With earnings season in full swing, it’s easy to get lost in the sea of information being released every day. Here are 3 companies that either won big, or lost big, in week 2.
CSL Limited (ASX: CSL)
The pharmaceutical juggernaut CSL continues to dazzle investors with its impressive growth. The company reported statutory net profit after tax of $1.9 billion, representing 17% growth even when compared against a strong prior period. Its highlighted exceptional growth in the immunoglobulin portfolio, with Privigen and Hizentra sales up 23% and 22%, respectively.
CEO Paul Perrault was pleased with the consistent result, anticipating growth in net profit of between 7%–10% in FY20. But with the CSL share price zooming to an all-time high of $239 – at a 40 times price-to-earnings valuation – I don’t think there is enough potential upside to justify a buy.
Domain Holdings Australia Ltd (ASX: DHG)
Another company in focus last week was Domain Holdings; in February, a weakening property market forced Domain to write off $178.8 million in goodwill impairments. This inevitably impacted its statutory results, which showed a net loss after tax of $137.6 million. Their underlying results weren’t much better, showing declines of 6.1% in revenue and 29.3% in net profit after tax.
However, it appeared that the market was expecting far worse, with the Domain share price climbing 14% since the announcement. Investors may be optimistic that the large write offs this year could lead to higher profit figures in the coming years as property prices recover. Personally, I’d favour industry peer REA Group Ltd (ASX: REA) ahead of Domain, which reported 8% growth in earnings despite challenging market conditions. Domain expects lower listings in the first half of FY20, with the company yet to provide any earnings guidance.
Blackmores Limited (ASX: BKL)
Perhaps one of the most disappointing earnings results this year has been Blackmores, with its share price plummeting 22% since the announcement. Its full-year net profit after tax of $53 million was down 24% on its FY18 figures. The poor performance of their second half is highlighted when compared to FY19H1 results, with net profit after tax 44% lower in FY19H2. The company has blamed changes in e-commerce laws leading to a 15% reduction in sales from China.
It appears the only real highlight was in its Asia ex-China sales, which grew 30% to contribute a meaningful $107 million in revenue. Although the company has a strong brand, its outlook remains bleak. Issues in China are expected to persist into the first half of 2020, and net profit is expected to be below its prior corresponding period.
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Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Blackmores 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.
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