Best calls to action – Thursday, 16 February
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 16 February 2023, 6:30 AM
- Sectors Covered:
- Equity Strategy and Quant
Wesfarmers Limited (ASX:WES) - Showing resilience
WES's 1H23 result was marginally below our forecasts but well above consensus.
Key positives: All divisions except for Kmart Group reported earnings above our expectations; Operating cash flow increased 27%.
Key negatives: Catch losses increased to -$108m (inc. restructuring costs) vs -$44m in the pcp with losses expected to remain in 2H23 (albeit reducing relative to 1H23); WES's share of capex for the Mt Holland lithium project is expected to be 10-20% above previous guidance with first production delayed by ~6 months.
Management said retail trading through the first five weeks of 2H23 has been broadly in line with growth in 1H23. We adjust FY23-25F group EBIT by between -1% and +2%. Our target price remains broadly unchanged at (login to view) and we maintain our Add rating.
Read our full reports and latest price targets on ASX:WES here.
Corp Travel Limited (ASX:CTD) - Banking on a big 2H recovery
CTD's 1H23 result was a slight miss compared to implied guidance and our forecast. However, the result included additional costs so that CTD can take advantage of the expected strong recovery in the 2H23 and FY24.
The midpoint of FY23 EBITDA guidance was slightly better than consensus however higher D&A and tax results in NPATA downgrades. CTD is confident of achieving a full recovery in FY24 based on significant new clients wins. We maintain an Add rating with a new price target of (login to view).
Read our full reports and latest price targets on ASX:CTD here.
Treasury Wine Estate (ASX:TWE) - Still growing strongly
TWE's 1H23 result was a slight miss to MorgansF and consensus. Nonetheless, the company still delivered strong EBITS growth of 17.2%, which is a solid outcome given the challenging macro-economic backdrop.
Guidance implies that 2H23 EBITS will be broadly consistent on an underlying basis with the 1H23, resulting in minor downgrades to consensus. However, we still expect TWE to deliver double digit earnings growth over 2H23/FY24/FY25.
Trading at a discount to our valuation, we maintain an Add rating with a new price target of (login to view) on this high quality company.
Read our full reports and latest price targets on ASX:TWE here.
Computershare (ASX:CPU) - Not expensive with deleveraging to create optionality
We downgrade our FY23F/FY24F EPS by ~1%-3% on slightly weaker revenue forecasts and higher interest expense. Our PT is lowered to A$29.78 (previously ~A$31). With >10% share price upside to our price target, we maintain our ADD recommendation.
We downgrade our FY23F/FY24F EPS by ~1%-3% on slightly weaker revenue forecasts and higher interest expense. Our PT is lowered to (login to view).
Read our full reports and latest price targets on ASX:CPU here.
Cochlear Limited (ASX:COH) - 1H solid - hearing is believing
1H results were better than expected, underpinned by strong sales growth in both developed and emerging markets, but OPM declined on growth initiatives.
Cochlear Implants (CI; +14%) and Acoustics (+17%) drove the result, on strong demand for the new Nucleus 8 (N8) sound processor and recovery in surgeries, while Services was expectedly flat in front of the N8 rollout.
We see continued momentum, with FY23 guidance reaffirmed, implying a strong 2H (+25% at the mid-point), underpinned by strong fundamentals and progressively improving trading conditions.
We have adjusted our FY23-25 estimates and increased our target price to (login to view). Add.
Read our full reports and latest price targets on ASX:COH here.
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You can find further detailed analysis of company results this reporting season by browsing our reporting season tag, and view a full list of upcoming results on our Reporting Season Calendar.
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Disclaimer: Analyst may own shares. The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.