of $3.90.- not bad income if share price remains steady

Question what do you do? – it depends on how highly you value very high dividends (Telstra was 7.2% pre-report) For holders who brought at lower prices than now may consider trimming their holdings and transfer those funds to other blue chips paying roughly similar dividends such as ASX; AGL; and Macquarie Group. Otherwise by holding the shares you could reap 9.6% this year but lower next year probably around the 5.5% fully franked mark.

 The bottom line – Telstra is transforming itself from a phone company to a technology company, ---and the dividend cut, combined with cost cuts, efficiencies and judicial acquisitions may transform it to from a dividend stock to a growth stock.

“Cheese and Vegemite Please Mum – But no Coke”

Iconic cheese maker Bega delivered a quietly impressive report this week.  But what you may not know is that this iconic cheese maker also bought the right to make and distribute a staple spread on toast called Vegemite (NO, not smashed Avo).  And to top your breakfast off you can have A2 Milk on cereal.  A2 also delivered a great result.  On the other hand, Coke (Coca-Cola Amatil) is struggling with what has now become a pariah of food additives – sugar.  And that has had a negative effect on Coke’s profitability and share price. 

WOW is the market code for Woolworths – but its result is no WOW factor

Were it not for the lacklustre performance of one of Woolworth’s offspring, Big W, the parent’s result would have been much better.  As it was the sales in its supermarkets did very well, in fact better than Coles. However the supermarket foursome of Wesfarmers Coles; Woolworths; Aldi and IGA are squeezing the pipes out of the profit lemons for all of them. Only the most nimble will win, and at the moment Woolworths is doing well in its road to recovery. 

It's Thunder Clap Newman again – There’s Something in the Air

What is now becoming an icon in the travel business, Flight Centre, delivered another impressive result. It cut the mustard by diversifying its offering product wise, geographically, online as well as in its shops.  Indeed its shops are properly a key differentiator from the likes of WotIf; Webjet; Trivago; Expedia; and Bookings.com among others.  Also we mustn’t forget Sydney Airport the Australian magnet for international travellers, continues on its merry and profitable ways.  Both Flight Centre and Sydney Airport look the goods.  

Oil and Iron ore --a combustible mixture for resources profits

Two of Australia’s three iron ore stocks reported this week, namely BHP and Fortescue. Their results were simply stunning – both profits and dividends increased substantially.  Consequent upon stronger economic growth in Europe; the US and China the future looks good for these iron ore stocks.

Conclusion

Well we have traversed what was shaping up as a problematic reporting season.  I am now happy to say that not only have we got through it, but we got through it with flying colours in many cases.  We can now look forward to the minor reporting season of the three major non CBA banks and Macquarie, reporting in October, and then we’re into in the usually positive run up to Christmas.

Stock Tips - Three midcaps on the menu

I alluded earlier to the great result by A2 Milk, which continues to look forward to good times.  And not to forget the Geelong based CostaGroup whichalso delivered a most workmanlike result, and its future profit growth is attractive.  Thirdly Bapcor the auto parts supplier delivered a sound result and its acquisition of New Zealand’s auto parts business Hellaby looks like being a winner.

australian stock market report

Next Week – In Australia no major reports

In the U.S.  - An avalanche of data:---on manufacturing activity; home sales; durable goods orders; and the outcome from a world Central Bank symposium being held at a place called Jackson Hole Wyoming USA.

 

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About Michael Heffernan

+61 (3) 8633 9925 Email Profile

Michael Heffernan has over 30 years’ experience in the finance and securities industry and is currently a Senior Client Advisor and Economist with a leading Australian Sharebroker Phillip Capital after having been Chief Economist/Lawyer with the Australian Stock Exchange for 13 years, and an Economist with Commonwealth Department of Employment and Industrial Relations for 11 years.

Most recently Michael topped the poll of the Australian Newspaper's Criterion column of his expert tipsters for 2014 with an average increase of 26% over the year. Also Michael was named Stock Picker of the year 2013 and 2016 at the Australian Stockbrokers Foundation Annual Awards Charity Dinner.

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