The Coca-Cola Amatil Ltd (ASX: CCL) share price is pushing higher on Thursday after the release of an update.

In morning trade the beverage giant’s shares are up 2.5% to $8.72.

What did Coca-Cola Amatil announce?

Coca-Cola Amatil has been finalising its first half financial results and is currently assessing the carrying value of each of its businesses.

In light of the adverse impact of COVID-19 on its trading performance and the prescribed approach to assessing carrying values, management advised that it expects to incur non-cash impairments in the range of $160 million to $190 million post tax in its half year accounts.

Management revealed that these impairments relate predominantly to its Indonesian business and will not impact its debt facilities. This is because these facilities do not have any financial covenants.

The final outcome of the impairment review is subject to external audit review and final board approval.

The company’s Group Managing Director, Alison Watkins, commented: “These expected impairments are non-cash accounting adjustments and we remain very confident about the long-term prospects for our Indonesian business”.

Trading update.

Coca-Cola Amatil revealed that it has experienced an improvement in trading conditions in its major markets during June. This reflects the gradual easing of COVID-19 related restrictions.

Trading volumes across the group in June 2020 were down approximately 9% compared to June 2019. This resulted in a second quarter 2020 volume decline of approximately 23% compared to the prior corresponding period.

How are its businesses performing?

Management advised that the rate of improvement has varied across different markets.

In New Zealand June volumes increased approximately 4% on June 2019 and in Australia monthly volumes declined approximately 3% year on year.

Over in Indonesia things haven’t been as positive. This market, where COVID-19 infection rates remain high, monthly volumes declined approximately 23% on June 2019.

Ms Watkins said, “It is encouraging to see the improvement in our Volumes as the pandemic restrictions were lifted across a number of our markets. It has also been pleasing to see that the strength of our brands and strong sales capabilities continue to drive market share gains in Australia and New Zealand. We nevertheless remain cautious, given the reinstatement of lockdown measures from July in Melbourne and the rising COVID19 infection rate in Indonesia.”

“The impacts of the pandemic are continuing to evolve with the situation fluid across all of our markets. I am proud of the way the Amatil team has responded to the unprecedented challenges we have faced and am confident that we have a clear path forward, which coupled with our ample liquidity, strong balance sheet and solid credit ratings, positions us well, to emerge from the pandemic as a stronger, better business,” she concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The August earnings season will be unlike anything we have ever seen in our investing careers. It will be a moment of truth when we’re able to find out what’s been going on behind closed doors over the past four months. We all have an idea of where the problems are, but there are always surprises. I think the following trends will be very important for investors to think about while positioning their portfolios.

Mass gatherings are still out

Clearly travel and tourism will be among the hardest hit sectors this earnings season. We have all seen the announcements about Qantas Airways Limited (ASX: QAN) reducing staffing levels and retiring aircraft. In addition, we all know other companies that have been smashed by the coronavirus pandemic include Webjet Limited (ASX: WEB) and Flight Centre Travel Group Ltd (ASX: FLT). However, during earnings season, these companies may still surprise on the downside. I think travel is likely to be a barren sector for at least the next two years. 

One company I think is unlikely to see its share price fall, however, is Alliance Aviation Services Ltd (ASX: AQZ). This company recently forecast a year-end profit before tax of $40 million. If anything, I think Alliance has a chance of surprising the market on the upside. 

Some other companies likely to report bad results during earnings season may include those exposed to retail real estate. In particular, Australian real estate investment trusts, or A-REITs, such as Vicinity Centres (ASX: VCX), Scentre Group (ASX: SCG) or GPT Group (ASX: GPT). For instance, GPT Group disclosed a re-valuation of 8 of the company’s retail centres, slashing 8.8%, or $476.7 million, from its portfolio valuation due to the impacts of coronavirus. These companies, in particular, could surprise on the downside. 

However, there are some real estate companies that may give the market cause to celebrate. I believe these are most likely to be companies focused on commercial real estate and self-storage. These include Centuria Office REIT (ASX: COF) and Abacus Property Group (ASX: ABP).

We may be seeing a shift from office to home-based work. Nevertheless, client leases in these two companies average 5.1 years and 4.4 years respectively. So even if their clients have downsized their office-based staff, they still have leases in place for now. In addition, both of these ASX shares have been sold down considerably. So much so, that I think there’s a good chance the market will be surprised come August.

Online trading is now, not tomorrow

The transition towards online shopping during the lockdown is now a recognised phenomenon. Digital-native companies such as Kogan.com Ltd (ASX: KGN) and Temple & Webster Group Ltd (ASX: TPW) have given every indication of strong results. They may surprise on the upside, however I think their success has already been priced into their share prices.

Potential earnings season surprises may also come from discretionary retail shares. Specifically, Accent Group Ltd (ASX: AX1) has recently reported that earnings before interest, taxes, depreciation and amortisation would be around 10% higher than FY19. This is largely due to digital sales and a 7% increase in like-for-like sales.

Other retail companies I will be watching include Lovisa Holdings Ltd (ASX: LOV), City Chic Collective Ltd (ASX: CCX) and Michael Hill International Ltd (ASX: MHJ). Of these three, I expect City Chic to perform well. The company already had two thirds of its global sales via digital channels. I believe Lovisa and Michael Hill are likely to disappoint in terms of overall sales volume. 

Earnings season for miners

Fortescue Metals Group Limited (ASX: FMG) is a pure play iron ore company that has benefitted greatly during lockdowns. Not only has the price of iron ore stayed strong, it has actually lifted. I expect this company to report solid results. This will be similar for all the larger gold mining companies. Of these, I think Regis Resources Limited (ASX: RRL) is likely to surprise on the upside, and is possibly the best choice of the established gold miners.

However, I’m not so sure about BHP Group Ltd (ASX: BHP). While iron ore has been very strong, other products like coal, copper and petroleum have seen production challenges and historically low prices. I think BHP will surprise on the downside, just as Rio Tinto Limited (ASX: RIO) may do for similar reasons.

However, even worse affected are likely to be the nation’s LNG and oil producers. Despite horrible oil prices, and disclosures of companies changing impairments, investors are still buying these shares. Personally, I think the pandemic has hastened a structural shift in the market. Maybe that will become evident during earnings season.

The move to work from home is over

Several companies did very well from the transition to working from home. Companies like JB Hi-Fi Limited (ASX: JBH) in particular reported strong results in June. However, I’m not sure this can continue into FY21. Personally, I needed one desk, one monitor and one chair. I am unlikely to need more than that for a year or so.

The same could be said for the retail arms of Wesfarmers Ltd (ASX: WES) including companies like Officeworks and Bunnings. I think most of the revenue uplift for these companies has already been priced in to their shares. They may well post strong results this earnings season, but I don’t think it is sustainable.

More reading

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Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd, Temple & Webster Group Ltd, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Accent Group, Flight Centre Travel Group Limited, Kogan.com ltd, Scentre Group, Sezzle Inc, and Temple & Webster Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Northern Star Resources Ltd (ASX: NST) share price could be on the move today after the release of its quarterly production update.

How did Northern Star perform in the fourth quarter?

Newcrest Mining Limited (ASX: NCM) isn’t the only gold miner to finish FY 2020 strongly. This morning Northern Star revealed that it had a strong end to the financial year.

According to the release, Northern Star delivered a record 262,717 ounces of gold sold during the June quarter. This was achieved with an all-in sustaining cost (AISC) of A$1,475 an ounce (US$969 an ounce). This includes 50,251 ounces of gold sold at its Pogo operation for an AISC of US$1,276 an ounce.

For the full year, Northern Star achieved record total sales of 900,388 ounces at an AISC of A$1,496 an ounce (US$983 an ounce).

From this, its Australian operations sold a record 727,352 ounces at an AISC of A$1,350 an ounce (US$887 an ounce). This was at the low end of its stated 720,000 ounces to 800,000 ounces guidance range. The balance was made up by the Pogo operation, which mined 200,718 ounces and sold 173,036 ounces at an AISC of US$1,402 an ounce.

High gold price boosts balance sheet.

Northern Star reported an average realised price of A$2,208 an ounce for FY 2020.

This includes sales of 271,378 ounces into hedged positions, reducing the hedge book to 536,426 ounces and equal to just 15% of the next three years’ production.

This led to the company’s underlying free cash flow coming in at A$218 million during June quarter, despite investing ~A$44 million into growth capital and exploration.

As a result, Northern Star’s cash, bullion, and investments rose by a sizeable 40% to A$770 million at 30 June 2020. Its corporate bank debt stood at A$700 million, with A$200 million repaid post quarter on 6 July.

Northern Star’s Executive Chair, Bill Beament, commented: “Our quarterly sales of 262,717oz was not only a record, but also very solid given the imposts stemming from the COVID-19 measures we moved quickly to put in place.”

Mr Beament believes this demonstrates just how much its free cash flow can grow when conditions return to normal.

“All together, this demonstrates the significant potential to grow our free cashflow as the impacts of COVID-19 on production and costs are alleviated and, importantly, as our exposure to the spot gold price increases,” he added.

FY 2021 group production and cost guidance will be published with its annual reserve and resource update in the coming weeks.

More reading

• 5 things to watch on the ASX 200 on Thursday
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX bank shares could be undervalued right now. That’s the message coming from leading fundie, Neil Margolis, from Merlon Capital.

Why is this fund manager bullish on the banks?

According to an article in yesterday’s Australian Financial Review (AFR), Mr Margolis sees strong upside potential in Aussie bank shares.

Much of the investment thesis is based around the impact of bad debts and forecast dividends in the short to medium term.

According to the article, Mr Margolis said, ‘if consensus estimates for bad debts of between $8 billion to $10 billion per bank over the next three years were correct, it would allow banks to make modest dividend payments’.

Introducing dividend estimates into the equation is a real game-changer. The Australian Prudential Regulation Authority (APRA) has been cracking down on bank dividends in 2020.

However, the banking regulator is now looking to revise its guidance on those dividend restrictions. That could be good news for ASX bank shares and their investors this year.

What does this mean for ASX bank shares?

I think much of the current pricing of ASX bank shares reflects a pessimistic view on dividends. 

However, the Commonwealth Bank of Australia (ASX: CBA) share price currently has a 5.8% dividend yield. Similarly, Westpac Banking Corp (ASX: WBC) shares are yielding a huge 9.7% today.

While I wouldn’t expect these yields to be maintained in the current climate, low bad debts and a modest dividend could definitely be good news.

That could mean ASX bank shares have been oversold at their current prices. The Commbank share price has fallen 7.2% in 2020 but is now outperforming the S&P/ASX 200 Index (ASX: XJO).

Westpac shares have fared worse, falling 25.5% to $18.01 per share. Interestingly, both bank shares are trading at a price-to-earnings (P/E) ratio of 13.5.

It’s worth noting that Mr Margolis wasn’t totally bullish on ASX bank shares, highlighting that a prolonged period of coronavirus restrictions could spell trouble for current valuations.

Prolonged restrictions could make current bad debt provisions insufficient and ‘that could mean capital raisings and zero dividends’.

Are there other ASX dividend shares to buy?

According to the AFR article, casino operator Star Entertainment Group Ltd (ASX: SGR) could be worth a look at $2.77 per share.

Star has similar upside exposure to economic recovery as the banks but with ‘more than $2 of property value’ per share to help protect investors against the downside.

Mr Margolis was less bullish on Telstra Corporation Ltd (ASX: TLS) shares. Significant headwinds including challenges presented by the NBN were cited as potential negatives for the Telstra dividend.

Foolish takeaway

It’s a very interesting time in the markets ahead of the August earnings season.

I often take market commentary with a grain of salt. However, it does give us investors some food for thought ahead of a big month for ASX shares.

More reading

• 2 of the best ASX dividend shares to buy now
• ASX 200 drops 1.1%: Big four banks fall, Resolute rockets, Afterpay tumbles
• Are you ready to invest in ASX shares?
• Are ASX 200 shares overvalued right now?
• 3 of the best ASX blue chip shares you can buy right now

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The A2 Milk Company Ltd (ASX: A2M) share price continues to kick goals for investors.

Shares in the Kiwi dairy group fell 2.1% lower yesterday but remain up 39.1% for the year. A $10,000 investment in A2 Milk in early April 2015 would be worth a tidy $348,214 today.

However, I prefer to look to the future instead of the past with my investments. That means I’ve got my eye on the A2 Milk share price ahead of its full-year earnings result on 19 August.

Is the A2 Milk share price overvalued?

The A2 Milk share price is trading just 2.7% below its all-time high of $20.05. 

That could mean it has been overbought by investors seeking to get extra cash into the market. However, I think there are enough strong, underlying share price drivers to warrant further exploration.

What was in the half-year result?

There’s also not too much that can be drawn from the company’s February half-year results given the changing global landscape.

A2 Milk posted half-year revenue up 31.6% to $806.7 million with EBITDA climbing 20.5% to $263.2 million.

That result was underpinned by strong growth in China label infant nutrition and United States milk revenue. Given China’s strong bounce back from the coronavirus pandemic, we could see further sales growth in these segments in August.

The company’s April trading update also gave investors some confidence about the full-year numbers. A2 Milk reported strong sales revenue growth across all key regions despite uncertainty for both revenue and earnings forecasts.

A2 Milk’s full-year EBITDA margin is expected to land between 31-32% for FY20. Currency impacts will also be worth watching given the volatility in the Australian, New Zealand and US dollars in 2020.

What is there to like about the A2 Milk share price?

One thing I like about the A2 Milk share price is its aggressive expansion plans. A2 Milk is looking to take the brand further abroad into the Canadian market.

Given its strong track record of strategy execution, I’m quietly hopeful about its Canadian plans.

A2 Milk has also continued to expand through increased investment in Synlait Milk Ltd (ASX: SM1).

A2 Milk now owns 19.84% of its fellow Kiwi dairy producer. While I wouldn’t call that diversification as such, I think it could generate a new growth corridor for A2 Milk going forward.

I also think recent strong supermarket sales bode well for a robust A2 Milk result in August.

Foolish takeaway

All in all, I’m quietly bullish on the company’s August full-year result. The A2 Milk share price has already climbed higher in 2020 but a strong result could see it hit a new record high next month.

More reading

• How you can take advantage of the surging Australian dollar
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• Where to invest $10,000 into quality ASX 200 shares
• 4 ASX 200 shares to buy with $4,000

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Newcrest Mining Limited (ASX: NCM) share price will be one to watch on Thursday after the release of the gold miner’s fourth quarter and full year production update.

How did Newcrest perform in the fourth quarter?

Newcrest Mining had a very strong finish to the financial year and achieved its production guidance for FY 2020.

According to the release, Newcrest delivered group gold production of 573,000 ounces during the fourth quarter, up 7% on the prior quarter. This compares to the consensus estimates of 542,000 ounces.

This strong production was driven by its Cadia operation, which exceeded the top end of its guidance range. Cadia achieved record annualised mined ore and mill throughput for the quarter.

Newcrest achieved this with a quarterly all-in sustaining cost (AISC) of US$878 per ounce, resulting in an AISC margin of US$768 per ounce. The former compares to the consensus estimate of an AISC of US$887 an ounce.

FY 2020 production.

For FY 2020, Newcrest’s total gold production came to 2,171,118 ounces. While this was down 12.7% year on year, it was at the high end of its guidance range of 2,100,000 ounces to 2,200,000 ounces.

Newcrest’s full year AISC was US$1,044 an ounce, which led to a margin of US$668 an ounce for FY 2020.

Newcrest Managing Director and Chief Executive Officer, Sandeep Biswas, was pleased with the company’s finish to FY 2020.

He said: “Newcrest has safely delivered a strong fourth quarter enabling us to meet our Group gold production guidance for the year, notwithstanding the challenges of addressing the risks associated with the COVID-19 pandemic. Cadia exceeded the top end of its production guidance range and achieved record annualised mine and mill throughput rates in the quarter, further highlighting the strength of this world-class asset.”

No guidance was given for FY 2021. Investors will need to wait until its results release in August for further details on that.

More reading

• 5 things to watch on the ASX 200 on Thursday
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• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Short sellers. Love them or hate them, they’re a big part of today’s markets and the pricing of ASX shares.

These investors had a field day in March as the S&P/ASX 200 Index (ASX: XJO) plunged lower into a deep bear market.

After being scared off in recent months by the recovering market, short sellers are back. Here are some of the most shorted ASX shares as a percentage of their tradeable shares.

1. Myer Holdings Ltd (ASX: MYR)

According to ASIC’s short position reports, Myer is one of the most-shorted ASX shares right now.

Myer currently has 99.1 million short positions against it or 12.1% of total shares on issue. That means there are plenty of investors betting on a Myer share price fall in 2020.

There’s no doubt conditions are challenging for some Aussie retailers right now. Myer is starting to reopen its stores which could help sales but there are persistent headwinds.

The company’s debt and liquidity also have many investors betting against the ASX retail share. The recent withdrawal of trade credit insurer QBE Insurance Group Ltd (ASX: QBE) also doesn’t send a strong signal to stakeholders in the market.

2. Webjet Limited (ASX: WEB)

There are perhaps no surprises with this one. The Webjet share price has been smashed in 2020 and is down 68.2% for the year.

ASX travel shares have been hit particularly hard by the coronavirus pandemic. With no recovery for international tourism in the foreseeable future, the Webjet share price could remain under pressure for some time.

That’s certainly the view of the short sellers in the market right now. According to the latest ASIC report, there are 34.0 million short positions or 10.0% of total shares on issue for Webjet.

3. Zip Co Ltd (ASX: Z1P)

The Zip Co share price has been one of the big success stories of 2020. The buy now, pay later share is up 83.9% this year and 451.7% since 19 March.

However, that strong share price growth has drawn the attention of short sellers. ASIC has reported 27.8 million short positions or 7.1% of its total shares.

Buy now, pay later ASX shares have been among the strongest performers in 2020. Many believe the sector has turned into a ‘bubble’ and is now detached from reality.

Time will tell which camp is right, but short sellers appear to be putting their money where their mouths are.

Foolish takeaway

As the share market rises, short sellers appear to be getting more confident in their short positions. No one knows who will be right when it’s all said and done but it’s worth watching the ASX shares that short sellers are betting against right now.

More reading

• Why the Santos share price is back on my radar
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drops 1.3%, Resolute Mining soars
• Top brokers list the latest ASX small cap stocks to buy today
• The ASX sector that’s heading for a V-shape recovery

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) may have been out of form on Wednesday, but that didn’t stop a number of shares from racing higher.

Some even managed to climb to 52-week highs or better despite the ASX 200 dropping 1.3%.

Three ASX shares that have achieved these milestones are listed below. Here’s why they are on a high:

HUB24 Ltd (ASX: HUB)

The HUB24 share price climbed to a 52-week high of $13.64 on Wednesday. Investors have been buying the investment platform provider’s shares after it continued its strong growth despite the pandemic. In fact, HUB24 recently revealed a record performance during the fourth quarter. It recorded a net inflow of $1.1 billion for the quarter, which together with favourable market movements, lifted its funds under administration by 14% or $2.1 billion to $17.2 billion. This means that its average monthly net inflows during FY 2020 was $412 million, up 26% from $326 million per month in FY 2019.

Marley Spoon AG (ASX: MMM)

The Marley Spoon share price stormed to a record high of $2.40 yesterday. Investors have been buying the meal kit delivery company’s shares after demand surged during the pandemic. This led to Marley Spoon’s first quarter revenue growing 46% on the prior corresponding period to 42.8 million euros. Another big positive was that this stronger than expected growth has accelerated its path to profitability. Next week Marley Spoon will be releasing its second quarter result and is tipped to reveal even stronger growth.

Whispir Ltd (ASX: WSP)

The Whispir share price continued its incredible run and hit a record high of $4.48 on Wednesday. This means the communications workflow platform provider’s shares are now up over 550% from their March low of 68 cents. As with the others, investors have been buying Whispir’s shares after the pandemic accelerated its growth. In its recent fourth quarter update, the company revealed annualised recurring revenue growth of 4.2% over the March quarter and 35.7% over the prior corresponding period to $42.2 million. This was driven by strong demand from new and existing customers.

More reading

• Add these ASX small cap shares to your watchlist immediately
• Market close: ASX 200 falls 0.5%
• Why Catapult, Eclipx, FlexiGroup, & Whispir shares are charging higher
• ASX 200 down 0.5%: Sydney Airport and South32 updates, HUB24 delivers record Q4
• HUB24 share price pushes higher on record Q4 performance

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd and Whispir Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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