The 3 biggest disappointments during earnings season

Yesterday I looked at three key highlights during earnings season. These included bumper profit growth from tech star Altium Limited (ASX: ALU) and an impressive turnaround by retail conglomerate Super Retail Group Ltd (ASX: SUL).

Unfortunately, not all companies had a successful earnings season. Three of the biggest disappointments during the month in my opinion are summarised below:

G8 Education Ltd (ASX: GEM)

Last month G8 Education released its half year results and revealed a 7.6% increase in revenue, but a 21% decline in underlying earnings before interest and tax on the prior corresponding period. The poor result was driven by another drop in the childcare operator’s occupancy levels and higher staff costs. G8 Education finished the period with an occupancy level of just 70.1% due to the impact of an oversupply of childcare centres. Unfortunately, I don’t see this issue going away any time soon, making G8 Education one to avoid.

Greencross Limited (ASX: GXL)

In FY 2018 this integrated pet care company posted statutory net profit after tax of $20.7 million, down 51% on the prior year. This led to the Greencross board reducing its FY 2018 dividend by 18% to 15.5 cents per share. While it has reported a reasonably solid start to FY 2019, I feel it is still a little soon to invest and expect another underwhelming year from the company. This was recently echoed by Deutsche Bank when it slapped a sell rating and $3.70 price target on the company’s shares.

Ramsay Health Care Limited (ASX: RHC)

While I was expecting this private hospital operator to deliver a weak full year result in FY 2018, I was still taken by surprise by how weak it was and how soft its guidance for the year ahead was. Due to tough trading conditions across its whole business, management expects Ramsay to grow core EPS by up to 2% in FY 2019. Although it is a high quality company, I think its shares are overvalued given its current growth profile.

Instead of Ramsay, I would be buying one of these top blue chip shares.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Greencross Limited. The Motley Fool Australia owns shares of Altium and Super Retail Group Limited. The Motley Fool Australia has recommended Ramsay Health Care 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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.