The Match Out: ASX up as Resources rally, CSL disappoints

Commodity stocks were the place to be today enjoying the more bullish rhetoric coming from China, the sector underpinning a solid move higher at the index level and more than offsetting a softer-than-expected update from heavyweight CSL.

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• The ASX 200 finished up +22pts/ +0.32% at 7161
• The Material sector was best on ground (+2.49%) while Financials (+0.90%) & Energy (+0.68%) were also solid.
• Healthcare (-4.82%) and IT (-1.44%) the weakest links.
• CSL Limited (ASX: CSL) -6.89%: Fell today following a weaker-than-expected trading update where they threw cold water over analysts’ FY24 earnings assumptions.
• That drop took a whopping ~30 points from the Index given it’s the 3^rd largest stock on the market.
• BHP Group (ASX: BHP) on the other hand rallied +3.64% and contributed +24 index points
• IAG Group (ASX: IAG) +2.55% was up after reconfirming FY23 guidance, and while they said costs could rise in FY24, they dangled the productivity carrot saying increased automation could be a decent offset.
• Lithium stocks were solid, Pilbara (ASX: PLS) +2.95% while Mineral Resources (ASX: MIN) enjoyed the session adding +5.01%, leading the ASX 200 in the process. We own both stocks in our Flagship Growth Portfolio.
• IPD Group (ASX: IPG) -2.93% fell despite delivering earnings guidance that showed strong growth on FY22. Our (Shaw) analyst Philip Pepe made material changes to his earnings forecasts and increased his price target from $3.60/s to $4.50/s, retaining a BUY rating. The stock closed $3.98
• Iron ore rose for a second day on China’s measures to spur growth, jumping another 2.6%. Daily steel output at major Chinese mills also jumped 6.5% in early June from late May, the China Iron & Steel Association said.
• A Chinese stimulus package would include support for the property sector which would mean higher steel demand. The Iron Ore stocks rallied, Fortescue Metals (ASX: FMG) +4.33% the best of them.
• Gold was down overnight to ~US$1942 before tracking up US$2 in Asian trade today, settled $US1946 at our close.
• Most gold stocks finished lower, although Newcrest (ASX: NCM) was +0.19% to $26.08. The Newmont deal is worth $27.40, or a 5% premium to last.
• Asian stocks were mixed Hong Kong down -0.60%, Japan +1.57% while China was flat.
• US Futures are down, but only a small amount.

ASX 200 Chart - Intraday 

ASX 200 Chart - Daily 

CSL Limited (ASX: CSL) $287.25

CSL -6.89%: Fell today following a weaker-than-expected trading update where they threw cold water over analysts FY24 earnings assumptions. While the common reaction to a CSL downgrade is ‘buy-it’, we think this will be a slower recovery than usual. For FY23 they said currency headwinds would be more severe than previously thought, more like ~US$250m which means underlying earnings (NPATA) should be $US2.55bn for FY23, pretty much inline with current consensus which is available on the Market Matters website here, however, guidance for growth of 13-18% in FY24 implies NPATA of between US$2.9bn - $US3bn. That’s ~10% below visible Bloomberg consensus however it’s more like 20% below where the bulls such as UBS were forecasting earnings would land. UBS only initiated coverage in May expecting net earnings of $US3.6bn in FY24, so on our first run-through (and without seeing an updated note from UBS), today’s update looks particularly weak versus bullish assumptions. We’ll have more on CSL tomorrow morning before open, however for now, our underweight ~4% position in our Flagship Growth Portfolio, seems to be 4% too much!

Broker Moves

• Domino's Pizza Enterprises Cut to Sell at UBS; PT A$40
• ARB Cut to Sell at Citi; PT A$24
• Macquarie Technology Gro Raised to Outperform at RBC; PT A$76
• McMillan Shakespeare Cut to Neutral at Citi; PT A$16.10
• Evolution Raised to Neutral at Citi; PT A$3.30

Major Movers Today

Have a great night

The Market Matters Team

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