Key points

• Some brokers reckon that the CBA share price is a sell, thinking it’s going to drop this year
• The bank may be facing income pressure in the first half of FY22
• CBA is expected by some brokers to pay a grossed-up dividend yield of 5.8% in FY22

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The Commonwealth Bank of Australia (ASX: CBA) share price has dropped around 10% since the start of the 2022 calendar year. But some brokers think that there are more declines to come.

Historically, CBA shares have been priced more expensively than the other ASX banks of Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).

But some brokers like Macquarie and Morgans believe that the CBA share price valuation is too high.

Sell calls on the CBA share price

Morgans rates CBA as ‘reduce’ and Macquarie thinks that CBA is going to ‘underperform’.

Macquarie reckons that CBA is going to fall around 5% over the next 12 months, with a price target of $88.50. After looking at how US banks performed, the broker thinks there is a risk of a drop of market income in HY22.

Morgans is much more pessimistic about the prospects of the CBA share price, with a price target of just $74. That would be a drop of more than 20% over the next 12 months. This broker is expecting CBA to generate half-year cash profit of $4.3 billion and pay an interim dividend of $1.74 per share.

Full year estimates

Looking at the broker’s estimates for FY22, Macquarie thinks that CBA is valued at 20x this year’s projected earnings. Morgans’ numbers put the bank at 18x FY22’s estimated earnings.

Turning to the dividend, which plenty of retail investors like CBA for, Macquarie thinks Australia’s biggest bank will pay a grossed-up dividend yield of 5.8% in FY22 at the current CBA share price. Morgans’ estimate is very similar, with the broker having a forecast grossed-up dividend yield of 5.8% from the bank.

Latest insight into profitability

The best insight that investors can get is what the bank itself says. In November 2021, the bank reported how well it did in the three months to 30 September 2021.

In that quarter, it generated statutory net profit of $2.3 billion and cash net profit of $2.2 billion. Reported continuing cash net profit was up 20% year on year, but down 9% against the FY21 second half quarterly average. Pre-provision profits were “stable”.

Income was down 1%, with above system volume growth helping to offset continued margin pressures and lower non-interest income. The net interest margin (NIM) was “considerably lower” because of higher liquid balances, home loan price competition and customers switching to lower margin fixed rate loans, as well as the continued impact of a low interest rate environment.

Looking at the costs, operating expenses (excluding remediation costs) were actually 3% higher, mainly due to higher staff costs from lower annual leave usage during the lockdowns.

CBA share price snapshot

Whilst CBA shares are down 1% today and around 10% this year, it still registers a gain of approximately 7% over the last 12 months.

The post Why these brokers think that the CBA (ASX:CBA) share price is a sell appeared first on The Motley Fool Australia.

More reading

• Here’s what this broker thinks of the Westpac (ASX:WBC) Q1 result
• ASX 200 (ASX:XJO) midday update: Westpac higher on Q1 update, tech shares sink
• Westpac (ASX:WBC) share price on watch after reporting $1.58bn Q1 profit
• 5 things to watch on the ASX 200 on Thursday
• How are ASX bank shares responding to the RBA’s interest rate call?

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 Macquarie Group Limited and Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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At the start of each month, the team at Morgans picks out its best ideas for investors. These are the ASX shares that it believes offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence.

Yesterday we looked at financial shares that have made the list this month. You can read about them here. Whereas on this occasion we’ll take a look at the resources sector. Here are the picks:

BHP Group Ltd (ASX: BHP)

This mining giant has made the broker’s list. It currently has an add rating and $48.60 price target on its shares.

The broker believes BHP is a “relatively low risk given its superior diversification relative to its major global mining peers.” In addition to this, its analysts like BHP due to its “attractive combination of upside sensitivity, balance sheet strength and resilient dividend profile.”

Newcrest Mining Ltd (ASX: NCM)

If you’re looking for exposure to the gold sector then Newcrest could be the share to buy according to Morgans. It has an add rating and $26.05 price target on its shares.

Morgans believes it could be a good option for investors “looking for gold exposure without development risk.” It also likes the company’s geographic spread, which it expects to provide “some relief from the cost and labour challenges WA focussed companies are currently feeling.”

Santos Ltd (ASX: STO)

Another option in the resources sector to consider is this leading energy producer. Morgans has an add rating and $9.15 price target on its shares.

The broker likes Santos due to the resilience of its growth profile and diversified earnings base, which it believes puts the company in a position “to outperform against a backdrop of a continuing broader sector recovery.”

South32 Ltd (ASX: S32)

Another resources share that makes Morgans’ best ideas list is South32. The broker has an add rating and $5.00 price target on the mining giant’s shares.

It commented: “We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.”

Woodside Petroleum Limited (ASX:WPL)

Finally, Morgans is positive on this energy producer and currently has an add rating and $30.55 price target on its shares. It is a fan of its “transformative” merger with the petroleum assets of BHP and believes it is getting the better end of the deal.

Morgans explained: “We think WPL is clearly getting the better of the deal, with synergies not baked into deal metrics and BHP willing to accept a discount. The deal is transformative, lifting WPL into being a top 10 global E&P with +2 billion barrels of 2P reserves, with EBITDA of US$4.7bnpa and growth options.”

The post Morgans names the best ASX resources shares to buy in February appeared first on The Motley Fool Australia.

More reading

• Own ASX 200 energy shares? Here’s what OPEC’s been up to
• What rising inflation could mean for Newcrest (ASX:NCM) shares
• Here’s why the BHP (ASX:BHP) share price is rebounding in 2022
• 5 things to watch on the ASX 200 on Thursday
• These 3 ASX 200 shares are topping the volume charts 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 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 Bruce Jackson.

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Shares in Beach Energy Ltd (ASX: BPT) have reversed course and begun the ascent back up north over these past 3 months.

Prices have skidded off a low of $1.16 last year and are trading at $1.48 at the time of writing, having gained more than 13% in the past week.

As such, Beach Energy has started the year off well, with the most recent surge in its share price stemming from the release of its quarterly report last week.

It now leads the S&P/ASX 300 Metals and Mining Index (ASX: XMM) and several other competitors in 2022 after breaking away from the pack at the start of the year, as seen on the chart below.

These results haven’t gone unnoticed either. The team at JP Morgan are constructive on Beach Energy shares, assigning an overweight rating on the stock. Analysts at the firm have analysed Beach’s quarterly results in the grand scheme of its long-term growth story, and like what they’ve found. Let’s take a look.

Strong prices support revenue

Beach Energy grew quarterly revenue by 3% year on year to $398 million in the three months ending 31 December 2021, above the broker’s internal estimates. Much of the upside was driven by strengths in the commodity markets.

“Stronger-than-expected revenue was primarily due to higher realised prices for liquids. The realised crude oil price of A$117/bbl was 16% above our estimate. This was only partially offset by lower-than-expected gas prices”, the broker said.

In fact, Beach Energy realised a gas price of $7.60/GJ this quarter, a 2% gain on the prior period, but still 6% below JP Morgan’s forecasts.

The firm is also constructive on the company’s project pipeline, noting that “the key highlight from Beach’s growth projects was the delivery of first gas from the Geographe 4 and 5 wells to the Otway gas plant”.

These catalysts, it reckons, will add to an already superior balance sheet that suggests Beach Energy is well-positioned to pull the trigger on future growth opportunities.

“We think Beach provides good exposure to a diversified suite of assets in Australia. Net debt is close to zero and therefore Beach has the strongest balance sheet of the large caps under our coverage”, analysts at the firm wrote.

In fact, Beach Energy is one of JP Morgan’s preferred stocks in the sector, given a healthy blend of driving forces behind its share price.

“While we acknowledge recent issues at the Western Flank and the sudden departure of the CEO last year has increased operational risk” the firm said, “we would highlight: the company’s exposure to East Coast gas; the balance sheet is also net cash and in a strong position to fund its growth projects; and the stock is trading at a P/NPV of 0.72x”

It also says that in order for Beach Energy to achieve current production guidance of 21-23mmboe, it needs to produce a minimum of 10-12mmboe in the remaining 2 quarters of FY22.

Capital expenditures also appear to have fallen well short of full year guidance of $900 million-$1.1 billion, with just $417 million spent year-to-date. The broker noted that this represents a substantial saving.

JP Morgan rates Beach Energy as a buy and values the company at $1.85 per share.

In a list of analysts covering Beach Energy provided by Bloomberg Intelligence, 79% have it as a buy whereas just 1 broker has it as a sell.

Beach Energy share price snapshot

In the last 12 months, the Beach Energy share price has fallen 14% and is well behind the benchmark indices in that time.

This year to date however, shares have reversed course and are now trading up around 17% after soaring another 13% in the last week of trading.

The post The 2022 outlook for Beach Energy (ASX:BPT) shares is sunny: expert appeared first on The Motley Fool Australia.

More reading

• Own ASX 200 energy shares? Here’s what OPEC’s been up to
• 5 things to watch on the ASX 200 on Wednesday
• These were the best performing ASX 200 shares in January
• 5 things to watch on the ASX 200 on Tuesday
• Why have ASX energy shares become such hot property in 2022?

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 Bruce Jackson.

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Key points

• The Nufarm share price is soaring today
• The company’s latest trading update and outlook was released this morning
• The agricultural company has reported a 36% increase in revenue for Q1 FY22

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The Nufarm Ltd (ASX: NUF) share price is enjoying another good day on the ASX, currently up 15.05% to $5.35. It follows 4 successive days of gains for the company. Its shares are now up by 22% since Monday.

The developer and manufacturer of crop protection solutions and seeds released its latest trading update today. The update covers the first quarter of FY22. It reported an increase in revenue and strong adaptation to global supply demands.

Nufarm also released its outlook for the rest of the financial year. Let’s take a look at what the company announced.

Nufarm share price surges on 36% revenue increase

The Nufarm share price is rocketing today on the back of the company’s trading update for Q1 FY22 and outlook. The highlights included:

• A substantial increase in revenue
• Favorable trading conditions
• Adjusted net working capital (ANWC)/sales remain within target of 35-40%.

Nufarm reported a 36% increase in revenue for the first quarter of FY22 (against the previous corresponding period), citing “favourable weather conditions” as a factor. New products also made up more than 20% of its revenue.

The company “expects earnings in FY22 will be heavily weighted for the first half of the financial year and is increasingly confident of revenue and earnings growth for the full FY22 financial year”.

In fact, Nufarm predicts its revenue could increase to more than $4 billion by FY26, due to its existing and upcoming products, and above market growth at an expected 2.3%.

However, the company also reported it was experiencing “upward pressure on costs due to raw material costs and global logistics challenges which are being offset by the increased revenues”.

What’s next for Nufarm?

The Aussie grower is committed to adapting to global growth demands and challenges, including:

• Catering to a growing global population (estimated 9.7 billion by 2050) and higher living standards by increasing yields
• Using more sustainable agricultural practices, such as “biologicals, bio-stimulants, mechanical, electric and other novel solutions”
• Reducing greenhouse gas emissions at manufacturing sites by 30% before 2030 and protecting crops

Among other essentials, Nufarm expects fuel demand to increase by 50% by 2050. On Tuesday, the farmer reported that it had entered into an agreement with BP to supply sustainable biofuels through its product, Nuseed Carinata oil.

All in all, 22 of its primary products target an addressable market valued at $6.6 billion (FY22 projected). Nufarm hopes to push its portfolio towards higher margin and growth products, with customer relevance front of mind.

Nufarm share price snapshot

Over the past 12 months, the Nufarm share price has increased by 7%. It reached its highest price of $5.60 in April 2021 and its lowest of $4.12 in September 2021.

The company has a market capitalisation of $2 billion and a price-to-earnings ratio (P/E) of 35.

The post Nufarm (ASX:NUF) share price leaps 15% as revenue soars appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Westpac higher on Q1 update, tech shares sink
• Nufarm (ASX:NUF) share price climbs higher on BP low-carbon fuel deal

Motley Fool contributor Alice de Bruin 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 Bruce Jackson.

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Key points

• The Lumos Diagnostics share price is up 8% today, and 22% in the last 3 days
• RAT supply shortages soon coming to an end
• Victorian government’s investment in Lumos Diagnostics has excited investors

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The Lumos Diagnostics Holdings Ltd (ASX: LDX) share price is again on the move today. This comes after news broke that rapid antigen test (RAT) shortages have started to ease over the past few days.

During afternoon trade, the medical diagnostics company’s shares are up 7.92% to $1.09 apiece, having earlier been as high as $1.26. This means that since the end of January — the close of trade on Monday — Lumos Diagnostics shares are up by more than 22%.

RAT supply concerns almost a thing in the past

Investors are pushing up the Lumos Diagnostics share price following the Federal Health Minister’s comments today regarding RATs.

According to an article published by news.com.au, Australia’s supply shortage of RATs could soon be at an end.

Health Minister Greg Hunt said he received a positive message from Chemist Warehouse boss Mario Verrocchi on Wednesday morning.

“The message from the CEO … was that they have very significant supplies,” Hunt said.

On January 24, the government launched a scheme to provide free RATs for pensioners and concession cardholders.

Around 3.1 million RATs have been handed out under the scheme, which is available to roughly 6 million Australians.

Chemist Warehouse, Australia’s largest pharmacy chain, revealed it has handed out two-thirds of free RATs to eligible users. This equates to about 2 million free RATs.

The news follows Lumos Diagnostics’ release yesterday in which it advised the Victorian government intends to support a diagnostics manufacturing facility and innovation hub.

The Andrews government plans to invest $17.2 million in Lumos Diagnostics to establish capability for manufacturing RATs in Victoria.

However, this is subject to the company meeting a number of requirements such as securing approval from the Australian Therapeutic Goods Administration (TGA) for its RATs.

Lumos Diagnostics believes if it is granted these rights, production can begin as early as the second quarter of 2022.

Once the facility is set up, up to 1 million RATs will be initially produced each year. This is expected to increase to up to 50 million RATs a year through the introduction of greater automation and expanding production lines.

Furthermore, the RATs can also be modified to be used for influenza, infectious diseases, reproductive health, and chronic disease management.

About the Lumos Diagnostics share price

Since being listed in July last year, the Lumos Diagnostics share price is down around 12%. However, with this week’s gains, it is up around 13% year to date.

Lumos Diagnostics has a market capitalisation of about $152 million.

The post The Lumos Diagnostics (ASX:LDX) share price is soaring another 8% today. Here’s why appeared first on The Motley Fool Australia.

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• Lumos Diagnostics (ASX:LDX) share price climbs amid RAT mania

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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Motley Fool Australia Chief Investment Officer Scott Phillips joined Nine’s Late News on Wednesday night to discuss the RBA hosing down expectations of a rate hike, the surge in energy stocks, and Telstra’s new $1.6b investment.

The post Energy stocks surge and RBA hoses down the chances of a rate rise. Scott Phillips on Nine’s Late News appeared first on The Motley Fool Australia.

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• Why Amcor, Ansell, Block, and Credit Corp shares are sinking today
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• ASX 200 (ASX:XJO) midday update: Amcor slides, BHP and Fortescue storm higher
• Telstra (ASX:TLS) share price climbs on new $1.6 billion ‘nation-building’ projects

Motley Fool contributor Scott Phillips owns Telstra Corporation 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 owns and has recommended Amcor Limited and Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are surprisingly few ASX shares that have a record of dividend increases that is longer than a few years. This is especially the case in the aftermath of the coronavirus pandemic. Between 2019 and today, there are only a select few ASX shares that have dialled up their shareholder payments annually. Any of the big banks? Nope. Woolworths Group Ltd (ASX: WOW)? Sadly not. Telstra Corporation Ltd (ASX: TLS)? Its divined has been a flat 16 cents per share for years.

BHP Group Ltd (ASX: BHP) may have doled out monster dividends last year, but its income track record is bumpier than an outback road.

So then you would think that finding a company that has given investors an annual dividend pay rise every year for almost two decades is harder to find than an egg-laying rooster.

But they are out there. And APA Group (ASX: APA) is one of them.

Why APA shares are ASX dividend royalty

Yes, APA has been paying its investors a rising dividend every financial year since FY2004. Back then, investors received a total of 21.5 cents per share. In FY2021, APA shareholders received 51 cents per share in dividend payments. That came after 50 cents per share in FY2020 and 47 cents per share in FY2019. The growth from 21.5 cents per share to 51 cents per share equates to a compounded annual growth rate (CAGR) of 4.92% per annum, which handily outperforms inflation over that period.

Now, of course, APA isn’t the only ASX share with those kinds of dividend bonafides.

Brickworks Limited (ASX: BKW) has been paying a consistent dividend for more than 45 years, although it hasn’t always risen every year. In saying that, the company has raised its dividend every year since 2014.

Before 2020, Ramsay Health Care Limited (ASX: RHC) had given its investors a dividend increase every year since 2000. Unfortunately, the pandemic put an end to that streak for 2020. However, the company did return its dividend payments to 2019 levels in 2021.

But Washington H. Soul Pattinson and Co Ltd (ASX: SOL) is the undisputed dividend king of the ASX. It has paid a rising dividend every single year since 2000, with no interruptions whatsoever over the ‘COVID era’.

So APA might not yet be at that dividend share calibre. But it certainly still has a dividend record that is amongst the best the ASX can offer.

At the current APA share price, the company has a trailing dividend yield of 5.02%. 

The post The APA (ASX:APA) dividend has grown every year for 18 years. What’s next? appeared first on The Motley Fool Australia.

More reading

• Dividend investors should put these 2 top ASX shares on the watchlist
• What kinds of dividends will APA Group (ASX:APA) pay out in 2022?
• What’s up with the APA Group (ASX:APA) share price today?
• These ASX dividend shares keep giving investors a payrise

Motley Fool contributor Sebastian Bowen owns Ramsay Health Care Limited, Telstra Corporation Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns and has recommended APA Group, Brickworks, Telstra Corporation Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• Stablecoins are different from other cryptocurrencies
• They’re backed by another asset, often a more traditional one
• Stablecoins are far less susceptible to market moves due to their backing
• Investors can still earn returns from Stablecoins through various platforms

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It’s been a tumultuous past few months for cryptocurrency. The market has seen wild fluctuations in value, with Bitcoin (CRYPTO: BTC) and other digital currencies plummeting in price. However, one sub-category of digital currencies has been largely immune to the cryptocurrency bloodbath: Stablecoins.

In this article, we will explore the unique characteristics that set Stablecoins apart from other cryptocurrencies.

What are Stablecoins?

It turns out the wild, wild world of crypto is not completely consumed by volatility. Indeed, even the speculative landscape of cryptocurrency demands a need for stability. Perhaps more so than traditional assets.

The solution… Stablecoins.

Put simply, Stablecoins are cryptocurrency tokens that have been pegged to another asset with a more stable value. To date, most Stablecoins have been backed by either a fiat currency or a cryptocurrency.

In other words, the value fluctuates in tandem with the value of a ‘steady’ asset. The largest Stablecoins in the world by market capitalisation all use the United States dollar as their reference point.

USD Coin (CRYPTO: USDC), for example, is pegged to the US dollar and each USDC token is supposedly backed by a real-world dollar held in reserve. Other notable examples include Tether (CRYPTO: USDT) and Dai (CRYPTO: DAI).

Stablecoin	Price (USD)	Market capitalisation (USD)
Tether	$1.00	$77.97 billion
USD Coin	$0.9999	$50.42 billion
Binance USD	$1.00	$15.78 billion
TerraUSD	$0.9994	$11.28 billion
Dai	$1.00	$9.64 billion
TrueUSD	$1.00	$1.51 billion
Pax Dollar	$1.00	$0.94 billion
Neutrino USD	$0.9771	$0.47 billion
Fei USD	$0.994	$0.42 billion
Tribe	$0.6802	$0.31 billion

While many of the above Stablecoins are fiat-backed, there are other options open to investors. For the more decentralised-desiring crypto enthusiasts, Stablecoins also come in crypto-backed and algorithmic forms, removing the link to central banks.

How do they differ from other cryptocurrencies?

The key difference between Stablecoins and other forms of cryptocurrency is that they are not beholden to the whims of the market.

Their stability makes them attractive to many cryptocurrency advocates, as they can safely store their money in Stablecoins without fear that their value will fluctuate significantly. But they still offer most of the benefits associated with cryptocurrency.

While the removal of the downside risk is appealing, keep in mind the upside is no longer present. However, crypto users can take advantage of attractive yields offered on Stablecoins across various platforms at their discretion.

Unlike traditional cryptocurrencies, this is one of the only ways to accrue returns while holding the token.

The post What are Stablecoins and how do they differ from other cryptocurrencies? appeared first on The Motley Fool Australia.

More reading

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• Bitcoin has crashed 45%: but its fundamentals remain the same
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• ASX shares have had a shaky start to 2022. Here’s what investors are planning: survey
• Bitcoin price sinks again. Here’s where it could find support: expert

Motley Fool contributor Mitchell Lawler owns Bitcoin. 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 Bruce Jackson.

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The Westpac Banking Corp (ASX: WBC) share price is pushing higher in afternoon trade.

At the time of writing, the banking giant’s shares are up 2% to $21.03.

Why is the Westpac share price pushing higher?

Investors have been bidding the Westpac share price higher today in response to its first quarter update.

In case you missed it, Australia’s oldest bank delivered unaudited cash earnings of $1.58 billion for the three months. This was up 1% over the quarterly average during the second half of FY 2021.

And while this fell short of Bell Potter’s estimate of $1.82 billion, it was better than some were expecting.

How did Westpac’s result compare?

According to a note out of Goldman Sachs, Westpac is currently outperforming its expectations following this update.

It commented: “WBC announced 1Q22 unaudited cash earnings (ex-notables) of A$1.58 bn, which was 1% higher than the 2H21 quarterly average of A$1.57 bn and run-rating 4% ahead of what is implied by our current 1H22E, with the beat entirely driven by better than expected revenues, which would appear due to Markets and Treasury. The A$118 mn BDD charge was broadly consistent with what is implied by our 1H22E charge of A$233 mn.”

However, Goldman, which has a neutral rating and $25.60 price target on its shares, does have concerns over its net interest margin (NIM) which fell 8 basis points to 1.91%.

It concluded: “Overall, today’s headline performance is slightly better than we had been expecting and while it appears largely driven by Markets and Treasury revenues, this should provide some comfort to the market. That said, the underlying decline in the NIM remains significant, with the NIM (ex-Markets and Treasury) 20 bp lower at Dec-21 than it was on average over 2H21. With approximately one-third of this driven by liquids and two-thirds from competition, retail banking profitability remains under intense pressure.”

The post Here’s what this broker thinks of the Westpac (ASX:WBC) Q1 result appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Westpac higher on Q1 update, tech shares sink
• Westpac (ASX:WBC) share price on watch after reporting $1.58bn Q1 profit
• 5 things to watch on the ASX 200 on Thursday
• How are ASX bank shares responding to the RBA’s interest rate call?
• Morgans names the best ASX financial shares to buy in February

Motley Fool contributor James Mickleboro owns Westpac Banking Corporation. 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 Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• ASX 200 energy shares have trounced the index this year
• Soaring crude prices could head even higher
• Many OPEC members can’t increase production from current levels

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The S&P/ASX 200 Index (ASX: XJO) is down approximately 7% since the opening bell on 4 January.

That’s despite some outsized gains posted by leading ASX 200 energy shares.

The Santos Ltd (ASX: STO) share price, for example, has gained 11% year-to-date.

Woodside Petroleum Limited (ASX: WPL) shares are up 15%.

And rival ASX 200 energy share Beach Energy Ltd (ASX: BPT) has also gained 15% so far in 2022.

While many factors influence the prices of individual ASX 200 energy shares, the soaring price of crude oil has certainly offered some strong tailwinds.

On 31 December Brent crude was trading for US$77.80 per barrel. Today that same barrel is fetching US$89.40, up 12% to 7-year highs.

And with the pace of new supplies looking to be outstripped by growing demand, crude could march even higher from here, offering more support to ASX 200 energy shares.

OPEC’s gradual increase

The Organization of Petroleum Exporting Countries (OPEC) and its partners, including Russia, successfully managed to cut global production after the pandemic saw demand evaporate and Brent crude oil prices plummet to US$21 per barrel in March 2020.

As energy demand rebounded when the world began to reopen, OPEC has been gradually opening up the crude spigots.

Gradually enough to keep oil prices marching higher, and ASX energy shares outperforming the benchmark.

Speaking ahead of yesterday’s meeting in Riyadh, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said (quoted by Bloomberg), “Prudence as I’ve been preaching about is what saved us in OPEC+. Prudence dictates that you have a bit of a think here and a bit of think there.”

During the meeting, OPEC+ members agreed to increase the cartel’s production level by 400,000 barrels per day (bpd) in March.

However, with political unrest afflicting several members, and a broader lack of investment impacting production capacity, analysts say many members already haven’t been meeting their monthly share of crude output.

As Bloomberg reports:

The 10 OPEC nations engaged in managing supplies increased by 160,000 barrels a day in January, about two-thirds of their targeted amount. The full 23-nation OPEC+ alliance is cutting far more than required, with a compliance rate of 122% in December…

That’s led many analysts, including Goldman Sachs Group, led by Damien Courvalin, to offer bullish forecasts for crude oil moving forward, which should come as good news to ASX energy shareholders.

According to Goldman’s analysts, “Core to our bullish oil price view is the now historically low levels of the oil market’s two buffers: inventory and spare capacity. Even if OPEC+ were ramping up faster, this would only come at the expense of a critically lower level of spare capacity.”

How have these ASX 200 energy shares been performing?

As noted above, the 3 ASX 200 energy shares we named have all outperformed the benchmark in 2020.

They’ve also outpaced it over the past 6 months.

While the ASX 200 is down 5% over the last 6 months, the Woodside share price is up 19%, the Santos share price is up 14%, and Beach Energy shares have soared 25%. 

The post Own ASX 200 energy shares? Here’s what OPEC’s been up to appeared first on The Motley Fool Australia.

More reading

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• Oil prices are at an 8-year high, so why isn’t the Woodside (ASX:WPL) share price?
• Here’s why Santos (ASX:STO) is attracting some investor ire this week
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 shares offer 12% upside after sell-off: JP Morgan

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 Bruce Jackson.

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