Category: Stock Market

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

New York Stock Exchange operator Intercontinental Exchange (NYSE: ICE) knows a few things about investing. The company has booked monster profits from two crypto investments and is now investing in another area of its business. This time, the company could change the game in the giant mortgage industry. Here’s what happened.

What’s next after crypto?

In December 2014, before anyone had ever heard of Bitcoin, Intercontinental Exchange invested $10 million for 1.4% ownership of a little-known crypto exchange called Coinbase Global (NASDAQ: COIN). The exchange was firmly entrenched in the crypto frenzy years later. Though it was almost unnoticeable at the time of its investment, it eventually sold its stake when Coinbase IPO‘d in April 2021 for a mind-numbing sum of $1.24 billion.

Intercontinental Exchange’s Coinbase investment foreshadowed another crypto-related investment. Bakkt (NYSE: BKKT) was initially launched in 2018 with majority backing from Intercontinental Exchange. The company was formed to provide digital wallets to institutional and consumer users to buy, sell, and spend digital assets. Of course, digital assets include crypto but also extend to airline miles, hotel loyalty points, and credit card points.

In late 2021, Bakkt merged with VPC Impact Acquisition, a special purpose acquisition company (SPAC) sponsored by Victory Park Capital, and the shares went public in October. In its annual report a few months later, Intercontinental Exchange booked an astonishing $1.4 billion gain from the transaction. Unlike its Coinbase investment, though, the exchange still holds its stake in Bakkt because it sees a future in digital currency, even if it doesn’t include cryptocurrency.

More recently, however, the SPAC has made a more significant investment in the mortgage tech company Black Knight (NYSE: BKI). In May, Intercontinental Exchange announced it had agreed to acquire Black Knight for $85 per share, implying a market value of $13.1 billion. Prior to the acquisition, the exchange had a competing mortgage tech business.

Intercontinental Exchange’s mortgage tech business provides software for loan officers, mortgage origination, closing, funding, and compliance. Black Knight’s mortgage tech business overlaps in origination and expands the combined company’s capabilities to multiple listing service (MLS) solutions and loan servicing. In addition, Black Knight is a leading data analytics provider in the real estate market.

Before the agreed tie-up, Black Knight made a significant mortgage tech investment of its own. In February 2022, the company completed a deal to acquire the remaining shares of Optimal Blue that it did not already own. Optimal Blue’s mortgage tech business provides a software suite that aids its customers in carrying out secondary transactions in the mortgage market. Ironically, Black Knight funded part of the deal with 37 million shares of Dun & Bradstreet Holdings it owned from a previous investment.

Altogether, the complementary capabilities of the mortgage tech companies provide one of the first end-to-end software packages on the market. On top of that, the combined company will have a mountain of real estate and mortgage data it can use to bolster its data and analytics business.

Intercontinental Exchange points out that the average origination costs have ballooned from about $4,000 in 2009 to $9,000 in 2021. The company believes the new mortgage tech segment can shave off $2,600 — nearly 30% — of those costs. Savings at that level make hiring Intercontinental Exchange a very compelling proposition, especially considering the massive number of originations some banks and mortgage companies do.

Is Intercontinental Exchange a buy right now?

The Intercontinental Exchange/Black Knight mortgage tech portfolio is a compelling reason to get excited about the stock. The mortgage portfolio adds to the exchange’s existing exchange segment consisting of 13 regulated stock and commodity exchanges, including the New York Stock Exchange and six clearing houses.

The Black Knight deal is not expected to close until the first half of 2023, but Intercontinental Exchange expects the accretive to its earnings per share in the first year after the deal closes. In addition, the deal should cut expenses by $200 million and provide $125 million in revenue synergies.

The company’s stock is down about 19% this year because rising mortgage rates could potentially slow down the real estate market and crimp fees earned from mortgage originations.

If you’re worried about the same things, consider that Intercontinental Exchange projects recurring revenue in its mortgage tech segment will increase from 50% of its revenue mix to 70% after the Black Knight acquisition. The stock’s fall could represent an outstanding opportunity for long-term investors.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post This company profited $2.6 billion from crypto. What is it investing in now? appeared first on The Motley Fool Australia.

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BJ Cook has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Coinbase Global, Inc. 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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The TPG Telecom Ltd (ASX: TPG) share price is taking a beating today after providing its results for the first half.

Shares in the telco giant are down 9.44% to $5.99 as the market takes decisive action. Let’s take a look at the important news for TPG shares.

TPG share price dumps amid uneventful half

• Service revenue relatively flat year on year at $2.19 billion
• Average revenue per user (ARPU) up 1% to $31.80 per month
• earnings before interest, tax, depreciation, and amortisation (EBITDA) down 5.3% year on year to $837 million
• Net profit after tax (NPAT) up 114% to $167 million
• Adjusted NPAT (excludes restructing costs) up 3.8% to $331 million
• Fully franked interim dividend of 9 cents per share, up 12.5%

At first glance, TPG’s earnings growth might look mind-blowing. However, the 114% growth is due to a tax credit of $86 million. As such, this doesn’t exactly reflect the underlying earnings growth within the business.

For this reason, the company’s EBITDA metric gives a better perspective on the core business. When excluding restructuring costs, EBITDA was slightly lower, but management pointed to positive momentum.

What else happened in the half?

Importantly, TPG witnessed a strong increase in mobile subscribers during the half. Net increases came to 135,000 over the six months. Similarly, fixed wireless subscribers grew by 113,000, putting the company on track for its 160,000 target for FY22.

Furthermore, a highlight for TPG during the first half involved telco competitor Telstra Corporation Ltd (ASX: TLS). The announced plan, which was released on 21 February, would see Australia’s two largest telecommunications companies enter a network sharing agreement. Since the announcement, the TPG share price has trended upwards.

According to today’s release, the regulatory decision is still with the ACCC and an outcome is expected on 2 December 2022. If the deal is approved, TPG could see its mobile coverage extended to 98.8% of the population with the help of Telstra.

What did management say?

Commenting on the result, TPG managing director and CEO Inaki Berroeta said:

The simplicity and value with which TPG has always been synonymous are more relevant today than
ever – and our focus positions us to win at a time when the market is becoming more disciplined.

We are experiencing a welcome return of momentum in customer growth and transforming our network position to deliver a step change in our ability to compete in all segments, in all technologies, and across the country.

What’s next?

Regarding the company’s outlook, Berroeta mentioned that TPG is transitioning to a “new phase of growth”. In turn, management plans for earnings momentum to accelerate in the second half.

Additionally, the targeted $125 million to $150 million in merger synergies is said to be on track in 2022. Notably, this is a year ahead of what was initially planned.

Finally, the record date for the interim TPG dividend is 14 September. After that, shareholders can expect the payment to land in their accounts on 12 October.

TPG share price snapshot

In contrast to Telstra, the TPG share price has been firing on all cylinders this year. With a return of 2.9% year-to-date, some might say it has been received with great reception. Meanwhile, Telstra shares are 2.8% worse off than at the end of 2021.

At present, TPG shares are offering up a dividend yield of approximately 2.9%.

The post TPG share price tumbles 9% on first half results appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler 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 Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom Limited. 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 Cleanaway Waste Management Ltd (ASX: CWY) share price won’t be trading this morning as it undertakes a $400 million capital raise. It has also announced an acquisition.

If that wasn’t enough to keep investors busy, the waste management group also released its full-year results at the same time.

But you won’t be able to use the Cleanaway share price as a barometer for its earnings news. The shares are unlikely to start trading until Monday.

Cleanaway share price undergoes a capital raise

This is to give the company time to pass the cap around. It’s looking to do a $350 million fully underwritten institutional placement. It will also undertake a $50 million non-underwritten share purchase plan for existing shareholders.

The offer price for the placement is set to $2.50 a pop. This represents a 7.7% discount to the last closing price for Cleanaway shares yesterday.

The price under the SPP will be the same as the placement or at the five-day VWAP – whichever is lower.

How Cleanaway will use the proceeds from the capital raise

Proceeds from the raise will be used to fund Cleanaway’s growth strategy and to pay for the takeover of Global Renewables Holdings Pty Ltd (GRL). Cleanaway is buying the business for $168.5 million.

The acquisition price represents 7.9 times the enterprise value of the target’s actual FY22 (FY22A) pro forma EBITDA.

Cleanaway believes it’s paying an attractive price, particularly as it regards itself as the natural owner of GRL.

What the acquisition means to Cleanaway

GRL is a licensed composting facility that processes ~20% of Sydney’s ‘Red bin’ household waste at its strategically located Eastern Creek site. It delivers ~30% landfill diversion and better carbon outcomes compared to landfill.

The bidder estimates that the deal will be 3.7% EPS accretive on a pro forma FY22A basis. It also believes there is incremental earnings upside as additional capital is deployed into growth projects targeting a double-digit return.

Stronger sales but lower profits

Meanwhile, management handed in its earnings report card that showed an 18.4% increase in net revenue to $2.6 billion.

But its underlying earnings fell due to costs linked to its acquisition and integration of the Sydney Resource Network (SRN).

Summary of Cleanaway’s FY22 results  

• Net revenue increased 18.4% to $2,603.8 million
• Underlying Earnings before Interest and Tax fell 0.6% to $257.1 million
• Cash flow from operating activities increased 9.9% to $466.3 million
• Total dividend per share increased 6.5% to 4.9 cents
• Statutory net profit fell 45.4% to $80.6 million

The big drop in the statutory profit is not only related to SRN but also the New Chum landfill rectification post floods, leadership transition and equipment loss in the Health Services business.

Management commentary

The managing director of Cleanaway, Mark Schuber, commented:

In a year of significant challenges posed by a global pandemic, natural disasters, supply chain disruptions and emerging inflation, Cleanaway delivered a strong financial performance.

While Cleanaway is not immune to inflationary pressures, we do have mechanisms within many of our contracts that allow us to recoup rising costs over time, but there is a time lag on our ability to recover these amounts, which has resulted in a temporary impact on margins.

Outlook

Cleanaway is expecting to deliver stronger earnings in FY23 compared to the last financial year. This is due largely to the full-year contribution of SRN, underlying growth and returns from its growth initiatives.

It expects underlying EBITDA to range between $630 million and $670 million for this year. So far, it believes it is on track to deliver a result at the mid-point of this range.

The guidance excludes the ~$21 million in annualised EBITDA contribution from the GRL acquisition. Management isn’t willing to bank that in just yet as material factors, like volumes into post collections assets and labour availability, can affect the outcome.

The post Cleanaway share price halted amid results, $400m cap raise and acquisition appeared first on The Motley Fool Australia.

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Motley Fool contributor Brendon Lau 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 Latitude Group Holdings Ltd (ASX: LFS) share price is down in early trade Friday after the first-half results for FY22 and the exit of its chief executive were announced.

At the time of writing, the financial services provider’s shares are down 0.63% to $1.58 apiece.

What did the company report?

• Statutory net profit after tax (NPAT) of $30.6 million, down 57% half-on-half and down 66% year-on-year (YoY)
• Cash net profit after tax of $93 million, down 11% YoY
• Total operating income of $370.4 million, down 9% YoY
• Dividend remains the same as 2H21 and 1H21 — 7.85 cents per share fully franked
• Managing director and chief executive Ahmed Fahour to retire by the end of August 2023 after more than four years in the position

What else happened in 1H22?

The major event for Latitude during the half-year was its attempted acquisition of the buy now, pay later business of Humm Group Ltd (ASX: HUM).

The $250 million proposal was ultimately mutually terminated. While neither party officially put up a reason for backing out, the business’ poor performance updates likely didn’t help.

The market consensus seemed to be that Latitude dodged a bullet. The Latitude share price rocketed up after the cancellation of the deal, while Humm’s valuation plummeted.

Earlier this month, which was well after the first half ended, Latitude sold its insurance arm Hallmark to St Andrew Insurance Group.

What did management say?

Fahour said of the first-half result:

The cash NPAT result of $93 million, which is above consensus forecast, and our strong underlying balance sheet highlight Latitude’s competitive and strategic advantage at a time of economic uncertainty. We have positioned the business to take advantage of the growth opportunities that we believe will emerge in the next 12-18 months. 

He then said of his departure:

While this is a difficult decision, after four years as CEO, now is the right time to prepare for my departure next year and support the Board as it plans for my succession as chief executive.

Getting Latitude ready for life as a public company and then realising that goal during a global pandemic with last year’s IPO is something that I am particularly proud of.

What’s next?

Latitude declined to give specific guidance for the second half and the full year.

However, the board stated:

Despite increased funding costs with the sharp rise in official interest rates in Australia and New Zealand, product re-pricing and other implemented measures will help offset the impact on margins. 

Latitude will gain further benefits from the full integration of Symple Loans, the growth in travel, cost discipline and productivity increases.

While unemployment remains low, Latitude anticipates delinquencies to stay below historical levels and it will persist with a prudent approach to credit underwriting. Receivables growth should be less affected by elevated repayments as higher cash rates erode excess consumer savings and governments end COVID-related financial assistance. Latitude’s instalments business will also benefit as the higher cash rate adds to the attraction of its ‘interest free’ proposition. 

Latitude Group share price snapshot

The Latitude share price has dipped more than 20% this year to date.

However, it has rallied nicely from its 23 June trough, having put on more than 47% since then.

The dividend yield currently sits at an eye-popping 9.9%.

The post Latitude share price slides as CEO exits, profit plunges appeared first on The Motley Fool Australia.

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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 recommended Humm Group Limited. 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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There’s been plenty of recession talk in Australia and across the globe this year. It was seemingly spurred by rife inflation and resulting interest rate hikes, both adding to the soaring cost of living. But such recession concerns might have sparked a buying opportunity for some S&P/ASX 200 Index (ASX: XJO) shares.  

And two in particular are catching the eyes of fund managers. Let’s take a look at the ASX 200 shares tipped to gain if recession fears fade.

Are these ASX 200 shares worth looking at?

Two sectors have been tipped as post-recession risk winners; lithium and building.

And TMS Capital’s Ben Clark and Marcus Today’s Henry Jennings told Livewire these ASX 200 shares will be their top picks if recession risks waver.

Pilbara Minerals Ltd (ASX: PLS)

Jennings told the publication that, if China emerges, COVID-19 fades into the background, and a recession doesn’t occur, the world will likely ramp up its push towards electric vehicles.

And with that potential trend in mind, the fundie likes the look of lithium favourite Pilbara Minerals.

He also said his head has been turned by upcoming Australian lithium producer Core Lithium Ltd (ASX: CXO).  

The Pilbara Minerals share price closed on Thursday at $3.06.

Reece Ltd (ASX: REH)

Looking to an entirely different sector, Clark said TMS Capital has been buying shares in ASX 200 plumbing and bathroom products supplier Reece. He told Livewire:

It’s been sold down aggressively, and it’s because of concerns about building and renovation activity, but I think that the renovation market here might hold up better than expected. Certainly, if recession fears fade it will. 

But it’s the company’s MORSCO business that’s really drawn Clark’s eye. MORSCO is a leading US distributor of plumbing, waterworks, and heating and cooling equipment. It was snapped up by Reece in a $1.9 billion acquisition in 2018. The fundie continued:

MORSCO is the biggest player in places like Florida and Texas where there’s huge amounts of house building and renovation happening. We still see some really good forward progress for Reece and it will certainly move if the market starts to get less bearish on a recession.

At Thursday’s close, shares in Reece were worth $16.25 apiece.

The post 2 ASX 200 shares set to soar if we manage to avoid a recession: experts appeared first on The Motley Fool Australia.

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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 Rio Tinto Limited (ASX: RIO) share price has flatlined recently and is currently around 2% higher than this time last month.

The miner’s shares closed on Thursday trading at $97.10 apiece, within range of their July 2022 levels.

But what do brokers think about the Rio Tinto share price? Let’s take a look.

Are Rio Tinto shares a buy?

Analyst opinion is fairly mixed on the stock’s status, with 11 out of 18 brokers saying it’s a buy and the remainder rating it a hold, according to Refinitiv Eikon data.

The consensus price target from this list is $113.36 per share, suggesting the group predicts a sizeable amount of upside yet to be priced in.

Those at Citi said that Rio still produces “robust” free cash flow, which could potentially pay up to $8.32 per share in dividends in FY22.

That dividend could potentially increase to $9.40 per share in FY23 if the miner continues its pace of free cash flow generation, Citi says.

Meanwhile, iron ore continues its sharp ascent and has reversed off highs of USD$119 per tonne on 1 August to reset at USD$105 per tonne on last check.

The volatility is matched within the Rio share price over extended periods, as seen in the chart below over the past six months.

With these factors in mind, it depends on investor process and preference as to whether Rio Tinto shares are a buy right now or not.

Analyst sentiment is tilted to bullish. However, underlying market fundamentals might be tightening, according to Trading Economics.

“Demand has also been suppressed by a worsening macroeconomic backdrop for the Chinese economy, with the latest data showing concerning figures for industrial production and retail sales that added to woes regarding the financial stability of the country’s property developers,” it said in a recent note.

The Rio Tinto share price is down more than 9% over the past 12 months.

The post Are Rio Tinto shares a buy? See what top brokers are saying appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow 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 Incannex Healthcare Ltd (ASX: IHL) share price has curled up in recent weeks, having bounced from yearly lows of 19 cents on 1 August.

At the time of writing, it is priced at 31 cents apiece, ready to open the session on Friday.

Meanwhile, the S&P/ASX 200 Health Care Index (ASX: XHJ) has climbed almost 1.5% in the past month of trade.

Is the Incannex share price climbing back?

After a bumpy few months, the Incannex share price has turned a corner in November and has lost 40% in the past month of trade.

Most recently the company advised of its strategic review of operations and assets, pointing out its $290 billion addressable market and potential $2 billion a year in revenue from psychedelic therapies.

It also said the obstructive sleep apnoea market is set to grow up to 6.2% per year from a valuation of US$10 billion.

Investors had a nibble following the release, although there was no immediate reaction from the update.

The question then becomes, just how much of the forward looking company growth is already priced into the stock.

Moreover, healthcare shares have caught a bid lately and are resting in the green.

The sector strength could potentially transpose onto the Incannex share price, meaning it would be on the clawback.

Other factors, such as recession fears, inflationary pressures and interest rate hikes are also equally important to consider.

Incannex had a cash position of $37.5 million as of 30 June 2022. It realized this after raising $24 million in an equity raising earlier in May 2022.

Returns for this year of trade are shown on the chart below.

Over the past 7 to 8 months, the Incannex share price is down more than 50%, however it has regained stem since August.

The post Up 35% in a month, is the Incannex share price on the comeback trail? appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow 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 Pilbara Minerals Ltd (ASX: PLS) share price has recorded notably larger trading volumes this week.

This comes despite the company not releasing any price-sensitive announcements since the results of its BMX auction earlier this month.

At Thursday’s market close, shares in the lithium miner finished 1.92% lower at $3.06 apiece.

Let’s take a look at what could be spurring investors to exchange ownership papers in Pilbara Minerals lately.

What’s going on with Pilbara Minerals this week?

After climbing to a four-month high of $3.25 on Tuesday, the Pilbara Minerals share price has tumbled by 6% since.

Trading volumes were in line with the 30-day moving average of 20 million shares being bought and sold. However, on Wednesday, this level increased to almost 50 million shares being swapped.

One reason why could be the relative strength index (RSI) which hit 78 on 15 August – just before traders swung into action.

The RSI is a momentum oscillator that is used to assess the strength or weakness of a share price. Normal levels range between 30 and 70, but anything outside this tells us if the share price is cheap or expensive.

In this instance, when the RSI touched 78, Pilbara Minerals shares were considered to be overbought by investors. Hence, this caused a retracement in the RSI as well as the share price in the following days.

It appears that investors were taking profit after the share rose 65% from its year-to-date low of $1.975 on 14 June.

Currently, the RSI for Pilbara Minerals shares stands at 64 (within the acceptable range below the sell signal).

Keep an eye out next Tuesday as the company is scheduled to report its full-year results for FY 2022.

Pilbara Minerals share price snapshot

With the lithium spot price rising to unprecedented levels, the Pilbara Minerals share price has accelerated by 43% in the past year.

Its shares are down 4% in 2022 but this is because of the extreme volatility that impacted the market earlier on in the year.

In comparison, the S&P/ASX 200 Materials (ASX: XMJ) sector lagged in July and is down 2% year-to-date.

Pilbara Minerals presides a market capitalisation of approximately $9.29 billion.

The post Why are Pilbara Minerals shares seeing so much action this week? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has positions in Pilbara Minerals Limited. 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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In an era of high inflation, most businesses are having to deal with more expensive supply costs.

So you might be surprised to find a S&P/ASX 200 Index (ASX: XJO) company that is enjoying falling input costs.

And investors could surmise that will be a competitive advantage.

The team at Firetrail thinks CSL Limited (ASX: CSL) is precisely in this enviable position.

‘Counter-cyclical nature’ of this input cost

One of the big activities for CSL is the collection of blood plasma. While paying donors is illegal in Australia, in the US that is the norm.

The Firetrail analysts’ interest in the biotechnology giant piqued recently when it heard a juicy tidbit from a plasma collection rival.

“At its June 2022 result, CSL’s competitor Takeda Pharmaceutical Co Ltd (TYO: 4502) announced that the fees it pays to plasma donors have reduced by 15% per litre,” read their memo to clients.

During the first couple of years of the COVID-19 pandemic, donor numbers plunged as communities were locked down or people were reluctant to physically visit donation centres.

This meant that donor compensation was raised to provide a higher incentive, and to compete with “substantial levels of fiscal stimulus”.

But now as the US shifts to post-COVID life, these fees can be reduced.

“We could see that reverse now that household budgets are becoming more stretched,” said the Firetrail team.

“The counter-cyclical nature of this cost driver is one of the key underpinnings to our positive investment thesis on CSL.”

2022 bad, 2023 good

The Firetrail team is not the only one bullish on CSL’s future.

The CSL share price on Wednesday morning plunged 4.8% after it released its financial results, which saw net profit fall for the 2022 financial year.

But both S&P Global Ratings and Moody’s cited the pending growth in plasma collections as a major tailwind for financial year 2023.

“Significant growth in the volume of plasma collected mitigates any concern around inventory, despite higher donor costs,” said Moody’s Investors Service vice president Ian Chitterer.

“The influenza business continues to perform strongly with record sales once again over the year.”

CSL shares are up just 0.38% for the year-to-date. It is still yet to re-touch its pre-COVID highs.

The post Buy this ASX 200 company as its costs are actually falling: Firetrail appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has positions in CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. 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 Cochlear Limited (ASX: COH) share price is in focus this morning after the company dropped its financial year 2022 (FY22) earnings.  

Shares in the leader in implantable hearing devices closed Thursday’s session at $214.20.

Cochlear share price in focus on record sales revenue

• Record sales revenue of $1,641.1 million ­­­– a 10% increase on that of the prior comparable period (pcp)
• Statutory net profit fell to $289.1 million – an 11% drop
• Underlying net profit, however, lifted to $277 million – an 18% improvement and within guidance
• Underlying earnings before interest and tax (EBIT) came to $382.7 million – a 17% increase
• Basic earnings per share (EPS) slipped 11% to $4.396, while underlying EPS rose 18% to $4.21
• Revealed a $1.45 partially franked final dividend, bringing its full-year payout to $3 – an 18% increase

The company sold 38,182 Cochlear implant units last financial year, marking a 5% year-on-year improvement. It noted its record sales revenue was driven by demand for acoustic implants and sound processor upgrades, with all regions and product segments tracking above pre-pandemic levels.

It boasted an underlying net profit margin of 17%, or 18% when excluding the impact of cloud computing-related expenses.

Its capital expenditure lifted 16% to $77.2 million last fiscal year, while its full-year dividends represent 71% of its underlying net profit.

Its cash balance also grew in FY22, ending the period at $587 million, boosted by strong cash flows. Operating cash flow lifted to $377 million over the period and free cash flow increased to $238 million.

What else happened in FY22?

The major news from Cochlear last financial year was its intent to acquire Oticon Medical. It agreed to snap up the loss-making hearing solutions provider for $170 million in April.

The Cochlear share price slipped 0.5% on the back of the news.

The acquisition is expected to add between $75 million and $80 million to the ASX-listed company’s annual revenue. Though, it expects to fork out around $30 million to $60 million in integration costs to get there.  

What did management say?

In a letter to shareholders enclosed in the company’s full-year results, Cochlear chair Alison Deans and CEO and president Dig Howitt commented:

We are pleased to report strong growth in sales revenue and profitability with all regions and product segments tracking above pre-COVID levels.

Our clear growth opportunity and strategy, combined with a strong balance sheet, mean we are well placed to create value for our stakeholders now, and over the long term.

What’s next?

Cochlear’s earnings guidance for financial year 2023 forecasts another year of profit growth.

It expects its underlying profit to come in at between $290 million and $305 million. That represents a potential year-on-year increase of between 5% and 10%, or between 8% and 13% when adjusted for increased cloud computing-related expenses.

It also predicts its investment in cloud computing to cost around $36 million – $14 million more than it did last financial year. Meanwhile, its capital expenditure is expected to come in at around $80 million.

The company believes trading conditions will improve over the fiscal year. Though, it admits intermittent COVID-related hospital or region-specific elective surgery restrictions are likely to continue. It also predicts that FY23 will be weighted to the second half.

Cochlear share price snapshot

The Cochlear share price has struggled in recent months.

It has fallen 4% since the start of 2022 and is currently trading 16% lower than it was this time last year.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has dumped 6% year to date. It’s also fallen 5% over the last 12 months.

The post Cochlear share price in focus as sales revenue surges to record $1.6b appeared first on The Motley Fool Australia.

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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 positions in and has recommended Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. 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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