At lunch on Friday the S&P/ASX 200 Index (ASX: XJO) is on course to end the week with a day in the red. The benchmark index is down 1.2% to 5,779.5 points.

Here’s what has been happening on the market today:

Big four banks tumble.

After a series of exceptionally strong gains, the big four banks have run out of steam on Friday. All four banks are trading lower and acting as a major drag on the ASX 200’s performance today. The worst performer in the group is the Westpac Banking Corp (ASX: WBC) share price with a 5% decline. However, its shares are still up over 16% since the start of the week.

Appen annual general meeting update.

The Appen Ltd (ASX: APX) share price is trading flat after releasing its annual general meeting presentation. The artificial intelligence company advised that it has orders in hand of $350 million year to date. This compares to its revenue of $536 million in FY 2019. As a result, it has reaffirmed its guidance in FY 2020. It expects to grow its operating earnings to between $125 million and $130 million.  

Costa CEO to retire.

The Costa Group Holdings Ltd (ASX: CGC) share price has come under pressure today after the horticulture company dropped a bombshell at its annual general meeting. Costa revealed in its annual general meeting update that its long-serving CEO intends to retire within the next nine months after over 10 years leading the company. Costa also advised that the majority of its produce was in demand and receiving favourable prices. Though, it did warn on increasing operating costs relating to the pandemic.

Best and worst ASX 200 performers.

The Austal Limited (ASX: ASB) share price is the best performer on the ASX 200 on Friday with a 9% gain. This morning the ship builder increased its profit guidance for FY 2020. The worst performer has been the Virgin Money UK PLC (ASX: VUK) share price with a 9% decline. Profit taking in the banking sector is weighing on the UK bank’s shares.

More reading

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James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia owns shares of Appen Ltd. 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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The Austal Limited (ASX: ASB) share price surged higher this morning after the shipbuilder surprised the market with a profit upgrade.

The Austal share price rallied 10.6% to $3.35 at the time of writing – making it the best performer on the S&P/ASX 200 Index (Index:^AXJO).

The Mayne Pharma Group Ltd (ASX: MYX) share price and Northern Star Resources Ltd (ASX: NST) share price were in distant second and third spots with gains of around 6%-7% each.

Rare profit upgrade despite COVID-19

Just meeting guidance is already a cause for celebration, just look at the ALS Ltd (ASX: ALS) share price when it reported its profit results this week.

Austal did one better. The group said that its FY20 revenue will hit around $2 billion while its earnings before interest and tax (EBIT) will be “no less than $125 million”.

This contrasts with its previous forecast of revenue of at least $1.9 billion and EBIT of no less than $110 million.

What’s lifting Austal’s share price

There are a few factors floating Austal’s boat. Management pointed to continued strong performance across its business and the COVID-19 fallout having less of an impact on its operations than it originally feared.

The recent contract win to build new patrol vessels for the Australian government is also helping, along with confirmation that it will be receiving research and development tax credits in the US.

The fifth factor behind the upgrade is the exchange rate. The stronger for longer US dollar means its Australian dollar denominated results will get an extra lift.

Defensive growth

“Austal’s continued strong performance across our shipyards in the USA, Australia, Philippines and Vietnam during the COVID-19 pandemic has provided confidence to increase the Company’s FY2020 earnings guidance at this time,” said its chief executive David Singleton.

It doesn’t mean the coronavirus crisis won’t drag on the group in the future periods, but at least Austal seems to have weathered the global shutdown well.

This is a much-needed shot in the arm for Austal’s shareholders. The stock sank at the start of the month when the group said it failed to win a tender to build the Guided-Missile Frigates FFG(X) for the US Navy.

Should you buy Austal’s shares?

While Austal’s pipeline of work is still looking pretty full, winning that lucrative contract would have secured its earnings for many years to come.

However, the stock is still good value in my view even without FFG(X). The fact is, most brokers weren’t expecting Austal to be successful anyhow, so not getting that contract doesn’t mean a downgrade.

Austal remains one of my key industrial picks for 2020.

More reading

• ASX 200 down 1.2%: Westpac tumbles, Appen reaffirms guidance, Costa CEO to retire
• 5 things to watch on the ASX 200 on Friday
• Top brokers pick the latest ASX shares to buy today
• 5 things to watch on the ASX 200 on Thursday
• The ASX 200 stock hit by the Brazilian COVID-19 wave

Brendon Lau owns shares of Austal Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Appen Ltd (ASX: APX) share price has edged lower so far today, down by 2.12% at the time of writing. This downward slide is despite the company providing a very positive update on its financial and operational performance.

Minimal coronavirus impact on business operations

In its AGM CEO’s presentation released to the market this morning, Appen revealed its earnings base remains resilient in the face of the coronavirus pandemic. Use of its products and services remains high among its major customers.

Despite a global slowdown in digital ad spending, Appen reported this has had minimal impact on its major customers to date. The tech company did acknowledge that the continued global economic downturn may have some impact on its smaller customer base moving forward.

Appen confirmed most of its staff continue to work efficiently and successfully in remote locations, supported by its at-home ‘crowd’ base of employees spread across the globe.

Strong balance sheet and healthy cash flow in place

In Appen’s market update in April, the company reported it had a strong balance sheet with cash in excess of $100 million. Today it confirmed its cash balance continues to be in this range. It also has an undrawn working capital facility available. Appen also confirmed that it is in a healthy cash flow position, which is underpinned by low overall capital requirements.

Outlook for FY 2020

Appen emphasised that despite current market challenges, it is continuing to strengthen its market position though continued investments in technology in the appropriate areas in order to achieve its long-term growth trajectory.

Based on Appen’s currently available market information, it expects negligible overall impact on its business performance due to the coronavirus pandemic in the months ahead.

It noted, however, that its current investment pipeline is likely to soften margins for 1H FY2020 to the mid teens, although margins for the full year to December 2020 are likely to be in the high teens.

Appen revealed that year-to-date revenue as at May 2020, including any orders in hand for delivery to customers, amounted to around $350 million. This compares favourably with overall revenues of $536 million for the 12 months to December 2019, and previous guidance.

Appen reaffirmed its full year earnings before interest, tax, depreciation and amortisation guidance of $125–$130 million.

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Motley Fool contributor Phil Harpur owns shares of Appen Ltd. The Motley Fool Australia owns shares of Appen Ltd. 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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