The Fortescue Metals Group Ltd (ASX: FMG) share price is down 1.67% in morning trade on Wednesday.

Shares in the S&P/ASX 200 Index (ASX: XJO) iron ore miner closed yesterday at $22.18 and are currently trading for $21.81 apiece.

This follows the release of the company’s half-year results for the six months ending 31 December (H1 FY23).

Here are the highlights:

Fortescue share price slides alongside profits and dividends

• Revenue of US$7.84 billion, down 3.6% from H1 FY22
• Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) declined 8.7% from the prior corresponding period to US$4.35 billion
• Net profit after tax (NPAT) of US$2.37 billion, down 4.7% from US$2.78 billion in H1 FY22
• Interim fully franked dividend of 75 Aussie cents per share declared, down 12.8% from 86 cents per share in H1 FY22

What else happened during the half year?

Also putting the Fortescue share price under pressure is the lower average realised price the miner received for its iron ore shipments. Over the reported half, that came to US$87 per dry metric tonne (dmt), down from US$96.dmt in the first half of the 2022 financial year.

Earnings per share (EPS), meanwhile, declined to AU$1.14 per share, down from AU$123.70 per share a year ago.

The ASX 200 miner’s dividend payout ratio declined from 70% in H1 FY22 to 65% in the current reported half-year.

On the positive side for the Fortescue share price, the miner achieved record half-year iron ore shipments of 96.9 million tonnes (Mt), beating the prior record first half set in H1 FY22 by 3.8Mt.

Ore processed was also a first-half record, coming in at 98.0Mt.

Ore mined, on the other hand, decreased to 114.8Mt, down from 118.0Mt in H1 FY22.

What did the miner report on the sustainability front?

The Fortescue share price could be getting some support from ESG investors, as the iron ore giant continues its strong focus on slashing emissions. Fortescue intends to achieve real zero emissions (Scope 1 and 2) across its iron ore operations by 2030.

The company stated:

Fortescue is making significant progress on our decarbonisation initiatives, enabled through our 100% renewable green energy and green technology company FFI [Fortescue Future Industries] and battery design and energy management system company WAE Technologies (WAE) in the United Kingdom.

Fortescue allocates 10% of NPAT to fund FFI.

Now what?

Looking at what could impact the Fortescue share price down the road, the miner provided the following FY23 guidance:

• Iron ore shipments in the range of 187 to 192Mt
• C1 costs for hematite of US$18.00 to US$18.75 per wet metric tonne (wmt)
• Capital expenditure (excluding FFI) of US$2.7 to US$3.1 billion
• FFI’s FY23 anticipated expenditure comprises US$500 to US$600 million of operating expenditure and US$230 million of capital expenditure

Fortescue assumed an average FY23 exchange rate of 70 Aussie cents to the US dollar.

Fortescue share price snapshot

As you can see in the chart below, the Fortescue share price has had a strong run in 2023, up 7% since the closing bell on 30 December despite this morning’s dip.

The post Fortescue share price sinks amid 13% dividend cut appeared first on The Motley Fool Australia.

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More reading

• Earnings preview: Here are the ASX shares reporting on Wednesday
• Here’s the iron ore price forecast for 2023: CBA
• Better buy: Fortescue vs BHP shares
• Own Fortescue shares? Here’s what the market expects from its half year results
• Fortescue share price shrugs off layoff rumblings

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 James Hardie Industries plc (ASX: JHX) share price is up 3.03% to $31.32, while the S&P/ASX 200 Index (ASX: XJO) is in the red this morning, down 0.53%.

The James Hardie share price took a hammering yesterday after the company released weak Q3 FY23 results.

As we reported, the ASX 200 share tumbled by 8% in early trading before recovering and closing down 4.25%. Over the past 12 months, the James Hardie share price has dropped by 34.36%.

But one broker is looking through the bad news, seeing a long-term opportunity with the ASX 200 share.

Weak Q3 result ‘a buying event’ for ASX 200 share

The housing downturns in the United States and Australia have taken a toll on the building materials supplier.

James Hardie reported a 4% dip in sales in Q3 FY23 compared to Q3 FY22 and a 19% drop in adjusted earnings before interest and taxes (EBIT).

The weak result prompted James Hardie to lower its FY23 full-year guidance considerably.

The company now expects adjusted net income in the range of US$600 million to US$620 million. This is down from the previous guidance of US$650 million to US$710 million.

According to reporting in The Australian today, Citi analyst Samuel Seow says the company is “attractive”, trading on an FY24 “trough earnings” multiple of 19 times.

Seow said:

Following a weaker than expected result, we believe the market will be looking for the last downgrade and we think this could be it.

Ironically, we see [the Q3] result as a buying event and the total shareholder return outlook should be positive from here.

Seow says the ASX 200 share is “close to an inflection”. He points to the improvement in United States mortgage applications and the 30-year fixed rate “appearing to settle”.

Seow maintains a buy rating on James Hardie but has lowered his 12-month share price target by 6.5% to $34.60.

What did James Hardie management say about Q3?

James Hardie CEO Aaron Erter said the company saw the current period “as an opportunity”.

He said they were cutting costs while continuing to “significantly invest in strategic growth initiatives”.

Erter commented:

We are managing quickly and decisively to accelerate our competitive advantages through this market downturn and we view this time as an opportunity.

… we remain aggressive, and we are laser focused on driving profitable volume share gain in every region and segment we do business in.

The post Down 35% in a year, this ASX 200 share offers ‘a buying event’ right now: Citi appeared first on The Motley Fool Australia.

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More reading

• James Hardie share price tumbles 8% as housing market downturn impacts sales
• These 3 ASX 300 shares are ‘significantly undervalued’: fund manager
• Brokers name 3 ASX shares to buy now
• Here are the top 10 ASX 200 shares today
• The ASX 200 is still full of cheap shares despite this year’s surge and I’m ready to buy more

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has positions in James Hardie Industries Plc. 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 Commonwealth Bank of Australia (ASX: CBA) share price took a beating in early trade.

At one stage, the banking giant’s shares were down as much as 5.5% to $103.06.

The CBA share price has recovered a touch since then but remains 3% lower at $106.07.

Why is the CBA share price sinking?

Investors have been selling down the shares of Australia’s largest bank following the release of its half year results.

As a reminder, for the six months ended 31 December, CBA delivered a 12% increase in operating income to $13,593 million and a 9% lift in cash earnings to $5,153 million. This was driven largely by volume growth in core products and a recovery in its net interest margin.

The CBA board elected to increase its interim dividend by 20% year over year to a fully franked $2.10 per share. But the returns won’t stop there. CBA has increased its ongoing share buy back by $1 billion.

Broker reaction

Goldman Sachs has taken a look at the result and given its verdict. It notes that its earnings were stronger than it was expecting. The broker commented:

CBA’s 1H23 cash earnings (company basis) from continued operations grew by 9% on pcp to A$5,153 mn, and was 1% ahead of our expectations. The beat was driven by better-than-expected net interest income and lower expenses, partially offset by lower non-interest income and higher BDDs, which translated to a 1H23 PPOP that was up 18% on pcp and 1% higher than expectations (in line revenues, lower operating expenses).

So why is the CBA share price falling? This could be due to concerns that the bank’s net interest margin has already peaked. If this is the case, it has peaked well ahead of expectations. Goldman adds:

Disclosure by CBA suggests that its monthly NIM peaked around the middle of 1H23, which likely implies our 1H24 peak half-year NIM forecast is optimistic.

The post Why did the CBA share price sink almost 6% today? appeared first on The Motley Fool Australia.

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More reading

• Everything you need to know about the supersized CBA dividend
• Earnings preview: Here are the ASX shares reporting on Wednesday
• CBA share price on watch amid strong profit growth and $1b buy-back
• 5 things to watch on the ASX 200 on Wednesday
• Is a bigger CBA dividend on the cards this week?

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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The Temple & Webster Group Ltd (ASX: TPW) share price suffered a massive sell-off after the company announced its FY23 half-year result yesterday. It fell by 27%.

Reporting season gives investors a true insight into how a business is performing, replacing the guesswork since a company’s last update.

With everything that’s going on with the economy, it’s understandable why the market is uncertain about a number of ASX retail shares, including an online homewares and furniture retailer.

However, with the release of Temple & Webster’s report, it’s not just overall market sentiment that’s hurting the company’s share price. There were also some downsides within the result.

The negatives in the update

The ASX share said that revenue fell year over year by 12% to $235.4 million. Temple & Webster explained that the comparative period (the first half of FY22) was significantly helped by strong e-commerce demand because of COVID-19 lockdowns.

It also said that sales from 1 January 2023 to 5 February 2023, the first five weeks of the second half, were down 7%.

The earnings before interest, tax, depreciation and amortisation (EBITDA) margin was only 3.5%, which the company said was in line with its guidance of 3% to 5%. However, the EBITDA margin was 4.7% excluding the company’s investment in The Build, its online home improvement start-up. It reduced its investment into The Build as it takes a “longer view” on the opportunity.

Temple & Webster also revealed that it reduced its marketing as a percentage of revenue. It was 11.8% of revenue, down from 13.6% for the prior corresponding period. It will return to ‘brand building’ from FY24 onwards.

As well, there were 840,000 active customers recorded in the FY23 half-year result, down from 940,000 at June 2022.

Here are some positives

While the company didn’t produce overall growth, there were some promising signs.

Since the fourth quarter of FY22, the ASX share has been focusing on accelerating cost base initiatives and profit margin improvements. In the second quarter of FY23, the gross profit margin of 46.5% improved 180 basis points (1.80%) compared to the prior corresponding period. It also noted shipping recovery improvements.

The month of December 2022, which wasn’t impacted by lockdowns or Omicron, saw revenue growth. The second quarter of FY23 saw EBITDA of $5.2 million, up 13% compared to the FY22 second quarter. I think that’s a positive for the Temple & Webster share price.

Temple & Webster is still targeting much higher profit margins in the longer-term, which could be very helpful for the bottom line.

The ASX share also revealed that the revenue per active customer increased 7%, thanks to an increase in the average order value and an increase in repeat orders. It said that 57% of orders are now from repeat orders.

Private label sales continue to grow as a percentage of total sales. In the first half of FY23, private label sales were 28% of the total, up from 27% in FY22 and 26% in FY21. This range offers “better price positions relative to offline” and it generates higher profit margins.

Home improvement revenue increased by 12%, representing 6% of the group. Trade and commercial saw 17% revenue growth, with a focus on margin growth.

My thoughts on the Temple & Webster share price

I thought the sell-off was overdone. I don’t believe the business is worth a quarter less than it was.

The company is still exposed to the same e-commerce tailwinds, it’s still planning to grow margins, it’s still talking about being profitable and getting back to growth this year. I think this is just a short(er)-term blip.

The situation over the next 12 months could be tricky, but investing is about more than just the next year. I think Temple & Webster shares could deliver substantial outperformance over the next three years as pessimism about the retail sector subsides and it invests for more growth.

The post Are Temple & Webster shares a bargain buy following Tuesday’s 27% fall? appeared first on The Motley Fool Australia.

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More reading

• Buy these beaten down ASX shares now: experts
• Why Ansell, Breville, Star, and Temple & Webster shares are falling
• Dash for trash fades as earnings cliff looms for ASX shares, with the market shooting first and asking questions later
• Temple & Webster share price sinks 13% on half year results
• Looking for growth? 3 ASX shares experts rate as buys

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 positions in and has recommended Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster Group. 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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If you own Commonwealth Bank of Australia (ASX: CBA) shares for their dividend, you’re in for a treat today.

Australia’s titan of the banking realm released its first-half results of FY23 earlier this morning. Alongside growing the bank’s net profits to $5,153 million (up 9% year on year), CBA decided to pass on the winnings with a bigger dividend.

In line with estimates, the latest CBA interim dividend is $2.10 per share.

Yet, it appears the market had been hoping for more. The CBA share price is trading 5% lower to $103.86 in the early moments of trade. This is a much more severe opening reaction than what is playing out on the S&P/ASX 200 Index (ASX: XJO) right now, which is down 0.5%.

CBA dividend is now even juicier

There is ample reason for investors in this ASX banking share to be chuffed this morning. The latest report was largely positive, but it is the passive income portion that is particularly exciting.

Today’s declared interim dividend of $2.10 per share is a monumental 20% upsize from the company’s payment a year ago. Notably, it also represents a 5% increase in the bank’s pre-COVID dividend.

Making it all possible is the Commonwealth Bank’s sturdy first-half profits in FY23. An improved net interest margin and growth across its core products allowed CBA to reel in more for the bottom line.

Furthermore, the interim dividend represents 69% of the bank’s cash earnings (or approximately 70% after normalising for loan loss rates) — matching up with its interim payout ratio target.

For those shareholders counting down the days to payment, there are some important dates to keep in mind. The 22nd of February will be when CBA shares trade ex-dividend — making 21 February the last chance for any new CBA investors to take the plunge and be entitled to the interim dividend.

The most important date of all — eligible shareholders will collect their CBA dividend on 30 March.

However, the good news doesn’t stop there. In addition to the increased payment, CBA’s management has decided to extend its on-market share buyback by a further $1 billion.

Taking a closer look at the CBA share price

Today’s weakening CBA share price has put a dent in the bank’s performance so far this year.

Prior to this morning, shares in Australia’s largest bank were up 8.1% year-to-date. However, after the negative reaction to its latest earnings, shares are now only up 2.7% in 2023.

Factoring in the latest CBA dividend and the reduced share price, the company now offers a dividend yield of roughly 4%.

The post Everything you need to know about the supersized CBA dividend appeared first on The Motley Fool Australia.

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More reading

• Earnings preview: Here are the ASX shares reporting on Wednesday
• CBA share price on watch amid strong profit growth and $1b buy-back
• 5 things to watch on the ASX 200 on Wednesday
• Is a bigger CBA dividend on the cards this week?
• The CBA share price is trading near all-time highs. Should you cash in?

Motley Fool contributor Mitchell Lawler has positions in Commonwealth Bank Of Australia. 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 Corporate Travel Management Ltd (ASX: CTD) share price is in the red this morning on the release of the company’s first-half earnings.

Right now, shares in the S&P/ASX 200 Index (ASX: XJO) travel services provider are down 1.62% at $16.97.

Here are the highlights of the company’s earnings report:

Corporate Travel share price falls despite 79% revenue jump

• $291.9 million of revenue – a 79% improvement on that of the prior comparable period (pcp) and a new record
• $4.2 billion of total transaction value (TTV) – more than double that of the pcp
• $51.3 million of underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) – a 182% improvement
• $15.7 million of statutory net profit after tax (NPAT) – up from a $10 million loss
• 6 cents per share unfranked interim dividend declared – the first of its kind since the onset of COVID-19
• Ended the period with $110 million of cash and no debt

What else happened last half?

The Australia and New Zealand region delivered the highest EBITDA last half, bringing in $23.5 million – a 2,511% improvement.

Despite a deluge of poor airport experiences and scheduling mishaps in the North American aviation industry last half, the company recognised $16.6 million of underlying EBITDA – a 177% jump.

The Europe region, meanwhile, delivered $17 million of underlying earnings – down 19% after a record half in financial year 2022.

Finally, its market share of Asia grew last half, with the region bringing in $3.4 million of underlying EBITDA – up from a $2.6 million loss.

The company boasts more than 97% client retention.

What did management say?

Corporate Travel managing director Jamie Pherous commented on the news driving the company’s share price today, saying:

It was pleasing to deliver a record TTV and revenue result in [the first half], noting this half included an additional $8.4 million charge for excess staff capacity held to be ready for a further expected [second half] recovery.

This is a one-off investment; thankfully, we are seeing strong momentum into [this half] through significant new clients transacting and activity recovery.

What’s next?

The company is gearing up to post record earnings later this year and hasn’t yet noticed any potential recessionary impacts.

It forecasts its underlying EBITDA to come in between $160 million and $180 million, while its underlying profit before tax is expected to reach $120 million to $140 million.

It expects Europe to contribute $2 billion of TTV this fiscal year, while China’s reopening has been tipped to indirectly drive down international airfares.  

Looking further ahead, it anticipates a full recovery in financial year 2024 on the back of client wins and retention as well as large account wins that will start trading in the current half.

Corporate Travel share price snapshot

This year has been good to the Corporate Travel share price so far.

The stock has lifted 15% since the start of 2023. Meanwhile, the ASX 200 has jumped 7%.

Looking further back, however, the share has fallen 25% over the last 12 months while the index has risen 3%.

The post Corporate Travel share price tumbles despite record earnings forecast appeared first on The Motley Fool Australia.

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More reading

• These are the best ASX 200 travel shares to buy right now: broker
• 10 ASX stocks to buy before they report this earnings season: Goldman
• Morgans names the best ASX growth shares to buy in February
• 2 ASX shares in the right place at the right time right now: Elvest
• These were the best performing ASX 200 shares in January

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 recommended Corporate Travel Management. 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 charging higher on Wednesday.

In early trade, the hearing solutions company’s shares are up over 6% to $222.87.

Investors have been bidding the Cochlear share price higher following the release of the company’s half year results.

Cochlear share price higher on strong result

• Sales revenue up 9% to $893 million
• Statutory net profit down 16% to $142 million
• Underlying net profit down 10% to $142 million
• Interim dividend maintained at $1.55 per share
• On-market share buy-back announced
• Guidance reaffirmed

What happened during the half?

For the six months ended 31 December, Cochlear reported a 9% increase in sales revenue to a record of $893 million. This was driven by strong growth in cochlear and acoustic implant revenue.

Cochlear implant units increased 14% over the prior corresponding thanks partly to strong demand for the Cochlear Nucleus 8 Sound Processor, which was launched during the second quarter. This was supported by the continuing recovery from COVID surgery delays across the emerging markets.

Things weren’t quite as positive for Cochlear’s earnings, at least on paper. Its statutory net profit was down 16% to $142 million due to one-off gains included in the prior corresponding period.

On an underlying basis, its net profit was down 10%. This reflects an increase in cloud computing‐ related expenses, new product launch costs, and the impact of the weighting in operating expenses to the second half of FY 2022.

Excluding its cloud computing‐related expenses, Cochlear’s underlying profit margin would have been 17%, which is just a touch below its long term target of 18%.

Despite this profit decline and thanks to the strength of its balance sheet, the Cochlear board has maintained its interim dividend at $1.55 per share.

Speaking of balance sheet strength, management has announced a progressive on-market share buy-back this morning. This will start with a $75 million buy-back, after which the company intends to progressively buy shares over the coming years until its cash balance is approximately $200 million.

Cochlear finished the period with a cash balance of $505 million, though $170 million will be used for an impending acquisition.

Outlook

Cochlear has reaffirmed its guidance for the remainder of the financial year.

It is expecting underlying net profit in the range of $290 million to $305 million, which will be a 5% to 10% increase on FY 2022’s underlying net profit or an increase of 8% to 13% when adjusted for the increase in cloud computing‐related expenses.

Commenting on trading conditions, management said:

Trading conditions have been progressively improving, in line with expectations, with intermittent COVID‐related hospital or region‐specific elective surgery restrictions or staffing shortages continuing. While surgical and clinical capacity to serve implant candidates appears to have stabilised, we continue to be mindful of the pressure on the healthcare system globally to contend with surgical waiting lists, ongoing staffing challenges and growing demand. We will continue our investment in R&D and market growth activities to support long‐term market growth.

The post Cochlear share price surges 6% on solid half and buyback appeared first on The Motley Fool Australia.

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More reading

• Why experts say these ASX 200 blue chip shares are buys
• Buy and hold these ASX 200 shares: experts
• Why experts say these ASX 200 blue chip shares are buys
• Here are the top 10 ASX 200 shares today
• 2 ASX 200 shares with multi-decade growth runways: Scott Phillips

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