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.

The post The best performing ASX 200 stock today may have more room to climb appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2XDweF3

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.

More reading

• 10 quality ASX shares to buy in June
• Forget day trading: Get rich with these top ASX shares
• Why Appen and these ASX shares just hit record highs
• 5 ASX 200 10-bagger shares of the decade
• If you invested $10,000 in the Appen IPO, this is how much you’d have now

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.

The post Appen share price falls after positive update fails to impress appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3cgZ9E5

In late morning trade the S&P/ASX 200 Index (ASX: XJO) looks set to end a very positive week on a disappointing note. At the time of writing the benchmark index is down just over 1.2% to 5,778.8 points.

Four shares that have fallen more than most today are listed below. Here’s why they are tumbling lower:

The Costa Group Holdings Ltd (ASX: CGC) share price is down 4% to $3.16. This follows the release of the horticulture company’s annual general meeting update this morning. That update revealed that Costa’s long-serving CEO intends to retire within the next nine months. In addition to this, the company revealed that the majority of its produce is in demand and receiving favourable prices. However, it did warn on increasing operating costs relating to the pandemic.

The Freedom Foods Group Ltd (ASX: FNP) share price has crashed 13% lower to $3.80. Investors have been selling the diversified food company’s shares after the release of trading update. According to the release, a number of Freedom Foods’ channels have been materially impacted by the pandemic. And given the importance of the second half for its overall result, this looks likely to lead to a significantly weaker than expected full year result in FY 2020.

The Sonic Healthcare Limited (ASX: SHL) share price is down 3% to $28.34. This decline may be in relation to a broker note out of UBS this week. According to the note, the broker has a sell rating and $25.10 price target on the company’s shares. It appears concerned that Sonic may not benefit as greatly from pandemic testing as the market expects.

The Westpac Banking Corp (ASX: WBC) share price has fallen over 4% to $17.60. This sizeable decline appears to be the result of profit taking after some sensational gains this week. Prior to today, the Westpac share price was up over 22% week to date. The rest of the big four are tumbling lower with Westpac today, which is weighing heavily on the performance of the ASX 200.

More reading

• Why the Freedom Foods share price crashed 19% lower today
• Why the Costa share price is sinking lower today
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises again, ASX banks push higher
• Are ASX bank shares finally back in the buy zone?

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended Freedom Foods Group Limited and Sonic Healthcare 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.

The post Why Costa, Freedom Foods, Sonic, & Westpac shares are tumbling lower appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2ZMhgzl