Why Woolworths Limited & Retail Food Group Limited shares are going nuts today

The S&P/ASX 200 (Index: ^AXJO) (ASX:XJO) is today trading marginally lower at lunchtime as investors continue to digest a flood of earnings results.

The consumer staples sector is the clear outperformer today, with weakness coming from the gold, materials and information technology sectors.

Four shares that have really outperformed today, include:

Woolworths Limited (ASX: WOW)

Shares of the supermarket giant have climbed more than 7% today, despite reporting a $1.2 billion full-year loss and a cut to its full year dividend. Although it was a fairly disappointing result, investors have cheered Woolworths’ move to exit the home improvement sector and focus its time and resources back into its core supermarket business. While the company expects the supermarket environment to remain highly competitive over the coming year, it is confident of making further progress on its turnaround strategy.

Metcash Limited (ASX: MTS)

Shares of Metcash have spiked more than 7.5% today after it agreed to purchase the Home Timer and Hardware Group from Woolworths for $165 million. According to the company (who already owns Mitre 10), the deal is expected to be around 4% earnings per share accretive (EPS) in the first year with “significant potential for synergies”. Investors are also cheering the fact that the closure of Masters is likely to reduce competition in the home improvement sector which should help the company over the medium term. Metcash will fund the acquisition through an $80 million capital raising and an $85 million increase to borrowings.

Retail Food Group Limited (ASX: RFG)

Shares of Retail Food Group have climbed more than 5% today after the company announced another record full-year result that saw revenues increase by 30.5% and underlying profits grow by 20.5% to $66.4 million. The strong result allowed the board to declare a final dividend of 14.5 cents per share, an increase of 23.4% over the previous corresponding period. The company also announced the acquisition of Hudson Pacific Corporation for $88 million, which it believes will be 10% earnings per share accretive. Pleasingly for investors, Retail Food Group expects to deliver another record result in FY17, with underlying profit growth of around 20%.

Ausdrill Limited (ASX: ASL)

Ausdrill shares have skyrocketed 40% higher today after delivering a stunning turnaround in full year profits. After delivering a $175.6 million loss in FY15, the mining services company recorded a profit of $58.2 million for FY16. Although the result was boosted by the sale of non-core assets, the underlying business performance was vastly improved thanks to cost cutting initiatives and the strength of the gold sector. It appears investors are also cheering Ausdrill’s outlook for FY17, where it is targeting revenue growth of around 7.5% and a 50% increase in profits from continuing operations. Interestingly, shares of Ausdrill have gained a whopping 687% over the past 12 months.

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Motley Fool contributor Christopher Georges owns shares of Retail Food Group Limited. The Motley Fool Australia owns shares of Retail Food Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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