Coca-Cola Amatil Ltd (ASX: CCL), Insurance Australia Group Ltd (ASX: IAG) and Medibank Private Ltd (ASX: MPL) are amongst Australia's biggest and most widely held stocks and have all reported their interim or full-year earnings results over the last week or so. Below is a quick summary of each of their reports and my thoughts on whether or not they're worth a second look.
Coca-Cola Amatil Ltd
Coca-Cola Amatil has been a serial underperformer for Australian investors having lost one third (33%) of its value over the last two years, heavily underperforming the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) in that time. Although the company again reported a 25.3% decline in underlying earnings for the 2014 financial year, investors were more than pleased with the outlook provided by management.
Management appears to be making all the right moves in returning the company to growth. Coca-Cola Amatil's new CEO Alison Watkins said that "concrete progress" had been made in returning the business to a position of dominance, while she expects a return to profit growth this calendar year. While it will by no means be an overnight fix, $10.20 is a very reasonable price to pay for the stock and investors who buy may stand to make excellent capital gains over the coming years, in addition to its compelling dividend, currently 4.2% partially franked.
Insurance Australia Group Ltd
Shares of the general insurer have fallen nearly 7% since Wednesday when it posted a 9.8% decline in net profit, citing an "increasingly competitive environment". The company began to recognise some of the synergies from its acquisition of Wesfarmers Ltd's (ASX: WES) insurance underwriting business, although those synergies are unlikely to be fully recognised for at least another 12-18 months.
Although there are certainly headwinds facing the insurance industry, Insurance Australia Group still appears to be doing a reasonable job of maintaining high margins and it offers a very compelling dividend – currently 6.6% fully franked, or 9.4% when grossed up for franking credits. Given that the stock is trading on a multiple of just 12 times this year's forecast earnings, this stock could be worth a second look, especially in today's low interest rate environment.
Medibank Private Ltd
Medibank Private's first interim report as a public company wasn't bad by any means, but investors had been hoping for more given the enormous level of hype built into the company's rather lofty stock price.
The health insurer confirmed it was on track to hit its full-year earnings guidance after posting a half-year pro-forma net profit of $151.2 million – a 10.8% increase on the prior year — while it reduced its management costs and improved its operating margin, both of which carried enormous importance in the eyes of investors.
Unfortunately, the result wasn't enough to impress the market with the stock falling by as much as 7.4% after the report was released. The fact is, while Medibank Private made considerable improvements during the period, the stock is still priced for perfection. While it might be worth adding it to your watchlist until the price cools down somewhat, there are plenty of other great companies which are looking like better buys than Medibank Private right now.
