Overseas Market Report – U.S. Stocks End Sharply Higher
U.S. stocks closed with solid gains on Thursday as the main indexes followed rallying oil prices higher.
In economic news, initial U.S. unemployment claims rose by 10,000 to 272,000 last week, slightly worse than analyst expectations. The less volatile four-week moving average was down 1,250 to 272,000.
Durable-goods orders rose a larger-than-expected 4.9% in January. The rise in the month was driven by autos and aircraft. Core capital goods orders were up 3.9% month to month but are down 3% year over year.
At the close the Dow was up 1.3%, the S&P 500 was up 1.1% and the NASDAQ had lifted by 0.9%.
For Australian ADRs listed on the NYSE, BHP Billiton rose 3 cents (0.13%) to $22.83, ResMed fell 39 cents (-0.67%) to $57.40, Telstra Corporation gained 11 cents (0.59%) to $18.77, Spark New Zealand lifted 13 cents (1.13%) to $11.60 and Westpac rose 6 cents (0.29%) to $20.76.
At 8:00 AM (AEDT), the 10-year Treasury note yield was 1.70% and the 5-year yield was 1.15%.
HP Inc. (HPQ) reported fiscal first-quarter results that were in line with Morningstar's expectations, owing to an ongoing market contraction in its PC and printing segments. Management is accelerating the US$1-billion cost-reduction plan and has announced a workforce reduction of 3,000 employees, which should lead to US$300 million in savings beginning in fiscal 2017. Total revenue came in at US$12.2 billion, down 12% year over year and flat sequentially. Gross margin declined 70 basis points year over year and 60 basis points sequentially to 18.7%, affected by aggressive competitor pricing.
Salesforce's (CRM) fourth-quarter results propagate Morningstar's view that the firm's grasp on its customers is increasing, as uptake of products beyond CRM continues to accelerate. The company closed a record number of large deals in the quarter, giving credence to Morningstar's belief Salesforce's entire suite is not only robust, but scalable to the world's largest organisations. Fourth-quarter revenue rose 25% (27% in constant currency) to US$1.81 billion.
Shares of Anheuser-Busch Inbev (BUD) were down after the firm provided disappointing full-year guidance. Fourth-quarter and full-year results were very close to Morningstar's below-consensus forecasts. However, 2016 guidance implies the firm may not generate the modest EBIT margin expansion Morningstar had anticipated this year. In another indication of the challenging macroeconomic environment, management guided to higher SG&A spending in 2016, at a rate higher than sales growth.
European markets headed higher on Thursday.
The FTSE 100, French CAC 40 and Germany's DAX rose 2.5%, 2.2% and 1.8%, respectively.
In Asia, the Shanghai Composite plunged 6.4%, reigniting concerns about liquidity in that market. The Hang Seng was down 1.6% while the Nikkei 225 rose 1.4%. India's Sensex fell 0.5%.
Australian Market Report- Local Market Expected To Open Higher
Ahead of the local open, SPI futures were 32 points higher at 4,871.
Thursday 25 February – close. The Australian market experienced a volatile day. Local stocks opened higher on the back of a positive lead from the US market overnight, fluctuated below the red line for the most part of the day, and fought its way back to positive territory in the last hour of trade. There were mixed results from the sectors; health care gained most significantly while consumer staples performed the worst. The Australian dollar depreciated against most major currencies, with the exception of the Japanese yen.
The All Ordinaries rose 1.40 points to 4,944.70 while the S&P/ASX 200 gained 6.20 points to 4,881.20.
In This Issue
Argonaut Research | Pacific Energy (PEA) | Buy
PEA’s business model provides visibility and predictable revenue, but a positive margin surprise in 1H16 delivered underlying EBITDA of $17.6m, 8% ahead of our forecast. Growth capex of $27m saw gearing increase to 28% (ND/E), but this is at comfortable levels and has probably peaked. PEA has good credentials and, despite headwinds in the mining space, we believe this will provide opportunities in its traditional, and potentially new, markets. We maintain our $0.60 valuation and buy call.
Argonaut Research | Western Areas (WSA) | Buy
Western Areas (WSA) release first half results with an underlying net loss of $7.8m and a reported net loss of $20.0m after impairments and write offs (vs Argonaut forecast of $10.2m). Cash outflow for the half, before convertible bond (CB) repayments of $125m, was $39m resulting from lower revenue from declining nickel prices, an instalment for the Cosmos acquisition and significant capex items. Capex for H2 FY16 is expected to decline $15m to $10-15m as the Company enacts disciplined capital management amidst a low nickel price environment. At December 31 WSA had $29.9m cash and no debt. Also announced was a 10% salary reduction for Board and Management.
Ramsay Health Care (RHC)
Ramsay Health Care announced half year results for the period ended 31 December 2015. The Company reported that core NPAT up 16.2% to $237.4m; core EPS up 16.9% to 114.1c. The Group reported revenue up 24.9% to $4.2bn and EBIT up 12.7% to $425.9m. The Company paid fully franked interim dividend of 47.0cps, up 16%. The Company has acquired a further nine hospitals in Lille, France which was completed in December 2015. In August 2015 the Company announced a strategic alliance with ICHOM (International Consortium for Health Outcomes Measurement). In the half year to December 2015. It has completed $126m worth of expansion projects delivering a total of 186 beds and 8 operating theatres. RHC added 70 cents to $63.00.
South32 announced a series of restructuring initiatives that will reset the cost base of its Worsley Alumina, Illawarra Metallurgical Coal, Australia Manganese and Cerro Matoso operations. Operational performance at Worsley Alumina continues to be optimised following the completion of the US$3.2bn Efficiency and Growth project in June 2011, which positioned the operation as one of the largest refineries in the industry. Over the 18 months to the end of December 2015, Illawarra Metallurgical Coal reduced its employee and contractor headcount by 100 and operating unit costs, including sustaining capital expenditure and underground development, by 34%. As a result, guidance for manganese saleable ore production in FY17 is lowered by 4% to 5.2Mt (100% basis). S32 lifted 4 cents to $1.17.
Recent Contacts & Presentations
Troy Resources (TRY), Northern Star Resources (NST), Regis Resources (RRL), Medusa Mining (MML), Doray Minerals (DRM), Beadell Resources (BDR), Red 5 (RED), Kingsgate Consolidated (KCN), OBJ (OBJ), Sino Gas & Energy Holdings (SEH), TFS Corporation (TFC), Paragon Care (PGC), Austal (ASB), Orbital Corporation (OEC),Energia Minerals (EMX), Berkeley Energia (BKY) , Finders Resources (FND), 4DS Memory Ltd (4DS) , Bionomics Ltd (BNO)