We are currently squarely in the middle of earnings season. And as a result, some ASX shares become more volatile than usual thanks to companies releasing a huge pile of new information to the public.
Given that this information can fail to meet, meet, or exceed market expectations, it has the potential to send shares flying higher or lower.
So with that being said, here are three S&P/ASX 200 Index (INDEXASX: XJO) companies that have recently seen share price spikes of more than 10% after releasing their 1H20 earnings reports.
Challenger Ltd (ASX: CGF)
Challenger shares were trading at $8.87 prior to the release of its half-year FY20 results. These results were released on Tuesday, which saw Challenger’s assets under management (AUM) growing 10% to $86 billion. Also reported was a rise in normalised net profit before tax, up 3% to $279 million.
The company recently adjusted its return on equity (ROE) target to be the RBA cash rate plus a margin of 14%. Challenger reported an ROE of 15.2%, beating this target by 30 basis points. Additionally, Challenger held its interim dividend constant at 17.5 cents per share, putting shares on a grossed-up dividend yield of 4.99%.
This result also saw total life sales rise 15% thanks to rapidly growing Japanese sales. Management projected a more upbeat future for Challenger and its shares followed accordingly, rising to finish the day at $10.10, 13.9% higher. At the time of writing, Challenger shares are currently trading for $10.07 per share.
Tassal Group Limited (ASX: TGR)
Tassal released its 1H20 result at around midday on Wednesday. The Tassal share price subsequently shot higher to finish the day up 11% at $4.61.
Investors were pleased with Tassal’s result despite a 15.8% drop in revenue. This drop in sales, however, was a two-fold strategic move by Tassal. The harvesting and selling of less salmon in the first half will support greater biomass and size for the second half, where it is expected to deliver a greater harvest and sales.
Additionally, the choice to hold fish longer and reduce sales meant less fish were sold to the lower-value export market. This drove a 15.5% increase in salmon’s earnings before interest, tax, depreciation and amortisation $/kg (essentially a measure of earnings per kg of salmon).
Investors also appeared pleased with Tassal’s update on its prawn business. Here, Tassal is on track for a 2,400 tonne harvest and sales in the second half.
Lastly, the company’s dividend was held constant at 9 cents, franked at 25%. This gives Tassal shares a grossed-up yield of 4.33%.
Idp Education Ltd (ASX: IEL)
IDP Education is our largest riser here, by far. The IDP share price is currently sitting a massive 37.5% higher today compared to before releasing its results on Wednesday morning.
The international education organisation reported an increase in revenue of 25% to $379 million and a net profit after tax (NPAT) rise of 42% to $57.7 million. All of this equated to an earnings per share (EPS) increase of 41% to 23.4 cents, and a 37% increase in IDP’s interim dividend to 16.5 cents.
Driving these results was a 30% increase in the company’s student placement business and 15% and 11% volume increases in its English Language Teaching and Testing businesses respectively. Investors would also have been pleased to hear the company report that disruptions from the coronavirus were not currently having a material impact. However, IDP’s outlook remains uncertain.
All three of these companies have risen significantly after pleasing the market with the release of their 1H20 results. I like the idea of investing in companies that are healthy, growing their businesses and performing well. This can be true for me even if they cost a little more than those which have dropped following poor results.
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Motley Fool contributor Michael Tonon owns shares of Challenger Limited. The Motley Fool Australia owns shares of and has recommended Challenger 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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