Freelancer Ltd (ASX: FLN) was one of the worst performers in the local market on Tuesday, down 16% to $0.50, after the release of its half-year results.

The critical point seems to be the lack of revenue growth. Despite a record-high volume of payments processed through the company's two websites – the online marketplace Freelancer.com and the escrow service Escrow.com – revenue declined 6% from the first half of FY17, which was itself a disappointing 0.4% increase on the first half of FY16. The company reported a negative EBIT of $1 million and an $800,000 loss.

Freelancer.com held promise to develop into a profitable global hub for job seekers, a sort of SEEK Limited (ASX: SEK) for freelancers, with dozens of dedicated country websites across five continents. While SEEK has delivered meaningful earnings growth over time, Freelancer results have disappointed investors and the stock price has dropped 23% in the past year.

The highlight of today's release is the 11% growth in revenue from the escrow business, which might become more and more important as the need for a reliable third-party regulating online payments increases with the success of e-commerce.

The post Why the Freelancer Ltd (ASX:FLN) share price dropped 16% today appeared first on The Motley Fool Australia.

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Graphite miner Syrah Resources Ltd (ASX: SYR) was one of the worst performers on the local market in Monday morning's trade, down 7% to $2.90. Production increased in the second quarter of 2018, but not enough to remain on track to meet the company's full-year guidance.

Syrah's share price had a 52-week high at  $4.95 in January, as the company was expected to make a bold entry in the resources sector as a leading provider of graphite, a key input in the production of lithium-ion batteries used to power electric vehicles.

Syrah started operations at its Balama project in Mozambique at the beginning of 2018, with an annual output forecast of 160,000 tonnes. After a subdued first quarter, the stock price plummeted and Syrah figured regularly as one of the most shorted shares on the ASX.

Production grew by 90% to 21,000 tonnes in the June 2018 quarter, and this figure is expected to increase significantly in the next six months. However, today Syrah announced a more prudent goal for 2018 production, in the range of 135,000 tonnes to 145,000 tonnes, with costs of between US$430 and US$450 per tonne, instead of the previously forecasted US$400 per tonne.

As volumes increase and unit costs decline, Balama should start generating a positive operating cash flow by the end of 2018, a few months later than expected.

Sales will be another crucial element for Syrah's success. At the moment, the company has managed to sell only 72% of its production, at a lower price than inferred by external price reporters.

Foolish takeaway

Syrah has just started production, and despite some initial headwinds, it's too soon to label Balama as an unprofitable operation. However, these results were quite disappointing and confirmed the intuition of short-sellers.

This should serve as a reminder that exposure to one of the new market trends – in this case, lithium batteries – is not a guarantee of immediate capital gains. But the market has plenty of opportunities to invest in growth stocks, such as these three.

The post The Syrah Resources Ltd (ASX:SYR) share price falls 7% on guidance downgrade appeared first on The Motley Fool Australia.

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Shares in AMP Limited (ASX: AMP) fell 5% to a multi-year low of $3.31 on Friday. The wealth manager, recently targeted by the Royal Banking Commission and ASIC, will see its earnings decline in the first half of FY18.

Profit downgrade

AMP will report interim results on August 8. Underlying profit should be in the range of $490 million to $500 million, down from the $533 million reported last year.

The company explained that while core businesses such as wealth management, AMP Capital and AMP Bank have performed well, the result was weighed down by the wealth protection segment, which will not contribute significantly to earnings.

For the first half of FY18, AMP will also book $55 million post-tax one-off costs relating to the investigations of the Royal Commission and to an internal portfolio review, which has been reprioritised after the recent turmoil.

AMP announced a dividend pay-out for the year at the lower end of its 70% to 90% guidance range. The company declared that, to retain capital and strategic flexibility, the interim dividend might be outside this range.

Resetting the business

In today's release, the company outlined a plan of action to "reset the business, prioritise customers and strengthen risk management systems and controls".

In addition to the reduction of underlying profit, AMP will bear the cost of compensation in favour of its clients, particularly for potential lost earnings.

Statutory profit will be impacted by a $290 million post-tax provision for potential remediation costs stemming from two ASIC reports that require an industry-wide review of the last ten years of service arrangements and advice to clients. The remediation program itself has an estimated cost of around $50 million over the next three years.

Other actions include fee reductions for around 700,000 superannuation customers, expected to cause a $50 million drop in wealth management revenue from FY19, and a $70 million investment over two years to reinforce risk management.

Foolish takeaway

With the stock trading so low, some investors in search of a bargain might be tempted by AMP. Personally, I think we are yet to witness the full impact of regulatory scrutiny and Royal Commission roasting.

AMP may have to do something drastic to retain clients and streamline its business. For the time being, I wouldn't risk buying AMP shares.

However, there's plenty of opportunities in the local market to invest in growing companies. Just follow the free link below to uncover three blue chip stocks to back for in 2018.

The post AMP Limited (ASX:AMP) shares slide to new multi-year low on earnings downgrade appeared first on The Motley Fool Australia.

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Shares in oil and gas company Beach Energy Ltd (ASX: BPT) rose 1.7% to $1.84 on Thursday, after the company released its quarterly report.

It was another strong result for Beach Energy, with a 10% increase in production on the previous quarter, to 7.2 million barrels of oil equivalent (MMboe). This brings FY18 pro forma production – which includes a 12-month contribution from the Lattice assets, acquired from Origin Energy Ltd (ASX: ORG) and actually consolidated only 6 months ago – to 26.7 MMboe. At the higher end of the company's guidance.

Higher sales, combined with an 11% increase in the average realised oil price, drove a 20% increase in revenue on the previous quarter, to $471 million. The strong free cash flow allowed the company to reduce its gearing ratio from 29% to 26%, while acquiring additional stakes in the Oatway gas project, which is now fully owned, and in the BassGas project, in which Beach Energy now has a controlling interest of 54%.

Thanks to the Lattice deal and recent exploration activities, Beach Energy increased its proved and probable reserves by 320%, to 313 MMboe, extending the remaining life of reserves from 7 years to 11 years.

The post How Beach Energy Ltd (ASX:BPT) expanded production and quadrupled reserves appeared first on The Motley Fool Australia.

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Shares in St Barbara Ltd (ASX: SBM) climbed 3% higher to $5.00 on Thursday, after the gold miner released a positive quarterly report for the last three months of FY18.

In the June 2018 quarter, the company produced a record-high 120.000 ounces of gold, lifting annual production above 400,000 ounces, with a 6% increase on the previous year.

St Barbara managed to reduce costs while increasing output. The all-in sustaining cost for the quarter was $812 per ounce, yielding an annual average of $891 per ounce. The average realised gold price for the quarter was $1,731 per ounce, ensuring the company a healthy margin and an operational cash contribution of $105 million. At June 30, St Barbara had $344 net cash.

This performance was possible thanks to the outstanding results from the company's Gwalia and Simberi operations. St Barbara recently completed a life of mine plan that extends the life of the Simberi project to FY21.

However, it's unlikely that St Barbara will be able to keep these levels of production next year. For FY19, the company expects production in the range of 350,000 ounces to 375,000 ounces, with an increase in costs.

The post Why the St Barbara Ltd (ASX:SBM) share price is rising on record results appeared first on The Motley Fool Australia.

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Shares in Megaport Ltd (ASX: MP1) were up 3.5% to $4.18 on Thursday, after the company updated the market with its results for the last quarter of FY18.

While you may have often heard about software as a service, or SaaS, Megaport provides "Network as a Service". Its business is connecting customers' IT services with cloud service providers. The company has partnerships with some of the world's leaders in this sector, including Alibaba, Google, IBM and Microsoft Azure.

In the June 2018 quarter, the company added Oracle Cloud to its list of partners and opened 15 new data centres, reaching a total of 221 data centres across the Asia-Pacific, North America and Europe.

Revenue was up 12% on the previous quarter, to $5.8 million. Monthly recurring revenue was $2 million in June 2018, a 63% increase on last year that says something about Megaport's capacity to expand its customer base.

The price of the stock has grown 85% in the past 12 months, matching the company's yearly revenue growth, and confirming Megaport as one of the hottest tech shares on the ASX.

If you want to discover other ideas for forward-thinking investors, just click here.

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Shares in Nufarm Limited (ASX: NUF) plunged 8% to $7.72 on Monday, after the agrochemical company flagged a substantial hit on earnings due to continuing dry weather in Australia and New Zealand. Earlier today, the stock had printed a 52-week low of $7.47.

Australian agriculture has suffered one of the driest autumns in the last 100 years. The resulting drop in demand for crop protection products has put significant margin pressure on Nufarm.

The company now expects its ANZ division to contribute between $5 million and $10 million to the group's EBIT for FY18. Last year, the ANZ business had earnings over $50 million.

Nufarm had already revised its earnings guidance in May, setting it on the lower end of a previously forecasted 5% to 10% increase on the FY17 EBIT of $302 million.

Even that prediction appears optimistic now that the company has issued a new EBIT guidance in the range of $255 million to $270 million.

The company has explained that a normal crop season could have still been possible had a rain break arrived in July. The end of last week was a turning point, after which such an occurrence became highly unlikely.

However, the expectation of a decent winter crop led to a high level of imports in the Australian crop protection market. This means that the agrochemical sector now has abnormally high inventory levels. This oversupply, combined with the dry spring forecasted by the Australian Bureau of Meteorology, will probably weigh on Nufarm's sales through to FY19.

Foolish takeaway

I was quite impressed with Nufarm's acquisition of $500 million worth of European patents back in March and thought that an agricultural company with a global presence was well positioned to navigate the seasonal cycles that characterise the industry.

I still think geographical diversification is a point of strength for Nufarm, but the two consecutive guidance downgrades and the negative outlook are making me wonder whether the stock has bottomed out yet.

For the time being, I'd rather look at companies set to grow in 2018, such as these three.

The post The Nufarm Limited (ASX:NUF) share price falls 8% on earnings downgrade appeared first on The Motley Fool Australia.

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The Santos Ltd (ASX: STO) share price is rising after the release of the first quarterly update since the company turned down a $14.6 billion takeover bid from Harbour Energy in May. At the time of writing, the stock was up 2% to $6.06.

During takeover talks, Santos's results gave the impression of a healthy business, supported by buoyant oil prices.

Today's release seems to confirm that impression.

Santos's production and sales were only marginally above the previous quarter, but a 10% increase in the average realised oil price to US$78.60 a barrel contributed to a lift in revenues by 12% to US$886 million.

In the three months to June 30, the price for Santos's oil was nearly 50% higher than last year.

The company has a net debt of US$2.4 billion and seems well on its way to achieve its end-2019 net debt target of US$2 billion by the second half of 2018.

According to Santos's CEO Kevin Gallagher, "this positions the company to return to sustainable dividend payments".

Santos will target a range of 10% to 30% payout of free cash flow per annum, considering additional distributions when the business cycle permits. The company hasn't paid dividends since 2016.

To find other blue chip stocks growing profits and dividends in 2018, just click here.

The post Santos Ltd (ASX:STO) just flagged a return to "sustainable dividend payments" appeared first on The Motley Fool Australia.

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Shares in Zip Co Ltd (ASX: Z1P) fell 2.4% to $1.02 on Thursday, after the company released results for the three months to June 2018, despite this being defined as a "record quarter" for the company. The stock partially recovered after having been down 7% earlier this morning.

Zip provides point-of-sale credit and digital payment solutions to the retail sector and to education and health industries. Its offer includes buy-now-pay later services and free budget planning app Pocketbook.

Results in the last quarter of FY18 were indeed an improvement on the previous quarter and record high figures.

Zip achieved its highest quarterly transaction volume, up 26% to $171 million. It also obtained a record high revenue of $13.2 million, an 18% increase on the previous period.

The number of customers increased 19% to over 738,000, with Zip now accredited with over 10,000 merchants. Customer engagement continues to increase: in the last quarter, 83% of all Zip transactions were performed by existing customers.

So why did the stock tumble today? There are two possible explanations, and both involve Afterpay Touch Group Ltd (ASX: APT), Zip's big rival in the buy-now-pay-later space.

Shares in Afterpay are rocketing on the latest business update: underlying sales are up 39% over the previous quarter. Afterpay is not only bigger, it's also growing faster than Zip. This may suggest that Zip's result is good, but not so impressive.

Even the fact that Zip's customer retention rates are increasing has a flipside: only 17% of transactions are made by new customers, a sign that the business might be peaking.

The second potential explanation for the cold reception of Zip's result is that the company might be seen as a minor player in the payment solutions market, which is particularly tough on small players. Think of credit and debit cards, the most widely used non-cash payment services. These cards are issued by only a handful of players worldwide. How many buy-now-pay-later services can coexist in Australia?

Foolish takeaway

Payment services are characterized by a strong network effect. Consumers want services accepted by the most merchants. Merchants accept payment systems used by many consumers. Afterpay has 2.2 million customers and is accredited with over 16,000 merchants in Australia. Zip must fight to close the gap with its rival.

The good news is that Zip recently signed its largest partners to date: Super Retail Group Ltd (ASX: SUL) and Wesfarmers Ltd's (ASX: WES) Officeworks.

The post Why is the Zip Co Ltd (ASX:Z1P) share price falling on a record result? appeared first on The Motley Fool Australia.

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Australia's heavyweight gold miner Northern Star Resources Ltd (ASX: NST) is well on its way to ramp up annual production above 600,000 ounces.

Today the company released its quarterly report and announced its production guidance for FY19: 600,000 to 640,000 ounces of gold at an all-in sustaining cost (AISC) of between $1,025 and $1,125 per ounce.

The figure appears easily attainable considering the result for the June 2018 quarter.

Northern Star had a record production of 184,000 ounces, equally distributed between its two operations in Jundee and Kalgoorlie. Thanks to this strong performance, annual production totalled 575,000 ounces, exceeding the top end of the company's guidance.

In the quarter, Northern Star produced an underlying free cash flow of $93 million, despite investing $46 million in expansionary capital and exploration. The company now has a $512 million net cash position.

Northern Star Executive Chairman Bill Beament has indicated exploration as the cornerstone of the company's growth and exceptional financial returns. To pursue organic growth in the near future, the company has already allocated $134 million in the FY19 budget for exploration and expansion.

At the time of writing, shares in Northern Star are down 0.7% to $7.16.

The post How Northern Star Resources Ltd (ASX:NST) plans to grow even more appeared first on The Motley Fool Australia.

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IT services provider Data#3 Limited (ASX: DTL) was one of the worst performers on the local market on Wednesday, down 4% to $1.62, after the company released an estimate of FY18 profit.

After a streak of positive results, in December 2017 Data#3 saw its share price plunge on the news that profit for the first half of FY18 would be substantially lower than the previous corresponding period due to some project delays.

However, management was confident that a strong performance in the second part of the year would have ensured that FY18 results would have been an improvement over FY17.

Today, the company announced that the second half was indeed positive, with a record net profit before tax of $16 million. Despite this, the consolidated net profit after tax of the Data#3 group for FY18 will be down 9% from the prior year, to $14 million.

Data#3 also revealed that its subsidiary Discovery Technology has instituted a legal proceeding for debt and economic loss recovery against a client for the early termination of a 5-year supply contract that negatively impacted the results.

But there's plenty of other companies that are growing their profits this year. Click here to find out about three blue chip stocks to back for 2018.

The post The Data#3 Limited (ASX:DTL) share price slides on profit downgrade appeared first on The Motley Fool Australia.

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Garbage collection and recycling company Bingo Industries Ltd (ASX: BIN) will remain a family-controlled business, according to an announcement made to the market on Tuesday.

The release refers to recent speculation that the Tartak family, who founded Bingo, would have sold part of their shares in August, after the end of a voluntary escrow period. The family owns on aggregate a 30% stake in the company, including a 17% share in the hands of Bingo's CEO and managing director Daniel Tartak. The Australian Financial Review reported a possible sale of shares a few days ago.

Today the Tartak family communicated they do not intend to sell their shareholding at the end of the escrow and confirmed their commitment to Bingo. The family remain confident in the positive long-term outlook for the company and the whole industry and expect the introduction of a new waste levy in Queensland in early 2019 to benefit the business.

Bingo reaffirmed its pro forma FY18 EBITDA guidance of $93 million, a 45% increase on the previous year.

Investors gave the release a warm reception. After starting the day in the red, Bingo's share price jumped 9% higher right after the announcement. The stock currently trades at $2.63, up 4% on yesterday's closing price.

The post Why the Bingo Industries Ltd (ASX:BIN) share price jumped higher today appeared first on The Motley Fool Australia.

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The latest quarterly production report from Whitehaven Coal Ltd (ASX: WHC) prompted a mixed reaction on the market on Monday. The stock posted a 3% gain in morning trade, before heading downwards to $5.52, 1.5% below yesterday's closing price.

The report includes some good news and some bad news, perhaps not enough to push the share price further up after it has almost doubled in the past 12 months.

Whitehaven sold 4,700 M/tonnes of coal in the June 2018 quarter, a 13% decrease from the previous corresponding period. The company blames a weather-related port congestion in Newcastle, but the sales slippage also mirrors a corresponding decline in production.

However, year-to-date sales are still 7% above the volumes recorded in 2017 and production in the whole of FY18 is within the company's guidance.

The company benefitted from strong coal prices in the first half of 2018. Thermal coal demand from Asia, particularly from China, was well supported by a cold winter and strong industrial demand. Buoying steel prices contributed to the demand for metallurgical coal.

The company expects prices to remain strong in the next year, particularly if the ongoing dispute between Queensland regulators and Aurizon Holdings Ltd (ASX: AZJ) continues to hamper coal miners' access to railways.

The post The Whitehaven Coal Ltd (ASX:WHC) share price falls on weak quarterly results appeared first on The Motley Fool Australia.

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Emeco Holdings Limited (ASX: EHL) continues its outstanding share price run. The stock was up 1.5% to $0.36c on Monday, after the earth-moving vehicle rental company released its unaudited results for FY18.

Two years ago Emeco traded at just 3 cents a share, but since then the company has delivered a series of strong results and grown through a number of acquisitions, topped off with the $80 million purchase of bulldozers rental business Matilda Equipment in April.

Emeco maintained a solid performance in the last quarter of FY18. Operating EBITDA grew 10% on the previous quarter, thanks to new contracts resulting in increased utilisation of the company's fleet. EBITDA for the full year amounts to $153 million, an 83% increase on FY17.

As strong earnings bring the company's net debt/EBITDA ratio down to 2x, Emeco appears well on its way to reduce leverage to 1.5x by FY20 as planned.

Emeco is not the only mining services stock that has enjoyed sustained growth recently. The NRW Holdings Limited (ASX: NWH) share price for instance has increased 150% in the last 52 weeks. However, such gains expose mining services stocks to spectacular falls, such as the 40% tumble that Ausdrill Limited (ASX: ASL) shareholders had to endure in the past 2 months.

The post Emeco Holdings Limited (ASX:EHL) reveals its full year profit result appeared first on The Motley Fool Australia.

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Shares in Resolute Mining Limited (ASX: RSG) fell 1% to $1.33 on Thursday, after the company reported the latest figures on its gold production.

Resolute produced 284,000 ounces of gold in FY18, in line with its 280,000 ounces forecast. This result is not particularly impressive, considering the company had slashed its production guidance in April after reporting a weak quarter.

Throughout the year, Resolute operated at an all-in sustaining cost (AISC) of $1,355 per ounce, higher than most industry peers, including Regis Resources Limited (ASX: RRL) and Evolution Mining Ltd (ASX: EVN).

Despite selling at a relatively high average price of $1,703 per ounce, the company couldn't generate a positive cash flow and saw its cash balance drop to $113 million, down 19% in the last three months of FY18.

However, the future seems brighter for the gold miner. A new underground mine will open at Resolute's Syama project in Mali, ensuring an output of 300,000 ounces and lower production costs in FY19.

Resolute is also expanding its Ravenswood mine in Queensland, and should soon open a new gold project in Ghana. If everything proceeds according to plans, the company should be able to ramp up production, reaching the ambitious target of 500,000 ounces per annum by FY22.

The post The Resolute Mining Limited (ASX:RSG) share price falls on weak FY18 results appeared first on The Motley Fool Australia.

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Mortgage broker franchisor Mortgage Choice Limited (ASX: MOC) may have found a way to avoid a war with its franchisees. After losing 42% in the past 6 months, today the stock is up 2% to $1.46.

In June, a joint investigation by Fairfax and ABC revealed that Mortgage Choice brokers were struggling to profit from their work and many were considering a legal action against the company. The news contributed significantly to the stock's poor performance.

Criticism over the mistreatment of franchisees recently hit other ASX-listed companies, including Retail Food Group Limited (ASX: RFG) and Domino's Pizza Enterprises Ltd. (ASX: DMP), as the Senate launched an inquiry into the operation and effectiveness of the Franchising Code of Conduct.

Mortgage Choice has acted quickly on the issue, accepting brokers' requests for higher and less volatile pay. While previously broker margins were linked to a monthly target of new loans, today the company announced a new remuneration model that gives brokers the highest monthly income based on either the volume of outstanding loans or the rolling average of loan settlements.

This change is expected to increase the average commission payout on residential lending from 65% to 74% and to provide better earnings certainty to franchisees.

The company will partially offset the cost of the more generous remuneration structure by saving on its services to brokers, which from now on will consist mostly of phone and online support.

For FY18, Mortgage Choice expects cash NPAT of about $23 million, in line with the previous year. The change in the remuneration policy will result in a $30 million non-cash negative adjustment to statutory NPAT.

The company should return to profit in FY19, with an expected statutory NPAT of $16.5 million. Based on this figure, the stock currently trades at 11x FY19's earnings.

Foolish takeaway

Considering the attention that franchising businesses may receive in the future as the Senate inquiry progresses, I think it's wise of Mortgage Choice to sacrifice some short-term profits to preserve its reputation and its network of brokers.

If you have a strong appetite for risk, you may consider investing in Mortgage Choice. For a safer option, I like the look of this dividend star.

The post Mortgage Choice Limited (ASX:MOC) just axed its profit to fix its franchising woes appeared first on The Motley Fool Australia.

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Shares in Independence Group NL (ASX: IGO) rose 3.5% to $5.08 on Monday, after the miner issued a preliminary report on production for the last quarter of FY18.

The results represent a general improvement on the previous quarter's figures. The company experienced an increase in the quantity of ores milled at its Nova project and an improvement in their grade, and managed to lift production of copper by 30%, while nickel and cobalt volumes grew by approximately 25%.

These three metals are all inputs in the production of batteries, and offer Independence exposure to the electric vehicle industry.

The strong quarter contributed to closing the gap between production volumes and the company's FY18 guidance. Production at Nova is still slightly lower than forecasted – as anticipated two weeks ago by analysts at Macquarie Group Ltd (ASX: MQG), who retained an underperform rating on Independence – but the company expects solid results in 2019 now that the project is fully ramped up.

Independence also has a 30% stake in the Tropicana gold project controlled by ANGLOGOLD/IDR UNRESTR (ASX: AGG). Tropicana produced 467,000 ounces of gold in FY2018, a result around midpoint of the company's guidance.

Independence will be one to watch when they release their FY19 guidance on July 30 2018. In the meantime, I would consider an investment in this small cap star.

The post Why the Independence Group NL (ASX:IGO) share price surged today appeared first on The Motley Fool Australia.

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Agribusiness Elders Ltd (ASX: ELD) was one of the worst performers on the local market on Friday, with its shares down 15% to $7.13, on a generally negative day of trade for agricultural stocks.

The company released a seasonal update, addressing market commentary on current adverse weather conditions. Elders admitted that the exceptionally dry season in many parts of Australia is reducing the demand for chemical input, reflecting negatively on retail earnings. Furthermore, the company is facing a decline in cattle prices.

These headwinds will have an impact on FY18 performance. Underlying EBIT is expected to be in the range of $70 million to $74 million, compared to $71 million in FY17.

Underlying NPAT should be between $59m and $63m, marginally up from the $58 million of last year. CEO Mark Allison confirmed the 5% to 10% EBIT growth target through the agricultural cycle to 2020.

Investors were disappointed with the update. Elders' diversified offer of services to the rural economy seemed to grant enough resilience to climate conditions, and the company had managed to grow its underlying profit by 13% in the first half of the year, while industry peers Nufarm Limited (ASX: NUF) and Graincorp Ltd (ASX: GNC), which specialise respectively in agrichemicals and bulk grain handling, slashed earnings.

Elders' update must have had an impact also on nut producers Select Harvests Limited (ASX: SHV) and Webster Limited Fully Paid Ord. Shrs (ASX: WBA), down 5% and 3% respectively. It's not surprising that dry weather would hurt nut producers, as nut orchards, particularly almonds, require huge volumes of water.

Foolish takeaway

A bad day of trade or a bad season don't mean you should avoid agricultural stocks altogether. Some agricultural businesses have solid fundamentals and can be rewarding long-term investments. Elders itself had an outstanding share price run in the last five years, thanks to a well-planned combination of organic growth, acquisitions and cost control.

However, this should serve as a reminder of the volatility that characterises an industry that is so heavily affected by weather conditions.

The post Why the Elders Ltd (ASX:ELD) share price plunged 15% today appeared first on The Motley Fool Australia.

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Shares in Sigma Healthcare Ltd (ASX: SIG) crashed 40% lower to $0.48 on Monday morning's trade, after the pharmaceutical distribution company announced it won't renew its wholesale supply contract with the My Chemist/Chemist Warehouse Group.

The current deal expires in June 2019, and after months of negotiations the two parties failed to agree on an extension. In 2017 the exclusive position of Sigma as a wholesaler for the group was the subject of a legal dispute that was eventually settled, but left doubts over the renewal of the contract.

Losing a client like Chemist Warehouse – Australia's largest pharmacy retailer – will reflect negatively on the company's earnings, which are already affected by a shortfall in sales.

Sigma slashed its FY19 EBIT guidance to $75 million, down from the previous forecast of $90 million, and from the $99 million of FY18.

The company reported adverse market conditions in the last two months, including the negative effect of price adjustments within the Pharmaceutical Benefits Scheme. "This continues to reinforce the need for government reform to introduce a margin floor for PBS wholesalers in line with the arrangements already enjoyed by pharmacists" commented CEO Mark Hooper.

But the full impact of the separation from the Chemist Warehouse will emerge after the end of FY19, when the supply contract will actually expire. For FY20, the company expects EBIT of between $40 million and $50 million.

From Sigma's perspective, the proposed terms for a renewal didn't provide an adequate return on invested capital. Instead, the conclusion of the contract will free up $300 million cash, to be invested in the rationalisation of Sigma's network of distribution centres and the pursuit of alternative sales opportunities, including hospitals.

The flip side of Sigma's tumble is the 5% surge of the EBOS Group Ltd (ASX: EBO) share price. The New-Zealand based pharmaceutical distributor will supply Chemist Warehouse for five years starting in July 2019, with a possible 3-year extension.

Foolish takeaway

Although Sigma presented the contract loss as an occasion to move to a new strategy and confirmed the intention to continue paying a high proportion of profits as franked dividends, I don't see this crash as a buying opportunity.

The stock might partially recover in the next few days, but Sigma confirmed trading conditions remain weak, aside from today's news.

I'd rather consider an investment in one of these three blue chips tipped to outperform the market in 2018.

The post Why the Sigma Healthcare Ltd (ASX:SIG) share price crashed 40% today appeared first on The Motley Fool Australia.

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Shares in Praemium Ltd (ASX: PPS) were up 3.5% to $0.88 on Friday, on the announcement of a 5-year contract with online trading business CMC Markets Stockbroking to distribute Praemium's advanced tax reporting solution, Tax Tools.

Tax Tools helps investors considering the tax implications of their transactions before they are executed, and provides a tax report that covers all ASX-listed securities plus 4,000 international securities, facilitating year-end tax reporting.

Under the new agreement, existing Tax Tools clients can continue to use the product transitioning to CMC, at a minimum contract value of $1 million per annum over the 5-year term.

Praemium specified that $1 million has been the minimum contract value for the provision of Tax Tools to one of the company's key institutional clients since 2008.

Tax Tools isn't Praemium's flagship product, as the company is better known for its Separately Managed Accounts (SMA) platform. However, the deal with CMC, a leading global provider of online trading services, offers the opportunity to increase revenue from Tax Tools with the addition of CMC clients.

Shares in Praemium are up 26% in June and up 144% in the past year, outperforming its peers in the rapidly expanding fintech space.

But there's another sector tipped to boom very soon. Click here to learn more.

The post Why the Praemium Ltd (ASX:PPS) share price is climbing again today appeared first on The Motley Fool Australia.

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