Ten-Day Triumph: ASX Scales New Heights as Earnings Season Surprises

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Welcome to Equity Espresso’s Market Recap.

The Australian share market extended its winning streak to 10 consecutive sessions, the longest since 2015, with the ASX 200 index rising 0.2% to 8,027.0 points. Revised U.S. jobs data bolstered the positive sentiment, suggesting a cooling labour market and increasing the likelihood of a Federal Reserve interest rate cut in September.

The Technology (+1.88%) sector led today’s gains, primarily driven by Wisetech's stellar performance. Wisetech shares surged 7.77% to a record $120.39, extending its two-day rally to 27.6% following better-than-expected FY2025 guidance. Life360 (+1.92%) continued its positive run, hitting a record close of $19.11.

Industrials (+1.28%) and Real Estate (+0.82%) were the next best-performing sectors, while Utilities (-0.52%) were the biggest laggards.

Another busy day of corporate earnings:

• Bank of Queensland (-7.32%) shares sunk after announcing plans to cut 400 jobs as part of a restructuring, incurring a $25-30 million charge in FY2024. The move aims to save $50 million annually, contributing to a $200 million cost reduction target by FY2026.

• Clearview Wealth (+2.52%) reported a 25% increase in underlying net profit to $35.3 million, with gross premium income rising 10% to $358.1 million. The life insurance company forecasts double-digit profit growth for FY2025 and targets an underlying net profit margin of 11-13% for FY2026.

• G8 Education (-7.47%) reported a 20.5% increase in earnings to $39.4 million and a 21.8% rise in net profits to $23.9 million for the first half of 2024. However, the childcare provider cautioned about upcoming industry challenges, noting recent declines in inquiries and occupancy rates at its centres.

• Insignia's (-15.70%) underlying net profit from continuing operations increased 13.6% to $216.6 million. However, the company reported a statutory net loss of $185.3 million due to remediation provisions and transformation costs. As a result, Insignia suspended dividend payments.

• Megaport (-20.95%) shares sunk on weaker guidance for FY25. The company posted a net profit of $9.6 million in FY2024, compared to a $9.8 million loss the previous year. Revenue surged 28% to $195.3 million. The company projects FY2025 revenue between $214-222 million and EBITDA of $57-65 million, up from $57 million in FY2024.

• Medibank (-2.30%) reported a 14.1% increase in net profit to $570.4 million for FY2024, leading to a dividend increase to 16.6¢ fully franked. The private health insurer aims for at least 15% annual organic profit growth through FY2026 and has allocated $150-250 million for potential acquisitions.

• Regis Resources (-) share price was unmoved after reporting a $184 million net loss for FY2024, mainly due to a significant impairment on its McPhillamys mine and $81 million in hedging-related losses.

• Qube (+1.30%) reported a 33% increase in statutory profit to $221 million for FY2024, driven by robust container activities. The company raised dividends by 13% to 9.15¢ fully franked.

• SkyCity Entertainment (-1.38%) shares fell after reporting a NZ$143.3 million statutory loss for 2024, primarily due to an NZ$86.2 million impairment on its Adelaide casino.

• Sonic Healthcare (+0.79%) reported a 25% drop in statutory net profit to $511 million for FY2024, primarily due to decreased COVID-19-related activities. Despite this, the company maintained its progressive dividend policy, increasing it by 1¢ to 63¢ unfranked.

• Super Retail Group (+6.24%) reported record sales of $3.88 billion for FY2023-24, up 2.1% year-on-year. Supercheap Auto and outdoor brands BCF and Macpac grew, while Rebel sales declined by 1%. Despite record sales, earnings and net profit fell 9% due to higher operating costs. The company declared a special dividend of 50¢.

• The Reject Shop (-9.65%) reported a 35.9% drop in net profit to $4.7 million despite a 4.1% increase in sales to $852.7 million for FY2024. The company cited rising labour and rental costs and increased shrinkage as reasons for the decline in profit.

Wall Street

U.S. markets saw modest gains on Wednesday as investors reacted to two key developments: a significant downward revision of payroll figures and the release of minutes from the Federal Reserve's latest meeting. The minutes strengthened expectations for an interest rate cut in September. The tech-heavy Nasdaq led the way, climbing 0.57%, buoyed by solid performance in semiconductor stocks. The Dow Jones edged up 0.14%, supported by gains in the financial sector, while the S&P 500 advanced 0.42%.

The Federal Reserve released minutes from its July meeting, where it kept interest rates steady. However, the minutes indicate that Fed officials were already strongly considering a rate cut at the upcoming September meeting, suggesting a potential shift in monetary policy direction.

Target (+11.20%) reported a 3% sales growth in Q2, beating expectations. The company maintained its full-year sales forecast but expects results in the lower range. Despite a cautious outlook, Target raised its profit guidance, projecting adjusted earnings per share between $9 and $9.70. JD.com.shares dropped 10% in Hong Kong after Walmart announced plans to sell its 5% stake in the Chinese e-commerce giant. This move ends a strategic alliance that began in June 2016 when Walmart invested in the company.

S&P500 Sector Performance

Economic Data

• The Eurozone Composite PMI rose to 51.2 in August 2024 from 50.2 in July, well above market expectations of 50.1. This marks the sixth consecutive expansion in the Euro Area’s private sector activity.

• The Bank of South Korea kept its base rate unchanged at 3.5% for the 13th time at the August meeting, as widely expected.

• U.S. Crude oil inventories decreased by 4.649 million barrels for the week ending August 16, 2024, exceeding expectations of a 2.72 million barrel reduction.

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🌎️ Around The Globe

• Alaska Air's $1 billion acquisition of Hawaiian Airlines has cleared a significant hurdle as the U.S. Department of Justice decided not to challenge the deal. The merger, announced in December, involves Alaska Air paying $18 per share in cash for Hawaiian, including $900 million of Hawaiian's debt.

• Alex Cooper's hit podcast "Call Her Daddy" is switching allegiances from Spotify to SiriusXM in a new multiyear deal reportedly worth over $100 million. This move ends Spotify's previous $60 million three-year exclusive agreement and aligns with their recent shift away from exclusive content.

• India's antitrust watchdog has raised concerns over the proposed $8.5B merger between Disney's India operations and Reliance, citing anti-competitive issues. The deal would create a media powerhouse controlling 40% of India's TV ad market, including crucial cricket broadcast rights.

• Eli Lilly's weight loss drug tirzepatide demonstrated a 94% reduction in Type 2 diabetes risk among overweight individuals. The study revealed that participants taking the highest 15 mg weekly dose experienced an average 23% body weight reduction.

• OpenAI has secured a multiyear licensing agreement with Condé Nast, gaining access to content from prestigious publications like Vogue, The New Yorker, Vanity Fair, and Wired. This deal allows OpenAI to incorporate Condé Nast's content into its products, including ChatGPT and the upcoming SearchGPT.

• Tesla has received a significant reduction in planned E.U. tariffs on its electric vehicles imported from China. The European Union revised the extra rate from 20.8% to 9% following Tesla's request for further investigations.

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*1-year, 3-year and 5-year returns are calculated as of 31 July 2024.

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