FNArena’s Weekly Insights – February 12 2021

This story features CIMIC GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: CIM

In Part II of this week’s Weekly Insights:

-A February Full Of Promise
-Dividends Are Back
-Strong, Stronger & Strongest – Consumer Stocks
-Winners & Losers (Forecast)
-Engineers & Contractors
-Healthcare: Same Old
-Fund Managers: Go With The Flow
-Peak Oil, Just Not Now
-Conviction Calls
-FNArena Webinar (recordings available)

By Rudi Filapek-Vandyck, Editor FNArena

A February Full Of Promise

There are multiple ways in which one can look at progress and events.

One angle, popular among economists, is through the lense of: economies are still so far off from trend lines shattered by last year’s pandemic, it’ll take another 18 months, if not longer, before economies are back on trend, and risks remain in the mean time.

The other angle is: companies are recovering much quicker than anticipated, with most corporate results beating forecasts hand over fist. The latter is how financial markets operate, and thus, in my humble view, the correct way to view this year’s corporate market updates.

Meanwhile, it’s good to keep in mind that corporate profits, while recovering strongly, will need another year of strong growth, and then maybe the majority of corporate profits in Australia might be back where they were in 2019.

Back to reported results versus forecasts, and here the early signals are suggesting February 2021 might just churn out the best corporate performance since coming out of the GST more than a decade ago. It’s probably no coincidence, this year equally marks a comeback post global recession, just as it was back then.

On Monday, the FNArena Monitor of corporate results showed no less than 70% of reports was beating expectations. By Wednesday, this number had accumulated to 75% of “beats”. On Thursday we saw a retreat to 64.7%, but only one company had released a fresh disappointing clear market “miss”; Cimic Group ((CIM)).

The retreat on Thursday points at two key factors: it’s early days still, and the number of reports will become a lot larger during the final two weeks of the February season, plus a number of companies -ALE Property ((LEP)), Alliance Aviation ((AQZ)), Computershare ((CPU)), Insurance Australia Group ((IAG)) and Megaport ((MP1))- might still have reported strongly, they did not “beat” what had already been anticipated.

Thus far, the number of companies that missed market expectations doesn’t exceed four, or 11.8% out of 34 corporate reports in total. Again, it has to be emphasised the numbers are low, the season overall is still young, but the early statistics look as good as they’ve ever looked over the past ten years.

This, of course, raises a few extra questions about the few companies that could not stay with the trend this month. Cimic Group has been in disarray for quite a while now, and management at Challenger ((CGF)) is equally familiar with the term “struggle”. Analysts had been warning about rising risks for BWP Trust ((BWP)) for a while, and they still are.

Maybe the one that stands out in this small group is online retailer Temple & Webster ((TPW)). Each one of the previous three management teams would give their right arm to achieve the kind of growth that Temple & Webster reported early in February, it’s just that analysts had expected more, and this has weighed down the share price.

Click to read the Full Report