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ASX 200 Weekly Wrap: Earnings drag ASX back to reality

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The S&P/ASX 200 Index (ASX: XJO) has just given investors the second week of falls in a row as earnings season draws to an end. The Index’s 0.6% drop over the week comes after the week prior’s 0.2% fall and pulls the ASX 200 back to 6,073 points. The ASX 200 has now trended around the 6,000-point level since early June (a support level I have highlighted before). Over the past month, the index had been threatening to break away from this rut, reaching as high as 6,167 points in mid-August. But since then, we have seen investors get cold feet and pull away from solidifying these gains. Even though there were both winners and losers from this week’s earnings reports, it was the bears that ended up seizing control of the week’s market moves.

ASX 200 Earningspalooza

So we heard from some big names last week. It started out strong on Monday with Fortescue Metals Group Limited (ASX: FMG) reporting a 49% lift in profits and a monster $1 per share final, fully franked dividend. Fortescue shares were up 4.89% for the week.

Cleanaway Waste Management Ltd (ASX: CWY) also had a well-received report, telling investors profits were up 2.1% and earnings per share (EPS) up 8.7%. Cleanaway shares were up 15% last week.

We also heard from Woolworths Group Ltd (ASX: WOW) on Thursday, which had a less-rosy set of numbers. Profits were down 1.2%, and the company announced a dividend trim when it declared a 48 cents per share final payout, fully franked. Even so, Woolies shares were up 0.6% for the week.

Other big names reporting last week include Boral Limited (ASX: BLD), Bingo Industries Ltd (ASX: BIN), Ramsay Health Care Limited (ASX: RHC), Afterpay Ltd (ASX: APT) and Harvey Norman Holdings Limited (ASX: HVN).

We already had a fair idea of what Afterpay would produce due to a previous guidance update, but the company’s stellar results (including a 112% increase in underlying sales and a 73% lift in earnings) helped push Afterpay shares to yet another all-time high of $93.99 on Thursday morning.

Speaking of buy now, pay later (BNPL) shares, we can’t finish without mentioning Zip Co Ltd (ASX: Z1P). The Zip share price rocketed almost 30% on Wednesday after the company announced a partnership with e-commerce giant eBay, before dropping 8% the next day at one point on its earnings result. Zip shares remain up 34% for the week.

How did the markets end the week?

As we previously flagged, the ASX 200 had a down week. It started out on Monday at 6,111.2 points and finished up on Friday at 6,073.8 points, translating to a total loss of 0.61% for the week. Monday started with a modest rise of 0.3%, while Tuesday backed it up with another 0.5% gain. Then Wednesday came and brought a 0.7% fall with it. This was countered on Thursday with a 0.3% rise, but Friday doubled down on the losses with a 0.86% fall.

Meanwhile, the All Ordinaries Index (ASX: XAO) also slipped 0.16% last week after starting out at 6,270.2 points and finishing up at 6,260.8 points.

Which ASX 200 shares were the biggest winners and losers?

It’s gossip time, so get some tea ready and we’ll check out which ASX shares were causing a stir last week. As always, we’ll start with the losers:

Worst ASX 200 losers

 % loss for the week

Whitehaven Coal Ltd (ASX: WHC)

(29.7%)

Bravura Solutions Ltd (ASX: BVS)

(15.6%)

Blackmores Limited (ASX: BKL)

(14.5%)

Appen Ltd (ASX: APX)

(13.6%)

Coal miner Whitehaven takes out last week’s wooden spoon with a near-30% drop in value. This was (of course) sparked by the company’s full-year earnings report that was released on Wednesday. Evidently investors weren’t too pleased with the company’s 94.7% drop in profits that was announced.

Fintech company, Bravura, wasn’t popular either, despite the company reporting bumps in both revenue and profits last Wednesday (the latter by 22%).

Vitamin hawker, Blackmores, was also out of favour, with the company reporting a 3% drop in revenue and a 66% collapse in profits. Management also warned that the company would likely only return to profit growth in the second half of FY21.

Lastly, the human dataset provider and WAAAX share, Appen, also disappointed last week. Investors sent the company’s shares down after Appen reported that, despite impressive revenue, earnings and profit growth, its guidance for FY21 will remain unchanged.

Let’s take a look at last weeks winners, now the bad news is out of the way:

Best ASX 200 gainers

 % gain for the week

Reliance Worldwide Corporation Ltd (ASX: RWC)

32.8%

Cleanaway Waste Management Ltd (ASX: CWY)

15%

Nearmap Ltd (ASX: NEA)

14.5%

Bingo Industries Ltd (ASX: BIN)

13.3%

Mr Worldwide, otherwise known as Reliance, topped last week’s gainers with a 32.8% surge. Investors were clearly pleasantly surprised by this company’s earnings report, which delivered a 5% bump in sales and a 33% drop in profits. Even after this hefty bump, Reliance shares are still down around 7.5% year to date.

It was a great week for garbage collectors it seems. We’ve already discussed the Cleanaway share price, but rival Bingo Industries was also in demand following its earnings result, which included a 21% surge in revenues and a 196% increase in statutory profits.

Meanwhile, aerial mapper, Nearmap, was also hot property and saw a new 52-week high last week. Nearmap reported its earnings in the week prior, but clearly investors haven’t quite got over their euphoria.

What does this week look like for the ASX 200?

It looks set to be a quieter week on the ASX boards this week, purely because earnings season is coming to a close. We will see some stragglers on Monday, such as IOOF Holdings Limited (ASX: IFL), but after the last few weeks, I’m sure many investors are looking forward to some eerie calm.

Whether that eventuates is still uncertain though. We have the monthly Reserve Bank of Australia (RBA) board meeting on Tuesday, in which the future cash rate will be determined for the month of September. It’s currently sitting at a record low of 0.25%, but the RBA could well decide to empty its last bullet in the chamber and pull rates down to zero. Expect some market euphoria and perhaps volatility if that does happen.

With that in mind, here is a look at how the major ASX blue chip shares are looking as we start another week. Note the changing price-to-earnings (P/E) ratios as earnings metrics are updated for FY20’s results.

ASX 200 company

Trailing P/E ratio

Last share price

52-week high

52-week low

CSL Limited (ASX: CSL)

45.19

$289.89

$342.75

$227.26

Commonwealth Bank of Australia (ASX: CBA)

16.9

$69.09

$91.05

$53.44

Westpac Banking Corp (ASX: WBC)

13.18

$17.56

$30.05

$13.47

National Australia Bank Ltd. (ASX: NAB)

16.09

$17.93

$30.00

$13.20

Australia and New Zealand Banking Group Limited (ASX: ANZ)

12.53

$18.40

$28.79

$14.10

Woolworths Group Ltd (ASX: WOW)

19.8

$39.77

$43.96

$32.12

Wesfarmers Ltd (ASX: WES)

33.68

$48.26

$49.62

$29.75

BHP Group Ltd (ASX: BHP) 17.29

$37.73

$41.47

$24.05

Rio Tinto Limited (ASX: RIO)

15.98

$97.88

$107.79

$72.77

Coles Group Ltd (ASX: COL)

24.91

$18.26

$19.26

$13.13

Telstra Corporation Ltd (ASX: TLS)

18.96

$2.90

$3.94

$2.87

Transurban Group (ASX: TCL)

$13.30

$16.44

$9.10

Sydney Airport Holdings Pty Ltd (ASX: SYD)

83.78

$5.51

$9.07

$4.26

Newcrest Mining Limited (ASX: NCM)

27.15

$31.37

$38.28

$20.70

Woodside Petroleum Limited (ASX: WPL)

$19.14

$36.28

$14.93

Macquarie Group Ltd (ASX: MQG)

15.08

$128.24

$152.35

$70.45

And finally, here is the lay of the land for some leading market indicators:

  •     S&P/ASX 200 (XJO) at 6,073.8 points
  •     All Ordinaries (XAO) at 6,260.8 points
  •     Dow Jones Industrial Average at 28,653.87 points after rising 0.57% on Friday night (our time)
  •     Gold (Spot) swapping hands for US$1,964.95 per troy ounce
  •     Iron ore asking US$120.18 per tonne
  •     Crude oil (Brent) trading at US$45.08 per barrel
  •     Crude oil (WTI) going for US$42.93 per barrel
  •     Australian dollar buying 73.66 US cents
  •    10-year Australian Government bonds yielding 1.01% per annum

Foolish takeaway

With another earnings season (mostly) out of the way, ASX investors can now benefit from having the full range of data for the 2020 financial year available for analysis. I would suggest taking a good look at the reports of all companies you currently hold, as well as any you are looking to add to your portfolio and see how they’ve been tracking during these difficult times.

It might be time to add to any winners and cut your losses on any underperformers. Remember, we are going through an extraordinary time that will likely battle-harden only the best companies on the ASX. If you have a holding that you suspect might not have what it takes to thrive in a post-COVID world, some hard-headed thinking might be necessary. On that note Fool, stay safe out there, stay rational and stay Foolish! Until next week!

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Sebastian Bowen owns shares of National Australia Bank Limited, Newcrest Mining Limited, Ramsay Health Care Limited, and Telstra Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd., Nearmap Ltd., Reliance Worldwide Limited, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Blackmores Limited, Bravura Solutions Ltd, Macquarie Group Limited, and Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, COLESGROUP DEF SET, Transurban Group, Wesfarmers Limited, and Woolworths Limited. The Motley Fool Australia has recommended Nearmap Ltd., Ramsay Health Care Limited, and Reliance Worldwide 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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