Macro Intelligence: BHP and Woolworths earnings insight
With over half of the companies exceeding expectations, we explore the standout performances, including AGL Energy's strong results, and delve into analysts' future outlooks and recommendations for BHP and Woolworths.
Article written by Juliette Saly (ausbiz)
Reporting season continues
In this week’s edition of IG Macro Intelligence, we delve further into the February reporting season, focusing specifically on BHP and Woolworths.
Out of the 21 companies that have reported their earnings to the ASX so far, 52.4% (11 companies) have exceeded expectations, nine have met market forecasts, and one has fallen short, as per FNArena’s Corporate Results Monitor.
AGL Energy significantly outperformed, whereas REA Group's results left analysts underwhelmed. Ord Minnett has recommended selling REA, arguing the stock is overvalued.
When is BHP reporting?
BHP Group Ltd is scheduled to announce its first-half earnings on 20 February 2024.
BHP's performance and market outlook
- Earnings per share (EPS) are forecast to decrease by 8.4% to USD$1.19, according to Reuters estimates.
- Revenue is projected to increase by 5.2% to USD$27.04 billion.
- BHP is anticipated to declare a first-half dividend of USD$0.78 per share, marking a 13.3% reduction.
Last year, BHP distributed an interim dividend of AUD$1.364, fully franked. Its highest interim dividend was paid in the first half of 2022.
Technical indicators suggest BHP shares are on a long-term upward trend, with the 200-day moving average ascending. Increased short interest indicates strong demand for the stock and over the past three years, BHP has seen a modest earnings growth of 0.38%, lagging behind the industry average of 9.17%. For FY24 and FY25, weaker growth is anticipated, according to CommSec Research.
BHP revenue expectations
BHP 2023 historical dividend data
BHP daily chart
BHP announcements and forecast earnings
When is Woolworths reporting?
Woolworths Group’s first-half earnings for FY24 are set to be announced on 21 February, 2024.
Past performance and growth projections
- The company is expected to report a 4.7% rise in first-half revenue to AUD$34.7 billion.
- EPS to increase by 6.5% to AUD$0.767.
- A fully franked dividend of 47 cents per share is forecasted, up from last year’s 46 cents.
ASX TradeMatch technical data indicates Woolworths’ investor sentiment has been subdued, with the stock recently entering oversold territory. While a short-term recovery is possible, the 200-day moving average remains in a downward trend.
Woolworths has experienced average annual earnings growth of 5.82% over the last three years, below the industry average of 9.54%. Analysts predict an average annualised growth of 8.52% for FY24 and FY25.
Woolworths announcements and forecast earnings
Woolworths 2023 historical dividend data
Woolworths daily chart
CBA announcements and forecast earnings
Analyst sentiments: BHP and Woolworths in focus
Analysts have assigned BHP a median rating of HOLD with a target price of AUD$48.40 per share. Conversely, Woolworths garners a more optimistic BUY rating with a target price of AUD$39.09, suggesting a potential 10.6% increase from current valuations.
BHP's growth dilemma
BHP’s long-term growth is projected to decline by 3.9%, with ratings consisting of 2 Strong Buys, 4 Buys, 10 Holds, 1 Sell, and 1 Strong Sell, according to Reuters. Macquarie and Morgans give BHP the highest rating with a target price of AUD$49 per share. Citi also values BHP at AUD$49 but maintains a neutral perspective.
Woolworths' bright future
Citi is particularly bullish on Woolworths, with a BUY rating and a target price of AUD$42 per share. Morgan Stanley adopts an underweight stance, targeting AUD$34. Overall, analysts remain optimistic, forecasting long-term growth of 8.26% for Woolworths, as per Reuters estimates, with 2 Strong Buys, 5 Buys, 5 Holds, and 2 Sells.
BHP mean estimate
Woolworths mean estimate
Sector showdown: materials outshine consumer staples
The materials sector has outperformed the consumer staples sector over the past year, with a 4% decrease compared to a 7.8% drop in consumer staples. However, the last six months have seen the materials sector return 1.54%, despite a 6.3% decline in the consumer staples sector, based on data compiled by the ASX.
ASX sector six month time frame
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
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