More landmines this reporting season
A fairly soggy day on the market today with stocks opening higher on the back of a good US lead however it was short lived, and it seemed like underwhelming reports from some of the well-known, well owned, and well-spoken about stocks on the mkt such as Healthscope that failed to live up to expectations, prompted caution, and the market drifted lower throughout the session.
In terms of Healthscope, this is a stock we’ve previously owned however sold because of a weak technical picture. The longer term thematics stack up for HSO however the tape never lies and the continued cap on the share price concerned us. Today’s result that showed higher costs, and a lack of any growth in earnings in the near term saw the stocks pummelled on big volume – closing down -15.3% to $1.85. We’ll cover this more in the AM report tomorrow.
Healthscope Daily Chart
Woolworths (WOW) also reported numbers that were a tad light on in aggregate, however there were some swings and roundabouts. Divisionally, the food and liquor business (69% of earnings) did really well in terms of growth with top line revenue up by 5% and the critical like for like sales (LFL) number up by a very strong 6.4% in 4Q17 (above market expectations of 5.5%), continuing the accelerating trend of the last 3 quarters (1Q +1.7%, 2Q +3.1%, 3Q +4.5% 4Q +6.4%). That said, this growth is clearly coming at the expense of margins which were down from 4.6% to 4.2% as aggressive price reductions start to bite. Woolies have clearly addressed their growth issues, and are getting customers through the door, which is a positive however it gets harder from here. We have no interest in WOW at current levels.
Woolworths Daily Chart
On the broader market today, the Energy sector led the way while most weakness was felt in IT which lost -1.03% - an overall range of +/- 58 points, a high of 5781, a low of 5723 and a close of 5737, off -13pts or -0.22%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Have a great night
The Market Matters Team
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