Overseas Market Report – U.S. Stocks Mostly Lower as Earnings Roll In
U.S. stocks ended lower on Wednesday in an up-and-down trading day, weighed by selling in energy, materials and health-care stocks.
There were no major economic data releases on Wednesday.
At the close the Dow, S&P 500 and NASDAQ were down 0.3%, 0.6% and 0.8%, respectively.
For Australian ADRs listed on the NYSE, BHP Billiton slipped 24 cents (0.69%) to $34.70, ResMed fell 25 cents (0.44%) to $56.21, Telstra Corporation lost 24 cents (1.22%) to $19.49, Spark New Zealand dropped 17 cents (1.56%) to $10.74 and Westpac declined 23 cents (1.03%) to $22.11.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 2.02% and the 5-year yield was 1.36%.
General Motors (GM) reported earnings that were well ahead of analyst expectations. On an adjusted basis, the firm said it earned $1.50 a share versus the consensus estimate of $1.19 a share. Results were driven by strong results for trucks and SUVs in the U.S. while sales in China were soft.
Positive pricing was a critical theme in Coca-Cola's (KO) third-quarter, with price and mix contributing about 3 percentage points of top-line growth in the quarter (and 2 points year to date), driven by a continued rational competitive environment in North America and substantial price hikes in Latin America to mitigate negative currency impacts. Unit case sales (a measure of end-market demand) ticked up 3% from a year ago, with noncarbonated beverages climbing a solid 6%. Coke's profitability was solid in the quarter, with adjusted margins roughly flat on a year ago in both the quarter and year to date.
Shares of Boeing (BA) were up after the firm reported a 25% increase in third-quarter earnings. The aircraft maker also raised its 2015 earnings and revenue guidance on the back of the strong results.
Shares of Yahoo! (YHOO) were down after the firm reported another disappointing quarter. Total revenues excluding traffic acquisition costs, or TAC, declined 8% relative to 2014, the worst top-line decline since Mayer took over as CEO. A 13% decline in search revenues was the primary cause of the weak results, which management blamed on increased TAC and investments in its new advertising platform, Gemini. On the expense side, the company has shown reasonable discipline, with improved expense leverage in the product development, sales and marketing, and general and administrative line items.
European markets were higher.
The FTSE 100, French CAC 40 and Germany's DAX were up 0.1%, 0.5% and 0.9%, respectively.
Asian shares were mixed.
The Shanghai Composite was down 3.1%, the Hang Seng lost 0.4%, while the Nikkei 225 rallied 1.9%. India's Sensex was 0.1% lower.
Australian Market Report – Local Market Expected To Open Lower
Ahead of the local open, SPI futures were 36 points lower at 5,203.
Wednesday 21 October – close. The Australian market started the day on a low point, following a soft lead from the US market overnight. Local stocks stayed in negative territory until a late rally led by miners drove the market above the red line. There were mixed results from the sectors; energy and materials gained most significantly while health care lagged behind the rest. The Australian dollar depreciated against most major currencies.
The All Ordinaries rose 14.90 points (0.28%) to 5,286.50 while the S&P/ASX 200 added 12.70 points (0.24%) to 5,248.30.
In This Issue
Paragon Care (PGC) | Initiation | BUY
We initiate coverage of Paragon Care (PGC) with a buy call based on a blended valuation of $0.85 (42% upside) and a positive sector outlook. PGC has proved it can be an active participant in industry consolidation through 3 recent acquisitions that not only trebles revenue, but significantly expands its product range and geographic diversification.
Saracen (SAR) | BUY
Saracen (SAR) delivered 38.1koz (previously announced) @ AISC A$1,025/oz during the September Q, in-line with Argonaut’s estimate. Cash and bullion was unchanged at A$44.9m after spending $10.2m at Thunderbox, A$9.2m at Karari and A$3.2m on exploration. The Company recently completed a series of studies and provided a five-year outlook. Whilst our valuation is little changed incorporating the plans (a marginal increase from 58c to 60c), this outlook provided enhanced visibility for the Carosue Dam operation in relation to costs and ore sources in the near to medium term. Longer term, exploration success within SAR’s tenements, particularly around the Whirling Dervish-Karari trend will underpin further mine life extensions. Development progress at Thunderbox is 10% ahead of schedule and 7% under budget. BUY maintained.
Crown Resorts (CWN)
Crown Resorts provided its chairman's and CEO's addresses to the Company's AGM. Normalised NPAT attributable to the parent was $525.5m which was down 17.9% on the FY2014. Normalised EBITDA was $824.9m, up 5.4% on the FY2014. The Company's share of Melco Crown Entertainment's Normalised NPAT was $161.3m, down $129.9m or 44.6%. A significant item after tax of $61.3m consists of asset impairments relating primarily to the Company's investment in Cannery. Reported NPAT attributable to the parent of $385.0m was down 41.3% after significant items. On 9 October 2015 it had paid a final dividend to its shareholders of 19 cps, franked to 50%, bringing the full year dividend to 37 cps. The Company's Melbourne's results were pleasing while its Perth's results were more subdued. CWN jumped 41 cents (3.54%) to $11.99.
BHP Billiton (BHP)
BHP Billiton announced that it had four major projects under development in Petroleum, Copper and Potash, with a combined budget of US$7.0bn. On 14 and 15 October 2015, the Company priced multi-currency hybrid notes in the Euro, Sterling and US Dollar markets. The Group priced EUR2.0bn of subordinated fixed rate reset notes in the Euro market across two tranches, GBP600m of subordinated fixed rate reset notes in the Sterling market and US$3.25bn of subordinated fixed rate reset notes in the US Dollar market across two tranches. The proceeds will be used for general corporate purposes, including refinancing existing near-term debt maturities. Total petroleum production for the September 2015 quarter decreased by 4% to 64.5 MMboe. Petroleum capital expenditure of US$2.9bn planned for the FY2016. BHP lifted 24 cents (1.00%) to $24.23.
Recent Contacts & Presentations
Tox Free Solutions (TOX), AWE Limited (AWE), Ausdrill (ASL), GR Engineering (GNG), Medusa (MML), Resolute (RSG), Kingsgate (KCN), Troy (TRY), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), FAR Limited (FAR), Central Petroleum (CTP), Senex Energy (SXY), Red River (RVR)
Please read Argonaut's Important Disclaimers & disclosures
Log in to the client area below to download the full Morning Note PDF
