Category: Stock Market

S&P/ASX 200 Index (ASX: XJO) lithium shares appear to be all the rage among short sellers right now, with four market favourites among the 10 most shorted ASX shares.

So, why have these lithium stocks caught the attention of market pessimists? Let’s take a look.

But first, what is short selling?

Short selling is a method used to effectively bet against a stock.

To short a stock, one must borrow shares from another investor for a set amount of time and then sell them on the market. Then, when it comes time to return the shares, a short seller will buy them back on the market and return them to their owner.

Thus, a short seller aims to sell the borrowed stock for a high price and repurchase it for cheaper later on, taking the difference as profit.

4 ASX 200 lithium shares in the sights of short sellers

With that in mind, one must wonder why short sellers appear so intent on ASX 200 lithium shares.

For instance, market favourite Core Lithium Ltd (ASX: CXO) has a short interest of nearly 10% right now. That makes it the fourth most shorted on the bourse.

Its peers Sayona Mining Ltd (ASX: SYA) and Liontown Resources Ltd (ASX: LTR) come in at number five and six. Their short interest is currently around 9% and 8% respectively.

Finally, 7.6% of Lake Resources N.L. (ASX: LKE) shares are currently being shorted.

Of course, there might be company-specific reasons making some of the lithium favourites short seller targets.

For instance, Goldman Sachs tips the Core Lithium share price – currently sitting at $1.02 – to fall to 95 cents. It believes the soon-to-be lithium producer’s stock is overvalued.

Meanwhile, activist short seller J Capital has been vocal in its concerns about Lake Resources’ Kachi Project’s funding and technology.

However, it’s also quite likely that concerns current lithium prices won’t last could be behind the doubt.

Returning to Goldman Sachs, the broker expects lithium prices to fall substantially over the coming years. That means the four unprofitable lithium outfits might never see the sort of income their profitable peers are currently banking.

Thus, some short sellers might expect ASX 200 lithium shares to fall in the coming weeks, months, or years alongside the battery-making material’s price.

Indeed, producers Pilbara Minerals Ltd (ASX: PLS), Allkem Ltd (ASX: AKE), and Mineral Resources Ltd (ASX: MIN) currently boast short interest of just 3.3%, 1.3%, and 1% respectively.

The post 4 ASX 200 lithium shares being targeted by short sellers appeared first on The Motley Fool Australia.

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More reading

• Could this new advancement reignite ASX 200 lithium stocks?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why is short interest in Core Lithium shares growing?
• 2 ASX lithium shares to pounce on before they explode: experts
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Treasury Wine Estates Ltd (ASX: TWE) share price is on the slide on Wednesday morning.

At the time of writing, the wine giant’s shares are down 7% to $13.33.

This follows the release of the company’s half year results.

Treasury Wine share price sinks despite solid earnings growth

• Net sales revenue (NSR) up 1.4% to $1,284.5 million
• NSR per case up 13.5% to $108.6
• Earnings before interest, tax, SGARA, and material items (EBITS) up 17.2% to $307.5 million
• Net profit after tax up 72.5% to $188.2 million
• Interim dividend up 16.7% to fully franked 18 cents per share

What happened during the half?

For the six months ended 31 December, Treasury Wine reported a 1.4% increase (1.1% decline at constant currency) in revenue to $1,284.5 million. This reflects a 13.5% jump in NSR per case, which offset lower volumes.

The key drivers of its growth were the Penfolds and Treasury Americas businesses, which reported 7.2% and 4.1% increases in revenue, respectively, thanks to distribution growth and strong consumer demand. This offset a 7% decline in Treasury Premium Brands revenue.

Things were much better for its EBITS, which grew 17.2% to $307.5 million. This was underpinned by margin improvement across all divisions. Treasury Wine’s EBITS margin increased 3.2 percentage points to 23.9%. Part of this came from its global supply chain optimisation program, which delivered incremental cost of goods sold savings of approximately $28 million for the half.

How does this compare to expectations?

As strong as this result looks on paper, it fell short of Goldman Sachs’ estimates due to weaker revenues.

The broker was forecasting sales revenue of $1,410 million and EBITS of $321 million. This may explain some of the weakness in the Treasury Wine share price today.

Management commentary

Treasury Wine’s CEO, Tim Ford, commented:

We are very pleased to have delivered strong progress towards our financial growth objectives in 1H23, with EBITS growth of 17% driven by improved revenue per case and EBITS margin expansion across all divisions. Our Luxury wine portfolios in particular continue to perform exceptionally well across all markets and channels, and the fundamentals of the category are expected to remain strong at these higher price points.

We consider this set of results to be an important and additional proof point of our teams’ ability to navigate the changing and variable economic, consumer and market dynamics, whilst maintaining our focus on the delivery of our financial objectives.

Outlook

Management advised that the company remains on track to deliver strong EBITS growth and EBITS margin expansion in FY 2023. It expects trading conditions for the remainder of the year to be broadly consistent with those experienced in the first half.

The company’s FY 2023 EBITS margin is expected to be approximately 23%, with year on year expansion driven by portfolio premiumisation and the delivery of price increases across key portfolio brands. Management also expects the benefits of the global supply chain optimisation program to mitigate the impacts of inflationary cost pressures.

The Treasury Wine share price is still up 26% over the last 12 months despite this decline.

The post Treasury Wine share price sinks 7% despite solid earnings growth appeared first on The Motley Fool Australia.

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More reading

• 3 of the best ASX 200 shares to buy now: broker
• Here are the top 10 ASX 200 shares today
• Why Appen, Endeavour, Imugene, and Treasury Wine shares are pushing higher
• Treasury Wine share price climbs on China tariff hopes
• 5 ASX 200 shares smashing new 52-week highs on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Treasury Wine Estates. 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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Westpac Banking Corp (ASX: WBC) shares could have a strong year in 2023 if things play out well for the ASX bank share.

The banking sector has gone through a lot of changes since the start of the COVID-19 period. But, the last 12 months have been particularly volatile with all of the economic challenges that Australia has gone through.

Westpac is not the biggest Australian bank in the sector, that title belongs to the Commonwealth Bank of Australia (ASX: CBA).

However, there are some factors that could drive the ASX bank share higher from here.

Net interest margin improvements

The higher interest rates are the talk of financial markets at the moment and have been for some time.

It’s not certain how high interest rates are going to go. However, the massive increase of the official interest rate over the last 12 months is expected to be a boost for Westpac earnings.

The ASX bank share has been passing on more of the interest rate rises to borrowers than savers. This boosts the lending profitability of the bank, which can then boost the bottom line of the bank.

Higher lending profits could be key for driving the Westpac share price higher because the valuation typically follows the direction of the earnings.

In FY23, Westpac’s earnings per share (EPS) is expected to rise to $2.16 according to Commsec. That would put the current valuation at 11 times FY23’s estimated earnings. This is a much cheaper price/earnings (P/E) ratio than CBA shares, which are currently valued at 18 times FY23’s estimated earnings.

Return on equity to jump

Experts believe that Westpac’s return on equity (ROE) is going to significantly improve in the short term. This basically means that the ASX bank share could generate more profit on how much shareholder money is invested inside the business.

My colleague James Mickleboro recently reported on comments from Morgans about the compelling situation for Westpac:

We view WBC as having the greatest potential for return on equity improvement amongst the major banks if its business transformation initiatives prove successful. The sources of this improvement include improved loan origination and processing capability, cost reductions (including from divestments and cost-out), rapid leverage to higher rates environment, and reduced regulatory credit risk intensity of non-home loan book. Yield including franking is attractive for income-oriented investors, while the ROE improvement should deliver share price growth.

Investors like it when a business makes more profit for them.

Stronger dividends

While fund managers may be largely focused on total returns, there are a number of investors that may be focused on the dividend side of the returns. A bigger dividend could attract more retirees to invest which could then be a catalyst to drive the Westpac share price higher.

Westpac’s dividend is expected to rise at a solid rate over the next two years. In FY23, Commsec numbers suggest it could generate a dividend per share of $1.38, which would be a grossed-up dividend yield of 8.25%.

The FY24 annual dividend per share could be increased again to $1.47. This would be a grossed-up dividend yield of 8.8%.

The post 3 catalysts for Westpac shares to take off in 2023 appeared first on The Motley Fool Australia.

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More reading

• Westpac share price higher amid latest BNPL moves
• 3 of the best ASX 200 shares to buy now: broker
• Big yields and strong gains ahead for these ASX shares: analysts
• 2 ASX shares with a dividend boost coming
• ASX 200 investors: A big bank stock that pays 5% dividend income

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking. 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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Pilbara Minerals Ltd (ASX: PLS) shares have boomed over the past year. It’s up by over 60%. But, can the ASX lithium share turn into a great ASX dividend share?

The business hasn’t even paid a single dividend yet, so some investors may feel it’s a little early to be calling Pilbara Minerals a potential dividend darling.

However, all of the major ASX mining shares that are now strong dividend payers started off with no dividend history. I’m mainly talking about the main ASX iron ore shares of BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG).

Let’s address what the company has said about its dividend policy.

Pilbara Minerals shares its dividend plans

A few months ago, the ASX lithium share revealed its capital management framework.

It announced that favourable market conditions and strong operating margins supported the establishment of an inaugural dividend policy.

The capital management framework is designed to establish an “appropriate structure that prudently allocates available capital between investment into the existing business, sustainability commitments, strategic growth opportunities, as well as the provision of sustainable returns to shareholders.”

Pilbara Minerals plans to target a dividend payout ratio of 20% to 30% of free cash flow to start with. The inaugural dividend payment is going to start in FY23, which is the current financial year.

This level of payment “reflects the early stages of Pilbara Minerals’ growth cycle, with the remaining cash flow to be allocated to organic and inorganic growth opportunities which are aligned with the company’s growth and diversification strategy to deliver long-term shareholder value.”

The dividends are expected to be fully franked because it will start paying income tax in February 2022.

Remember, in the three months to 31 December 2022, it finished with a cash balance of $2.23 billion.

How big could the dividends be in the next 3 years?

As Pilbara Minerals said, the dividend is going to be set based on how much profit it generates.

Commsec estimates suggest that the annual dividend per share could be 15 cents in FY23 and in FY24. Hence, at the current Pilbara Minerals share price, it could pay a grossed-up dividend yield of 4.4% in the current financial year and the next financial year.

However, the profit is projected to drift lower to FY25. Commsec forecasts suggest that FY25 earnings per share (EPS) could be 50 cents. This could mean the dividend per share is 10 cents, which could be a grossed-up dividend yield of around 3%.

Will Pilbara Minerals shares become a dividend darling?

The fact that it’s a commodity business would suggest to me that it’s not going to be the type of business that can grow its dividend every single year. Resource prices can move up and down quite significantly, so the net profit is not likely to be consistent.

However, with the likely long-term growth of demand for lithium due to electric vehicles, the company plans to invest in improving its production and become involved with more of the lithium value chain. I think it can improve its profit margins in the coming years.

Unless the lithium price completely sinks, I think Pilbara Minerals is about to embark on many years of (at least) decent dividend payments. However, I’d hope to buy the Pilbara Minerals share price at a lower level because of its recent strength.

The post Pilbara Minerals shares: Future dividend darling? appeared first on The Motley Fool Australia.

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More reading

• Could this new advancement reignite ASX 200 lithium stocks?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Own Pilbara Minerals shares? Here’s why China is set to remain a ‘key customer’
• Here are the 3 most heavily traded ASX 200 shares on Thursday
• These ASX 200 shares are top picks in Macquarie’s growth portfolio

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Are you wanting for a passive income boost? If you are, then you may want to look at the quality ASX 200 dividend shares listed below.

Here’s why these dividend shares could be top options this year:

Deterra Royalties Ltd (ASX: DRR)

The first ASX 200 dividend share for income investors to look at buying is Deterra Royalties.

Although found in the mining sector, it isn’t actually a miner. Instead, it is the owner of a portfolio of royalty assets across a range of commodities.

One of the key assets in the company’s portfolio is the Mining Area C (MAC) iron ore operation. It is part of Western Australia Iron Ore (WAIO) and operated by mining giant BHP Group Ltd (ASX: BHP).

The team at Citi is positive on the company and has a buy rating and $5.10 price target on its shares.

As for dividends, Citi is forecasting fully franked dividends per share of 30 cents in FY 2023 and FY 2024. Based on the current Deterra Royalties share price of $4.84, this will mean yields of 6.2% for both years.

National Australia Bank Ltd (ASX: NAB)

Another ASX 200 dividend share for income investors to consider is NAB.

It is of course one of Australia’s big four banks, with a particularly strong presence in commercial lending

Goldman Sachs is a fan of the bank. Its analysts like NAB due to its aforementioned exposure to commercial lending, which they expect to perform better than home lending in the current environment.

The broker also believes the work NAB has done on productivity and cost management leaves it well positioned for an environment of elevated inflationary pressure.

In respect to dividends, Goldman Sachs is expecting NAB to pay fully franked dividends of $1.73 per share in FY 2023 and $1.78 per share in FY 2024. Based on the current NAB share price of $31.61, this means yields of 5.5% and 5.6%, respectively.

Goldman has a buy rating and $35.60 price target on its shares.

The post Buy NAB and this ASX 200 dividend share for passive income: brokers appeared first on The Motley Fool Australia.

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More reading

• If you invested $5,000 in NAB shares 5 years ago, here’s how much dividend income you’d have pocketed
• 3 ASX 200 shares that this fund manager loves at these prices
• 5 ASX 200 shares I would buy if I was starting from scratch: expert
• Buy NAB and this ASX 200 blue chip share: brokers
• Macquarie has these ASX 200 dividend shares in its income portfolio

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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A much-maligned ASX stock has rocketed 96% over the last three months, but one fund manager reckons there’s plenty more where that came from. 

Retail Food Group Ltd (ASX: RFG) is the franchisor for well-known brands like Donut King, Michel’s Patisserie and Gloria Jeans.

Six years ago, the share price was flying high around the $7 mark. But then it ran into legal and regulatory problems from consumer watchdog Australian Competition and Consumer Commission over its treatment of some franchisees.

By March 2020, when stocks crashed during the first wave of COVID-19, Retail Food shares were virtually worthless, going for around 3 cents.

It was still sitting at 5 cents last November. But since then it has pretty much doubled, to close Tuesday at 9.6 cents.

‘Positive earnings outlook’ looking good for stock price

Glenmore Asset portfolio manager Robert Gregory, who held the stock last year in anticipation of this boom, knows exactly what happened.

“In our view, this was driven by growing investor awareness of Retail Food Group’s cheap valuation, following the announcement on 23 December 2022, that the ACCC investigation into misconduct by previous RFG management had been finalised,” he said in a memo to clients.

The Retail Food share price remarkably gained 21.2% over December, then another 31.3% in January.

Despite its meteoric rise, Gregory is holding on for further gains.

“Whilst the stock is no longer nearly as cheap as it was before the ACCC announcement, we met with RFG management during the month, and continue to see a positive earnings outlook for the business.”

Gregory’s optimistic forecast is based on Retail Food’s business plans like overseas expansion of Gloria Jeans and growing the number of franchisees for the Donut King, Crust and Gloria Jeans drive-through brands in particular.

“RFG currently has ~700 franchisees,” he said.

“However, with the ACCC investigation now behind it, we believe the company is well positioned to grow this key metric which should be supportive for earnings going forward.”

RFG is headquartered on the Gold Coast and also runs franchise networks for Crust Pizza, Brumby’s Bakeries and Pizza Capers.

The post This ASX share’s doubled in 3 months. Expert says it’s not too late to buy! appeared first on The Motley Fool Australia.

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• 2 December winners ready to rocket further in 2023: expert

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Wesfarmers Ltd (ASX: WES) share price could be in for a big day after the company posted its earnings for the first half of financial year 2023 this morning.

Stock in the conglomerate behind Bunnings, Kmart, and Officeworks last traded at $48.70.

Wesfarmers share price on watch as dividend boosted

• $22.56 billion of revenue – a 27% improvement on that of the prior comparable period (pcp)
• $1.38 billion of net profit after tax (NPAT) – a 14.1% increase
• $2.16 billion of earnings before interest and tax (EBIT) – up 13.4%
• Basic earnings per share (EPS) came to $1.223 – a 14% jump
• 88 cent per share interim dividend declared – up 10% on last year’s
• Ended the period with a $4.72 billion net debt position

What else happened last half?

Looking at the company’s headline businesses, Bunnings saw revenue lift 6.3% to $9.79 billion last half while its EBIT increased 1.5% to $1.28 billion.

Meanwhile, Kmart Group (which includes Target) posted $5.71 billion of revenue – a 24.1% increase – while its EBIT more than doubled to $475 million.

At Officeworks, revenue jumped 4.5% and EBIT increased 3.7% to $1.65 billion and $85 million respectively.

Much of the group’s notable revenue jump came from Wesfarmers Health. It was acquired in March 2022 and brought it $2.78 billion in revenue and $27 million in earnings last half.

Over at Wesfarmers Chemicals, Energy and Fertilisers (WesCEF), revenue jumped 30.2% to $1.4 billion while EBIT lifted 48.6% to $324 million. The company’s industrial and safety business, meanwhile, posted a 4.5% jump in revenue, coming in at $978 million, while EBIT increased 14.6% to $47 million.

However, sales at Catch softened, leading the business to report a $108 million loss. That included $33 million of restructuring costs.

Finally, first ore was mined and stockpiled at the company’s Mt Holland lithium project in December.

What did management say?

Wesfarmers managing director Rob Scott commented on the news likely to drive the company’s share price today, saying:

The retail businesses benefitted from their well-established value credentials and omnichannel offer as customer shopping behaviours began to normalise, and WesCEF’s continued strong operating performance enabled it to capitalise on favourable commodity price conditions.

Growth across the retail businesses also reflected the impact of COVID-related lockdowns in the prior corresponding period.

The disappointing financial performance in Catch reflected operational and execution challenges in addition to the broader decline in online retail demand during the period.

What’s next?

Looking forward, the company believes its retail businesses are well-positioned to meet changing customer demand and mitigate rising costs amid surging inflation and higher interest rates.

Its retail trading results for the first five weeks of 2023 were broadly in line with the first half’s growth, supported by strong growth in areas most impacted by COVID-19 disruptions in early 2022. Meanwhile, WesCEF is tipped to keep benefiting from strong commodity prices in the second half.

Wesfarmers expects its full-year capital expenditure to come in between $1 billion and $1.2 billion.

Wesfarmers share price snapshot

The Wesfarmers share price has performed in line with the S&P/ASX 200 Index (ASX: XJO) so far this year.

Both the stock and the index have gained 7% year to date.

However, Wesfarmers shares have fallen 11% over the last 12 months. Meanwhile, the ASX 200 has lifted 3%.

The post Wesfarmers share price in focus as revenue jumps 27% appeared first on The Motley Fool Australia.

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More reading

• Earnings preview: Here are the ASX shares reporting on Wednesday
• Banking on term deposits to retire rich? I’d buy ASX 200 dividend shares instead
• Should I buy Wesfarmers shares before the company reports this week?
• 3 of the best ASX 200 shares to buy now: broker
• 5 ASX 200 shares I would buy if I was starting from scratch: expert

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers. 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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S&P/ASX 200 Index (ASX: XJO) lithium stocks remain strong performers in 2023, with a few exceptions.

Here’s how the big lithium companies have been tracking since the opening bell on 3 January:

• Core Lithium Ltd (ASX: CXO) shares are flat
• Allkem Ltd (ASX: AKE) shares are up 13%
• Pilbara Minerals Ltd (ASX: PLS) shares have gained 34%
• IGO Ltd (ASX: IGO) shares are up 9%
• Mineral Resources Ltd (ASX: MIN) shares have gained 16%

By comparison, the ASX 200 is up 7% over the same period.

That’s certainly a very healthy performance for investors holding an even-weighted basket of these ASX 200 lithium stocks.

But could a new rally be on the cards to rival the mammoth gains posted by the miners in 2021?

Could this advancement spur a new rally for ASX 200 lithium stocks?

The advancement in question relates to lithium-metal batteries, as opposed to the lithium-ion batteries currently used in most EVs.

Rather than storing lithium ions in electrode materials within the battery, lithium-metal batteries have a layer of lithium at one of the electrodes. This makes them lighter and, potentially, superior designs.

Oh, and they also won’t catch fire.

But, as Popular Mechanics reports, lithium-metal batteries are prone to short circuit. That’s caused by dendrites, microscopic cracks in the ceramic electrolyte.

Which has left scientists puzzled. Until now.

In a discovery that could change the makeup of batteries, and spur fresh demand for ASX 200 lithium stocks, researchers at Stanford University and the SLAC National Accelerator Laboratory uncovered why dendrites form in lithium-metal batteries.

Apparently, these occur from any indentation or impurities within the batteries, which cause nanoscopic cracks in the ceramic solid electrolyte, resulting in short circuits.

According to lead co-author William Chueh (as quoted by Popular Mechanics):

Just modest indentation, bending or twisting of the batteries can cause nanoscopic fissures in the materials to open and lithium to intrude into the solid electrolyte causing it to short circuit. Even dust or other impurities introduced in manufacturing can generate enough stress to cause failure.

What’s next?

ASX 200 lithium stocks aren’t likely to benefit from the latest advancement overnight.

But the researchers have now turned their attention to strengthening the electrolyte during manufacturing. They’re also investigating ways to coat the ceramic barrier, enabling it to repair any dendrites when those occur.

If the next phase of the research bears fruit, ASX 200 lithium stocks may be dominating financial news headlines once more.

The post Could this new advancement reignite ASX 200 lithium stocks? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 ASX earnings season is beginning to kick it up a notch. Today, some of the most renowned companies on the Australian share market are set to reveal their latest financial results.

Wondering which names are set to report? Here’s a quick summary to prime you for success today.

ASX shares slated to report today

Ranked in order of market capitalisation (largest to smallest)

Commonwealth Bank of Australia (ASX: CBA), $184.5 billion

Fortescue Metals Group Ltd (ASX: FMG), $68.3 billion

Wesfarmers Ltd (ASX: WES), $55.2 billion

Cochlear Limited (ASX: COH), $13.8 billion

Treasury Wine Estates Ltd (ASX: TWE), $10.3 billion

Vicinity Centres (ASX: VCX), $9.1 billion

Seven Group Holdings Ltd (ASX: SVW), $8.5 billion

Pro Medicus Limited (ASX: PME), $6.8 billion

Fletcher Building Ltd (ASX: FBU), $3.6 billion

Netwealth Group Ltd (ASX: NWL), $3.2 billion

Corporate Travel Management Ltd (ASX: CTD), $2.5 billion

GUD Holdings Limited (ASX: GUD), $1.2 billion

Pact Group Holdings Ltd (ASX: PGH), $351.2 million

Redbubble Ltd (ASX: RBL), $130.5 million

To view the complete agenda for the reporting season, check out our calendar here.

What can we expect to see today?

Without a shadow of a doubt, CBA and Fortescue Metals will be two ASX shares attracting a large portion of the attention today. Both giants are releasing their first-half results to the market, and investors will be keen to gather some insights into the guidance for the future.

For CBA, it will be a question of whether the bank is anticipating further tailwinds from interest rate rises or not. Alternatively, the elevated rates could begin to act as a headwind due to increased bad debts. What it might look like over the next six to 12 months will be a critical data point for CBA shareholders today.

Heading into today, analysts were largely expecting cash profit of $5.2 billion and dividends per share (DPS) of $2.10 for Australia’s largest bank. Though, Goldman Sachs has been more bullish — ascribing a DPS estimate of $2.12.

Turning to Wesfarmers, investors will be keen to get a sense of how the retail parts of this ASX share performed. As we’ve seen so far this season, retail companies have been hit and miss in terms of their financial performance.

Given Wesfarmers’ size — encapsulating brands such as Bunnings, Kmart, Target, and Officeworks — the report should shed some light on the strength of the consumer. Bloomberg data estimates earnings could come in at around $1.2 billion for the first half.

Don’t forget to check back in throughout the day to get the latest results coverage for these ASX shares.

The post Earnings preview: Here are the ASX shares reporting on Wednesday appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has positions in Commonwealth Bank Of Australia and Pro Medicus. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Cochlear, Netwealth Group, Pro Medicus, and Redbubble. The Motley Fool Australia has positions in and has recommended Netwealth Group, Pro Medicus, and Wesfarmers. The Motley Fool Australia has recommended Cochlear, Corporate Travel Management, and Treasury Wine Estates. 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 Commonwealth Bank of Australia (ASX: CBA) share price will be on watch on Wednesday.

This follows the release of the banking giant’s half year results this morning.

CBA share price on watch amid strong growth

• Operating income up 12% to $13,593 million
• Cash net profit up 9% to $5,153 million
• Net interest margin lifted 18 basis points to 2.10%
• Interim dividend increased 20% to $2.10 per share
• CET1 ratio of 11.4%
• Buy-back increased by $1 billion

What happened during the half?

For the six months ended 31 December, Australia’s largest bank reported a 12% jump in operating income to $13,593 million. This was driven by volume growth in core products, a recovery in its net interest margin, partly offset by a decrease in other operating income.

CBA’s net interest margin increased 18 basis points year over year to 2.10%. This reflects higher earnings on deposits, replicated products, and equity hedges in a rising rate environment, partly offset by increased competition.

Operating expenses were well controlled during the half and increased 5% to $5,773 million. This increase reflects wage and supplier inflation and higher information technology costs and remediation, which were partly offset by productivity initiatives.

On the bottom line, CBA’s cash net profit after tax came in 9% higher year over year at $5,153 million. This was driven by its strong operational performance, a rising rate environment, and higher loan loss provisioning.

This allowed the CBA board to increase its interim dividend by 20% to a fully franked $2.10 per share. This represents a 69% payout ratio and reflects the bank’s continued capital and balance sheet strength.

One slight negative was the bank’s loan impairment expense, which increased by $586 million. Management blamed ongoing inflationary pressures, rising interest rates, supply chain disruptions, and house price weakness.

Management commentary

CBA’s CEO, Matt Comyn, was pleased with the bank’s performance. He commented:

We continue to invest in our technology and businesses to improve our customers’ lived experience and solve their unmet needs. This focus is a key driver of strong organic growth across all of our businesses

Higher interim cash profits were a result of volume growth and the recovery in our margins as cash rates rise from historic lows. The result was further supported by sound portfolio credit quality.

Our continued balance sheet strength and capital position creates flexibility to support our customers and manage potential economic headwinds, while delivering predictable and sustainable returns to shareholders. As a result, a higher interim dividend of $2.10 per share, fully franked, has been determined. We continue our long-term approach to capital management by announcing an intention to increase our on-market share buy-back by an additional $1 billion.

How does this compare to expectations?

The good news for the CBA share price today is that this result appears to be largely in line with expectations.

For example, Goldman Sachs was expecting cash earnings of $5,108 million and an interim dividend of $2.12 per share.

Outlook

CEO Matt Comyn appears cautiously optimistic on the future. While highlighting that the cost of living is putting “significant strain” on Australian households, he notes that consumer spending remains resilient and the “fundamentals of the economy remain solid.”

Commenting on the bank’s outlook, he added:

We expect business credit growth to moderate and global economic growth to slow during 2023. However, we remain optimistic that a soft landing for the Australian economy can be achieved and positive on the medium-term outlook for Australia. The Bank remains well provisioned and capitalised to continue to support Australian households and businesses.

The post CBA share price on watch amid strong profit growth and $1b buy-back appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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