AU earnings: the season wraps up

In this week’s bonus edition of Investor Spotlight, we review the results of three companies from the ASX reporting period and analyse their stock’s technicals.

• Commonwealth Bank of Australia’s better-than-expected results boost dividend

The Commonwealth Bank of Australia (CBA) delivered a slightly better-than-expected set of full-year results. Revenues were in line with expectations. However, the bottom line increased by more than expected, which supported a chunkier dividend.

The bank's robust results can be attributed to two main factors: continued growth in its loan portfolio and a 17-basis point increase in Net Interest Margins (NIM) compared to the previous year. Despite this, the bank did note that NIM was slightly lower compared to the first half of the year, indicating that peak margins for this business cycle have been surpassed.

Key financial metrics

• Revenue: $27.23 billion, up 9.4% (Est. $27.1 billion)
• NPAT: $10.5 billion, down 6% (Est. $10 billion)
• Final dividend $2.40 (Est. $2.26)

CEO signals cautious outlook

Further, CBA's CEO Matt Comyn validated analysts' worries about potential challenges to profitability. He signaled that consumer demand is moderating and economic growth is slowing, factors which could have a dampening effect on future performance.

The overall reaction from analysts was somewhat upbeat, nudging the consensus price target upwards. However, despite the strong set of results and slight increase in price targets, analysts believe that the bank is currently trading at a valuation that is higher than its intrinsic worth.

Price target summary

Commonwealth Bank of Australia technical analysis

CBA shares lifted following the bank’s full-year profits. However, the gains were pared, with the stock remaining range-bound. Major resistance remains at the share’s all-time high at $110. Support could be funded at an upward-sloping trendline of around $97 in the short term. Major support could emerge at $90, which coincides with the 200-week moving average.

Commonwealth Bank of Australia weekly chart

• Woolworths full-year results meet expectations

Woolworths' annual results largely met analysts' forecasts, with only a minor shortfall in profits compared to consensus estimates. Both revenue and net profit showed growth year-over-year, culminating in a final dividend of 58 cents per share.

Key financial metrics

• Revenue: $64.3 billion, up 5.7% (Est. $64.2 billion)
• NPAT: $1.61 billion, up 4.6% (Est. $1.68 billion)
• Final dividend $0.58

CEO points to "relative stability" amid challenges

Woolworths CEO Brad Banducci noted that while the past year marked a return to "relative stability" for the company, cost-of-living pressures and persistent supply chain disruptions acted as drags on performance. As for the outlook for FY24, Banducci expects inflation to ease but concedes that the consumer landscape will "remain challenging."

The markets and analysts responded in a mixed fashion to Woolworths' full-year results. The share price lifted on the day of the report; brokers' median consensus price target was pared back slightly but remains at a small premium to the current share price.

Price target summary

Woolworths technical analysis

In the long term, Woolworth's share price appears to be range-bound, suggesting a lack of directional conviction among investors. Recently, the stock lost its short-term trend-line support, signaling a change in momentum towards a bearish stance. While upward movements above $40 have been met with selling pressure, there seems to be substantial buying interest when the price approaches $30 per share.

Woolworth weekly chart

• Appen faces uphill battle

Appen has once again underwhelmed investors with its half-year performance, reflecting the company's ongoing struggle to turn the business around. The numbers were far from encouraging, with both revenue and net profit after tax (NPAT) missing estimates.

Key financial metrics miss the mark

• Revenue: $138.9 million, down 24% (Est. $143 million)
• NPAT: -$43.3 million, down 15% (Est. $29.6 million)

CEO cites "challenging external environment"

Appen's CEO and President, Armughan Ahmad, didn't mince words in acknowledging the grim results. He cited a "challenging external environment" as the major factor behind the disappointing numbers. The company's primary focus now is on reducing costs in a bid to end the year with a positive EBITDA.

Analysts remain neutral with a slight bearish bias towards Appen shares. However, after the result and a subsequent plunge in the share price, brokers’ consensus price target has been sliced to $1.65.

Price target summary

Appen technical analysis

Appen’s share price is in a clear downtrend, having broken through psychological support of $2.00 after the release of half-year results. The next key level to watch is $1.20.

Appen weekly chart