The Match Out: ASX up, Fortescue (FMG) gets yet another CEO

A solid session to kick off the new week despite a mixed bag on the reporting front as we transition down the market cap spectrum over the next week. So far, results have been better-than-expected with earnings beats outnumbering misses 5:3, however there is growing uncertainty around what comes next and that’s filtering into softer guidance in aggregate for FY24, prompting downgrades.

• The ASX 200 finished up +44pts/ +0.63% at 7159
• The Healthcare sector was best on ground (+1.45%) while Consumer Discretionary (+1.36%) & Financials (+0.78%) were also strong.
• IT (-0.74%) and Communications (Flat) the weakest links.
• Retail sales bounced +0.5 in July, beating forecasts of +0.3% - the rise in July follows a 0.8% fall in June 2023 and a 0.8% rise in May 2023 i.e. things are getting choppy and more uncertain, but probably better in aggregate than was feared.
• Fortescue (ASX: FMG) -5.06% fell as FY23 profit missed the mark and they lost another CEO after just 6 months in the job..
• For every Altium (ASX: ALU) there’s an Appen (ASX: APX), the latter is still in a world of pain down 32% today on declining 1H revenue and a bleak forecast for 2H. This looks a lot like a death spiral!
• NEXTDC (ASX: NXT) -2.64% fell on softer EBITDA guidance for FY24, although FY23 was solid and the lower guidance relates to higher capex which will deliver growth in outer years.
• Nice to see some of the beaten up healthcare stocks rally today, Ramsay (ASX: RHC) +2.52%, CSL +1.72% while Resmed (ASX: RMD) lagged up just +0.6%.
• Gold stocks found some form with Northern Star (ASX: NST) +2.69% and Evolution (ASX: EVN) +3.17% outperforming.
• Wesfarmers (ASX: WES) +2.16% continues to see upgrades post last week’s results.
• BHP +1.23% is at the bottom of its recent trading range – we think it’s a buy here.
• Iron Ore was ~0.80% lower in Asia however it’s been very supported over the past week trading ~US$110/mt
• Gold edged higher trading at US$1916 at our close.
• Asian stocks were solid Hong Kong up +1.12%, Japan +1.71% while China was up +0.98%
• US Futures are all up, around +0.20%
• Reporting season now starts to wind down slowly, download the Market Matters Reporting Calendar Here

ASX 200 Chart

Fortescue Metals (ASX: FMG) $19.87

FMG -5.06%: A fairly tough session for Fortescue today as they announced a mixed FY23 result and surprise departure of CEO Fiona Hick after only 6 months in the job. Underlying revenue of US$16.9bn was smack inline with expectations however profitability was a slight miss, with underlying net profit after tax (NPAT) of US$5.5bn vs consensus US$5.7bn. The dividend of $1.00 was also below the $1.05 expected. Higher costs to blame for the miss at the profit line while there was plenty of focus around the departure of the CEO, the 10th Senior exec departure in the past 3-years. The current COO Dino Otranto appointed as new CEO. Operationally, they updated their forecasts for Iron Bridge life of mine C1 cost to US$45/wmt versus expectations of sub US$40/wmt while they also wrote the asset down by $726m post tax, partly due to higher discount rates.

• A tougher result for FMG, costs again an issue which has been a sector wide theme this reporting period, while stability in management is now very important.

NEXTDC (ASX: NXT) $13.26

NXT –2.64%: A mixed result for the data centre operative today with a strong FY23 in the books but they guided lower for FY24 than consensus, initially pushing shares sharply lower, however, an explanation of the miss (investing in capacity) will ultimately have a positive impact on growth in outer years, which caused the stock to rebound. Data services revenue came in at $362m, up 25% YoY strong relative to $355m consensus and guidance of $350-360m, underlying EBITDA was inline and no dividend was declared, all as per programmed. They said FY24 underlying EBITDA would be $190-200m versus consensus of $210m, which was the issue, however higher costs will drive better growth in FY24 and beyond.

• A solid result from NXT, they’re simply spending more to take advantage of the opportunity in front of them.

Broker Moves

• Opthea Cut to Underweight at Wilsons; PT 30 Australian cents
• Bravura Raised to Market-Weight at Wilsons
• Whitehaven Cut to Neutral at Macquarie; PT A$6
• Wesfarmers Raised to Outperform at Macquarie; PT A$54
• Bravura Cut to Underperform at Macquarie; PT 65 Australian cents
• Accent Group Cut to Sell at CLSA; PT A$1.75
• Ventia Services Raised to Buy at CLSA; PT A$3.05
• Wesfarmers Cut to Accumulate at CLSA; PT A$56.85
• Wesfarmers Raised to Neutral at Goldman; PT A$49.80
• Capitol Health Cut to Neutral at Goldman; PT 26 Australian cents
• Accent Group Raised to Overweight at Wilsons; PT A$2.20
• Australian Finance Cut to Neutral at Citi; PT A$1.70
• Regis Healthcare Raised to Overweight at JPMorgan; PT A$2.75
• Insignia Financial Cut to Equal-Weight at Morgan Stanley
• Chalice Mining Rated New Add at Morgans Financial Limited
• Wesfarmers Raised to Buy at Jefferies; PT A$57
• Accent Group Raised to Add at Morgans Financial Limited
• Pilbara Minerals Cut to Neutral at Citi; PT A$4.80

Major Movers Today

Have a great night

The Market Matters Team

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