FNArena’s Weekly Insights – November 14 2022
In this week’s Weekly Insights:
-Re-Opening Opportunities In Healthcare
-Conviction Calls
-Research To Download
-FNArena Talks
-AIA Investor Day In Sydney
By Rudi Filapek-Vandyck, Editor FNArena
Re-Opening Opportunities In Healthcare
US midterms, crypto failures, China re-opening and US CPI have pushed corporate profits into the background recently, but investors would be wise to not let their attention weaken.
Some important signals are there for everyone to see, both locally and internationally.
In the US, the Q3 reporting season, virtually finished, is accumulating into the weakest since Q3 2020; two years ago. The problem, thus far, is not so much with sales and revenues, but with a peak in profit margins.
Aggregate top line growth is still recording 10% growth year-on-year but at the bottom line growth has fallen to no more than 2%. And the outlook, it appears, remains sombre with forecasts for the quarters ahead worse or only of similar magnitude.
Many forecasters worry the US economy might be in recession by early next year and corporate profits will increasingly start to reflect this downturn challenge.
Wilsons, on Monday, made the following prediction:
“A US downturn (even if it does prove to be a recessionary downturn) is likely to be mild by historical standards, but would likely still send the US earnings cycle into contraction mode.”
Locally, the majority of market updates fails to trigger a positive share price response and quite a number of recent updates has seen share prices weaken noticeably, including for Xero ((XRO)), News Corp ((NWS)), Sims ((SGM)) and James Hardie ((JHX)) – and Elders ((ELD)) on Monday.
Admittedly, the sharp Buy-everything short-covering rally that has ensued post the US CPI release last week has seen these share prices in strong recovery mode since, but that would be to ignore the underlying message that corporate Australia, yet again, is polarising around profit growth momentum.
