Insights
Maximising your wealth | Preparing for the new financial year
Get ready for the end of financial year.
It is easy to become distracted by the current affairs occurring both domestically and overseas. From the upcoming federal election to Trump tariffs, the Ukraine/Russia war and so much more, there’s just too much to keep up with for any sane person.
With everything going on, it's important we try to maintain other, more 'normal' aspects of life. Things we can control, such as our end of financial year tax planning. What do you need to do to get your financial house in order before 30 June?
Here are some handy hints for you to consider over the next few months, contact your adviser to chat about any of the following topics:
Investment, Property, and Insurance
Have you sold an investment asset this financial year? Ensure you have copies of your investment statements, including dividend statements. This is also a good time to review your investment portfolio. Markets have been quite volatile recently, so there may be opportunities you can take advantage of, such as capital gains/losses. If you own property, make sure you have your paperwork up to date, particularly if you can claim depreciation. Additionally, ensure your personal insurance, including life and income protection insurance, is in order. Has your personal situation changed? Talk to your Morgans adviser about a portfolio administration service that will make next year’s paperwork and tax time simple.
Retirement and Superannuation
Are you thinking about retiring this year? Ensure you have your details to access your Super or other retirement income stream. Review your capital gains and losses for your investment and superannuation portfolios. Consider what superannuation contributions you have already made or intend to make prior to 30 June. Talk to your financial adviser to ensure you understand what contribution limits apply to you. If you are already receiving a pension from your superannuation, make sure you meet your minimum pension requirements before 30 June to avoid significant penalties. Talk to your adviser to identify investment and superannuation strategies you can put in place before 30 June to help protect your retirement savings.
What the superannuation thresholds for 2025-2026 means for you
From 1 July 2025, the transfer balance cap will index from $1.9 million to $2.0 million, allowing individuals to transfer more into their retirement phase accounts. Similarly, the total super balance cap will index to $2.0 million from 30 June 2025. Concessional contributions will remain at $30,000 per person per annum, while non-concessional contributions will stay at $120,000 per person per annum, with the option to bring forward up to $360,000 over three years for eligible individuals, depending on their total super balance as of the previous 30 June. Additionally, the Super Guarantee Charge (SGC) rate will increase from 11.5% to 12% for the 2025/26 financial year, marking the final planned increase to the SGC rate. These changes provide opportunities to maximise your superannuation contributions and benefits, so it's important to plan accordingly and consult with your financial adviser.
Will you be ready?
Don't let global issues distract you from the things you would normally focus on at this time of year. It's time to get back on track.
Feel free to contact your Morgans adviser to discuss your end of financial year planning.
A strong result from Eli Lilly overnight came amid a 2.3% surge in the S&P 500, the best day for the index since 2022. Eli Lilly raised sales and profit guidance for the year after a strong performance by its diabetes and weight loss drugs Mounjaro and Zepbound.
Most of the US companies we’re watching have now reported and the frequency of results now slows down. Stocks of interest still yet to report include Home Depot (13 August), Cisco (14 August), Walmart (15 August), Palo Alto Networks (19 August) and NVIDIA (28 August).
Eli Lilly
In contrast to yesterday’s lacklustre result from Novo Nordisk, Eli Lilly knocked it out of the park overnight with a strong Q2 result and an increase in its full year guidance. Quarterly sales of the Zepbound weight-loss drug passed $1 billion for the first time. Supply of both Mounjaro and Zepbound increased during Q2 and Lilly said it was able to backfill orders and increase stocks at wholesalers. Lilly now expects adjusted profit of $45.4-46.6 billion in 2024, up from $42.4-43.6 billion. Some investors have speculated that the strong performance of Eli Lilly in the period means it is outmaneuvering Novo Nordisk in the push to increase manufacturing capacity.
The roundup
Almost all US companies have now released their quarterly earnings. The median EPS beat has been 4.2% and the median yoy EPS growth 9.7%.
This is a featured article from Stockhead's Investor Guide on Health and BioTech FY25. To read the full publication visit here.
Historically, the ASX healthcare sector has delivered strong performance for investors. The S&P/ASX 200 Health Care index outperformed the benchmark S&P/ASX 200 index in seven of the past 10 years, delivering a CAGR of 11.9% compared to 8.1%. As inflation rose, the ASX healthcare sector struggled, but come October 2023 signs of improving investor sentiment emerged.
Looking forward, the outlook feels very positive. Inflation has been sticky and interest rates higher for longer than forecast. However, as rates come down and economic conditions improve, money is expected to continue to flow into the stock market and the emerging healthcare space.
Strong backing for life sciences and biotech
The Australian life sciences ecosystem is worth more than $8 billion in annual revenue and is projected to grow at 3% annually from 2021-2026. Australia’s medical and biotechnology sector has benefited from a multimillion-dollar windfall of government funding and substantial tax breaks for companies investing in R&D. Globally, the sector is projected to be worth around US$3.44 trillion by 2030, and the Federal Government is ensuring Australia will well and truly be at the party.
Milestones and strong sales pushing some stocks higher
As of June 2024 there were 147 companies with a market capitalisation of $236 billion or more on the ASX, according to Bioshares. The top 10 health stocks represent 94% of the total and include blood products giant CSL (ASX:CSL), Cochlear (ASX:COH) and Resmed (ASX:RMD).
As macroeconomic and geopolitical factors continue to impact equity markets, companies hitting major milestones – such as receiving regulatory approval, achieving positive clinical results or securing material sales orders – are performing well.
Those in hot spaces, such as radiopharmaceuticals, are also performing strongly, while solid sales momentum, approaching profitability and leading-edge technologies also tend to move a share price higher.
The lucrative rare diseases market is also getting plenty of attention as investors come to understand the benefits of an orphan drug designation (ODD). In the US perks include increased access to the US FDA, new drug application fee waivers, a potentially faster route to market and seven additional years of exclusivity once a drug is approved.
In most cases, shares are being positively re-rated
After an extended period of under-performance, 2024 has seen several companies refresh management teams and boards or change or refocus strategy in an attempt to revitalise investor interest. In most cases shares are being positively re-rated.
On the M&A front, domestic and international activity has increased. Many larger pharmaceutical and medical device companies with strong post-Covid balance sheets are looking to bolster their portfolios, meaning M&A activity will likely continue throughout 2024.
AI emerging as a major healthcare theme
Artificial intelligence (AI) is also emerging as a theme for healthcare. The Albanese government is investing $30 million in improving access to health services and maintaining Australia’s world class health system.
Healthcare has historically lagged in technology adoption, but the healthcare system’s inherent constraints offer a compelling case for a significant role for AI in the sector’s future. Labour shortages and budgetary pressures are changing current practices, with software being introduced to optimise workflow, enhance scheduling, coordinate care and fortify data security. Also, drug development will likely benefit through shorter development times and improved patient selection, resulting in reduced costs and increasing the number of drugs in the pipeline.
Morgans clients receive exclusive insights such as access to the latest stock and sector coverage featured in the Month Ahead. Contact ustoday to begin your journey with Morgans.
.jpg)
Arguably the best result last night came from Shopify, which beat analyst expectations by nearly 30% as its AI capabilities attracted more merchants to its e-commerce platform. By contrast, there was a rare miss from Novo Nordisk, with its weight-loss drug Wegovy undershooting expectations. Disney posted its first ever profit from the combined streaming businesses of Disney+, Hulu and ESPN+, but warned of more challenging trading in its theme parks. Occidental Petroleum beat consensus on higher production and crude prices.
We are nearing the end of US reporting season and tomorrow will see the last in our series of daily updates for this quarter. The highlight tonight will be the Q2 result from the health care giant Eli Lilly.
Walt Disney
Disney comfortably exceeded consensus EPS estimates, driven mainly by a much better performance in the Entertainment division. The combined streaming businesses of Disney+, Hulu and ESPN+ posted a profit for the first time. Revenue was in line with forecasts and up 4% yoy with weaker sales and licencing of content offsetting a better-than-expected performance by US theme parks. After the strong Q3 EPS performance, Disney said it anticipates full year EPS growth of at least 20% (consensus 12%). It did, however, predict a short-term “moderation in demand” in the theme parks due to a softening consumer environment. Shares fell nearly 5%.
Novo Nordisk
Weaker sales of Novo Nordisk’s weight-loss drug Wegovy in Q3 sent its shares down 8%. This is a rare miss from a company that has seen its shares put on more than 200% since the launch of Wegovy in June 2021 amid a series of profit beats. This has caused investors to worry about competition from Eli Lilly, which reports tomorrow. Overall sales guidance was raised by 2% due to improving GLP-1 Rx trends. Volume trends are improving, which suggests the negative reaction overnight may be short-lived.
Shopify
Shopify beat Q2 EPS expectations by 27% as its AI-enabled tools brought more merchants onto its e-commerce platform. Some of the new brands using Shopify include Toys "R" Us, Mas+ by Lionel Messi and Dios Mio Coffee by Sofia Vergara. Sales were 2% higher than forecast, but good cost discipline magnified the beat at the bottom line. Shares rose 18%, reversing the negative trend since it issued downbeat sales forecasts after its Q4 2023 and Q1 2024 results. The implied outlook for Q3 2024 is 25% higher than consensus.
Occidental Petroleum
Higher oil production in Colorado and higher realised crude prices underpinned a significant profit beat in Q2, with EPS coming in 33% above consensus. Output in the U.S. Permian basin and in the Gulf of Mexico was at the higher end of the company's guidance. Q3 production is expected to increase about 140,000 boepd to 1.390m boepd. The recent acquisition of CrownRock has strengthened Occidental's position in the Permian basin.
The story so far
With nearly all companies now having reported, the median EPS beat is 4.2% and the median EPS growth 9.5%. The top share price reactions have been to Shopify, Spotify and Uber. The most negative have been to Intel, Snap and Ford.
.jpg)
It was a rough night for Airbnb, with shares falling 15% after the bell on a reduction to Q3 guidance, citing a shortening of booking windows around the world. Uber Technologies did the opposite, its shares rising 11% after beating consensus, notably in Delivery margins. Caterpillar achieved an unexpected improvement in margins with steady growth in the US (but weakness in global markets, notably China). Amgen reported earnings in line with expectations, with higher costs offsetting the additional revenue from the acquisition of Horizon. Global Business Travel Group (AMEX) beat forecasts as international corporate travel demand recovers, sending its shares up 17%.
Tonight, we’re watching out for results from Walt Disney, Shopify and Occidental Petroleum.
Amgen
Biotechnology company Amgen’s Q2 EPS fell by 0.6%, largely in line with analyst expectations. This was due to higher expenses, including costs related to development of the experimental obesity drug MariTide, offset a 20% increase in revenue driven by the acquisition in October of rare disease drugmaker Horizon Therapeutics. Shares fell 2% in afterhours trading.
Caterpillar
Caterpillar beat analyst EPS expectations by 8% as higher prices and lower manufacturing costs offset the effects of reduced demand for heavy equipment in key markets outside the US, especially in China but also in Europe. North American sales were up 1%, buoyed by infrastructure investment arising from the Federal Government’s spectacularly misnamed Inflation Reduction Act. Caterpillar increased its full year EPS guidance on the strength of its improved margins. Shares rose 3%.
Uber Technologies
Uber performed well in Q2 with gross bookings up 21% and 1% above consensus; EBITDA up 71% and 4% above consensus; and EPS up 161% and 53% above consensus. Demand trends were stable in Mobility with sales slightly above expectations. Delivery saw steady growth in sales, but 1% below the street, although its profits were higher than forecast. Q3 guidance was in line with current analyst estimates for both bookings and EBITDA.
Airbnb
Airbnb guided to Q3 revenue below analyst expectations, indicating booking windows are shortening around the world, which suggests consumers are leaving it to the last minute to book holidays amid economic uncertainty. This echoes similar comments made by Booking (BKNG.NAS) in July. Airbnb’s Q2 EPS was down 12% and 6% below analyst forecasts. The average cost per night rose 2% to $169.53. Shares fell 15% in afterhours trading.
Global Business Travel Group
A recovery in global travel demand saw EBITDA rise 20%, above analyst expectations and company guidance. The EBITDA margin rose from 18% to 20% driven by lower administrative costs and productivity improvements relating to the use of AI. Transaction growth was 3.8% yoy, with a slowdown in Q2, partly because of the Paris Olympics. Full year guidance was reiterated.
The story so far
76% of results in and the median EPS beat has firmed to +4.1%. The median yoy EPS growth is 9.2%. Most positive share price reactions have been to Global Business Travel Group, Spotify, PayPal and Bristol-Myers Squibb. The most negative have been to Intel, Snap, Ford and Domino’s Pizza.
Investment Watch is a quarterly publication produced by Morgans that delves into key insights for equity and economic strategy. This latest publication will cover;
- Asset Allocation – not the time to play defence
- Economic Strategy – averting a world recession
- Equity Strategy – attention turns to August
- Resources & Energy – domestic gas coming to the boil
- Banks – befuddling
- Updated Morgans Best Ideas
Morgans clients receive exclusive insights such as access to our latest Investment Watch publication. Download the preview now.
Preview
We think the investment landscape remains favourable. The US economic fundamentals are strong with no significant downside risks to growth in the near-term. European leading indicators suggest a turning point is near and China’s cyclical recovery is still gaining momentum after bottoming earlier in the year.
Meanwhile, the Australian economy continues to defy expectations of a sharper slowdown. In our view, this is not the time to play defence and continue to expect growth assets such as equities and property to do well. This quarter, we look at tactical opportunities in private credit, global equities and across the Australian equity market (resources, agriculture, travel and technology).
As interest rates normalise, earnings quality, market positioning and balance sheet strength will play an important role in distinguishing companies from their peers. We think stocks will continue to diverge in performance at the market and sector level, and investors need to take a more active approach than usual to manage portfolios.
Additions: This month we add Elders.
July best ideas
Elders (ELD)
Small cap | Food/Ag
ELD is one of Australia’s leading agribusinesses. It has an iconic brand, 185 years of history and a national distribution network throughout Australia. With the outlook for FY25 looking more positive and many growth projects in place to drive strong earnings growth over the next few years, ELD is a key pick for us. It is also trading on undemanding multiples and offers an attractive dividend yield.
Technology One (TNE)
Small cap | Technology
TNE is an Enterprise Resource Planning (aka Accounting) company. It’s one of the highest quality companies on the ASX with an impressive ROE, nearly $200m of net cash and a 30-year history of growing its earnings by ~15% and its dividend ~10% per annum. As a result of its impeccable track record TNE trades on high PE. With earnings growth looking likely to accelerate towards 20% pa, we think TNE’s trading multiple is likely to expand from here.
ALS Limited
Small cap | Industrials
ALQ is the dominant global leader in geochemistry testing (>50% market share), which is highly cash generative and has little chance of being competed away. Looking forward, ALQ looks poised to benefit from margin recovery in Life Sciences, as well as a cyclical volume recovery in Commodities (exploration). Timing around the latter is less certain, though our analysis suggests this may not be too far away (3-12 months). All the while, gold and copper prices - the key lead indicators for exploration - are gathering pace.
Clearview Wealth
Small cap | Financial Services
CVW is a challenger brand in the Australian retail life insurance market (market size = ~A$10bn of in-force premiums). CVW sees its key points of differentiation as its: 1) reliable/trusted brand; 2) operational excellence (in product development, underwriting and claims management); and 3) diversified distributing network. CVW's significant multiyear Business Transformation Program has, in our view, shown clear signs of driving improved growth and profitability in recent years. We expect further benefits to flow from this program in the near term, and we see CVW's FY26 key business targets as achievable. With a robust balance sheet, and with our expectations for ~21% EPS CAGR over the next three years, we see CVW's current ~11x FY25F PE multiple as undemanding.
GUD Holdings
Large cap | Consumer Discretionary
GUD is a high-quality business with an entrenched market position in its core operations and deep growth opportunities in new markets. We view GUD’s investment case as compelling, a robust earnings base of predominantly non-discretionary products, structural industry tailwinds supporting organic growth and ongoing accretive M&A optionality. We view the ~12x multiple as undemanding given the resilient earnings and long-duration growth outlook for the business ahead.
Stanmore Resources
Small cap | Metals & Mining
SMR’s assets offer long-life cashflow leverage at solid margins to the resilient outlook for steelmaking coal prices. We’re strong believers that physical coal markets will see future cycles of “super-pricing” well above consensus expectations, supporting further periods of elevated cash flows and shareholder returns. We like SMR’s ability to pay sustainable dividends and its inventory of organic growth options into the medium term, with meaningful synergies, and which look under-recognised by the market. We see SMR as the default ASX-listed producer for pure met coal exposure. We maintain an Add and see compelling value with SMR trading at less than 0.8x P/NPV.
Morgans clients receive full access of the Best Ideas, including our large, mid and small-cap key stock picks.
