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ASX retail shares can be some of the hardest stocks on the market to assess as a good investment. The retail sector is notoriously cyclical, and its players have to constantly adapt to changing consumer tastes and preferences.

As such, only the strongest ASX retail shares tend to be effective compounders of wealth over long periods of time.

Today, we’ll discuss two ASX retail shares that might just qualify for that label, at least according to one ASX broker. We’ll also cover one stock that this broker is telling investors to avoid.

ASX broker gives verdict on 3 ASX retail shares

As reported in The Australian this week, analysts at ASX broker Macquarie are eyeing two ASX retail shares that might stand to benefit from an artificial intelligence (AI)-fuelled “generational upgrade cycle in computer hardware”.

Macquarie is arguing that household appliances, computers and technology typically have a “5-7 year lifespan”. As such, the COVID boom in this corner of the market should result in an “echo” over the next 18 months or so.

Macquarie’s Ross Curran told The Australian, “An accelerated 5-year refresh rate on PCs instead of the usual 6-year cycle, along with a 15 per cent increase in price, could see a 34 per cent uplift in category”.

As such, Curran has upgraded Macquarie’s earnings estimates for the 2025 financial year for JB Hi-Fi Ltd (ASX: JBH), Harvey Norman Holdings Ltd (ASX: HVN) and OfficeWorks owner Wesfarmers Ltd (ASX: WES) by 4.5%, 3.7% and 0.5% respectively.

Consequently, Curran has lifted Macquarie’s ratings on JB Hi-Fi and Harvey Norman from ‘Neutral’ to ‘Outperform’. This implies investors should consider buying these ASX retail shares at current pricing.

However, Curran maintained a ‘Neutral’ rating for Wesfarmers, citing concerns over its current high valuation.

A tale of three retailers

To be fair, all three ASX retail shares have enjoyed some healthy rises over the past 12 months. At current pricing, Wesfarmers stock is up 33.8% since this time last year, while JB Hi-Fi has risen 26.7% and Harvey Norman, 21.25%.

Even so, Wesfarmers shares are currently trading on a price-to-earnings (P/E) ratio of 30.8. That looks elevated against JB’s 13.7 and Harvey Norman’s 14.6. Put another way, investors are currently being asked to pay more than double for $1 of earnings from Wesfarmers compared to $1 of earnings from JB or Harvey Norman.

As such, it’s not difficult to understand why Curran sees Wesfarmers shares as more overvalued than those of JB Hi-Fi or Harvey Norman.

The post 2 ASX retail shares just upgraded by brokers (and 1 downgraded) appeared first on The Motley Fool Australia.

More reading

• Dump ’em! Top broker says sell these 3 ASX retail shares
• What is the price target for Wesfarmers shares?
• Here’s how the ASX 200 market sectors stacked up last week
• How I plan to invest my tax cuts
• Top ASX dividend shares to buy in May 2024

Motley Fool contributor Sebastian Bowen has positions in Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Wesfarmers. The Motley Fool Australia has positions in and has recommended Harvey Norman, Macquarie Group, and Wesfarmers. The Motley Fool Australia has recommended Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Brainchip Holdings Ltd (ASX: BRN) shares are rebounding on Tuesday.

In afternoon trade, the struggling semiconductor company’s shares are up 6% to 26.5 cents.

Why are Brainchip shares rising today?

Investors have been buying the company’s shares for a couple of reasons.

One is the release of its annual general meeting (AGM) update this morning. The other is news that the company has managed to avoid a spill of its board at this meeting.

In respect to its AGM update, Brainchip CEO, Sean Hehir, acknowledged that the company hasn’t delivered meaningful revenue yet, and was disappointed by this, but remains positive on the future. He said:

Let me acknowledge right up front that our revenue numbers are not there yet. The evaluation and design cycle are longer, deeper, and more complex than we anticipated as customers plan their strategic roadmaps. However, after hearing my prepared remarks, hopefully you too will share my conviction that we are a much stronger and a better positioned company and share my optimism in our near-term and long-term success.

Licensing deals

Hehir believes the company is close to getting an answer from some potential customers after being in discussions for over a year. He said:

First and foremost, I know we need to close license sales. We have several engagements that have been in evaluation for over 1 year that are near closing in on a decision. These engagements are with leading companies in audio, IOT, and microcontroller segments.

The under pressure CEO has been heavily criticised for his big salary and bonuses and distinct lack of commercial success since joining. However, he remains confident on delivering the goods for shareholders. He adds:

The board brought me on with a critical mission: to transform a promising technology into a successful product for a challenging market, while establishing the sales and marketing capabilities to drive its adoption.

We are doing the right things. I know we are on the right trajectory. When I pair all these actions with the emergence of a true edge AI market, I am more confident than ever that we are on the cusp of generating sustainable revenue streams. BrainChip has the momentum in place and potential to emerge as the undisputed leader in the exciting and continuously growing Edge AI market.

Time will tell if this proves to be the case or if the next 12 months will just be more of the same – all hype and no substance.

Board spill avoided

Brainchip shares may also be rising today after the company avoided a disruptive board spill.

While 33.41% of votes were against its remuneration report, a sizeable 85.59% of votes were against spilling the board.

The post Why are Brainchip shares racing higher after its AGM? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

S&P/ASX 200 Index (ASX: XJO) gold stocks are back in the spotlight today as the price of the yellow metal again broke into new all-time high territory.

The gold price reached US$2,449.89 per ounce earlier today. It’s retraced a touch since then, trading for US$2,412.69 per ounce at the time of writing.

Based on current levels, the gold price has now soared by 22.4% since this time last year, when that same ounce was worth US$1,971.86.

But the real rally in the gold price, and for ASX 200 gold stocks, kicked off in late February. The yellow metal began to rocket from US$2,034 per ounce on 28 February in a rally that’s seen it gain 18.6% since then.

That price surge has helped drive the S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller gold miners outside of the ASX 200 – up a whopping 29.8% since 28 February.

That compares to a 2.4% gain posted by the ASX 200.

Here’s how these top Aussie gold miners stack up compared to the Gold Index over this same period:

• Northern Star Resources Ltd (ASX: NST) shares are up 17.4%
• Newmont Corp (ASX: NEM) shares are up 43.9%
• De Grey Mining Ltd (ASX: DEG) shares are down 5.3%
• Ramelius Resources Ltd(ASX: RMS) shares are up 51.4%
• Gold Road Resources Ltd (ASX: GOR) shares are up 12.7%
• Evolution Mining Ltd (ASX: EVN) shares are up 39.8%
• Bellevue Gold Ltd (ASX: BGL) shares are up 38.7%
• Perseus Mining Ltd (ASX: PRU) shares are up 41.7%

Impressive, no?

Now, the majority of the ASX 200 gold stocks are in the red today. That may be partly due to gold’s intraday price decline from the all-time highs.

And investors may be spooked by new revelations that the RBA came closer than we’d like to think to raising interest rates earlier this month.

Gold, which pays no yield itself, tends to perform better in low or falling rate environments. Though the yellow metal has proven resilient to the lingering higher rates across most of the developed world this year.

However, today’s price dip may offer a decent entry point to buy more of these ASX 200 gold stocks if you believe, like I do, that the gold price rally has a way to run yet.

What’s sending the gold price and ASX 200 gold stocks soaring?

The gold price and ASX 200 gold stocks have been receiving tailwinds from a number of fronts.

Those include gold’s haven status in times of geopolitical uncertainty, the prospect of lower global interest rates down the road, and robust central bank buying.

China’s central bank has had a particularly voracious appetite for bullion in recent years.

According to the Stanford Institute for Economic Policy Research (cited by Bloomberg), the share of gold in the People’s Bank of China’s total currency reserves has increased from less than 2% in 2015 to 4.3% last year. The nation’s US bond holdings have fallen from 44% to 30% of total currency reserves over that same period.

Commenting on this trend, Gita Gopinath, deputy managing director of the International Monetary Fund, recently said:

[This] suggests that gold purchases by some central banks may have been driven by concerns about sanctions risk. This is consistent with a recent IMF study confirming that FX reserve managers tend to increase gold holdings to hedge against economic uncertainty and geopolitical including sanctions risk.

Regardless of their motivations, central bank buying looks to be helping drive the gold price to a series of new record highs.

If this trend continues, it should come as good news for shareholders in ASX 200 gold stocks.

The post ASX 200 gold stocks in focus as gold price smashes record highs appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There aren’t many S&P/ASX 200 Index (ASX: XJO) stocks that have done as well as Goodman Group (ASX: GMG) in the last year, with a rise of around 70%. Greg Goodman has chosen this point in time to transact a large sale of Goodman shares.

Greg Goodman is the current CEO and co-founder of the property giant.

When a member of the leadership team decides to sell shares, it can be a worrying sign. Let’s examine the sale and then consider whether it’s actually concerning.

Goodman share sale

Greg Goodman has a beneficial interest in the JSH Family Trust, which is the entity that sold shares.

This family trust owned 1.95 million Goodman shares before the sale and sold 1 million Goodman shares on 15 May 2024, according to the ASX announcement.

The sale raised $33.336 million, suggesting the average price per share was approximately $33.34.

Is this a worrying sign for the ASX 200 stock?

The last time Greg Goodman sold shares was in mid-September 2023 when he sold around $20 million of shares. Since then, the Goodman share price has gone up around 50%, so the just-announced sale does not mean an impending decline is certain to occur.

The co-founder still has an enormous amount of wealth tied to the ASX 200 stock. Greg Goodman has an indirect holding of 37.9 million Goodman shares, which is worth around $1.3 billion – he still has a lot of skin in the game.

Plus, Greg Goodman owns 4.3 million performance rights. He is incentivised to help the business succeed.

The FY24 third-quarter update showed ongoing success for the business, with expectations for its operating earnings per security (EPS) growth upgraded to 13%.

Goodman Group’s total portfolio is now worth $80.5 billion, with a $12.9 billion development work in progress (WIP) pipeline. It completed $0.8 billion of developments in the latest quarter, with 96% of year-to-date completions committed (by tenants). Data centres under construction currently represent approximately 40% of WIP.

The rental performance remains commendable across Goodman’s partnerships, with an 98% occupancy rate and net property income like-for-like growth of 4.9%.

Goodman share price snapshot

Since the start of 2024, the ASX 200 stock has risen 36% (as seen on the chart below), compared to a rise of just 3% for the ASX 200.

The Goodman share price is up 0.5% today amid news of this sale.

The post Guess which ASX 200 co-founder just sold $33 million worth of company shares appeared first on The Motley Fool Australia.

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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 Goodman Group. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The S&P/ASX 200 Index (ASX: XJO) is having a subdued session and is on course to record a small decline. In afternoon trade, the benchmark index is down 0.1% to 7,856.4 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

Infratil Ltd (ASX: IFT)

The Infratil share price is down 5% to $9.80. Investors have been hitting the sell button today after the New Zealand infrastructure business released its full year results. This was despite the company reporting a 63% jump in proportionate EBITDA to NZ$864 million, which was above the top end of its revised guidance range. Though, it is worth noting that a substantial portion of this EBITDA increase can be attributed to the higher ownership stake in One NZ since June 2023. After adjusting for this change, EBITDA growth stood at 15.5% in FY 2024.

James Hardie Industries plc (ASX: JHX)

The James Hardie share price is down over 11% to $48.42. This has been driven by the release of the fourth quarter and full year update from the building materials company. James Hardie achieved record fourth quarter sales of US$1,004.9 million and record full year sales of US$3,936.3 million. However, despite this strong top line performance, it appears that the company’s earnings still fell short of expectations for the fourth quarter. In addition, its guidance for FY 2025 was well below the consensus estimate.

Sonic Healthcare Ltd (ASX: SHL)

The Sonic Healthcare share price is down 6% to $25.01. Investors have been selling this pathology company’s shares after it downgraded its guidance for FY 2024. It now expects FY 2024 EBITDA of approximately $1.6 billion on revenues of approximately $8.9 billion. The former is short of its guidance range of $1.7 billion to $1.8 billion. Management advised that this is due to inflationary pressures on the business. This is being exacerbated by currency exchange headwinds.

Star Entertainment Group Ltd (ASX: SGR)

The Star Entertainment share price is down 8% to 49.7 cents. This has been driven by news that a rumoured suitor, Hard Rock Hotels and Casinos, has denied that it is interested in acquiring the troubled casino and resorts operator. Hard Rock wasn’t happy to learn of the media speculation. It said: “Any misuse of the Hard Rock name in unauthorised business dealings is taken very seriously. We are currently investigating this matter and will pursue all necessary legal actions to protect our brand and reputation.”

The post Why Infratil, James Hardie, Sonic Healthcare, and Star Entertainment shares are sinking today appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX 200 stock James Hardie Industries plc (ASX: JHX) is the worst performer of the S&P/ASX 200 Index (ASX: XJO) today after the building materials company released its FY24 4Q and full-year results.

Despite reporting record net sales and record adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the 12 months to 31 March, investors are punishing the ASX 200 stock today.

The James Hardie share price hit an intraday low of $48.22 this morning, down 11.95% on yesterday’s close. The ASX 200 stock is currently swapping hands for $49.20, down 10.17%.

Let’s review the numbers.

ASX 200 materials stock plunges on full-year numbers

Here are the highlights of the full year ending 31 March: 

• Record net sales of US$3,936.3 million, up 4% on the prior corresponding period (pcp) of FY23
• Record adjusted EBITDA of US$1,125.8 million
• Adjusted EBITDA margin of 28.6%
• Record adjusted EBIT of US$940.8 million
• Adjusted EBIT margin of 23.9%
• Record adjusted net income of US$707.5 million, up 17%
• Adjusted diluted earnings per share (EPS) of US$1.61 per share, up 18%
• Record full year operating cash flow of US$914.2 million, up 50%  

Here are the highlights of 4Q FY24: 

• Record net sales of US$1,004.9 million, up 9% on the prior corresponding period (pcp) of Q4 FY23
• Adjusted EBITDA of US$280.8 million
• Adjusted EBITDA margin of 27.9%
• Adjusted EBIT of US$232.5 million
• Adjusted EBIT margin of 23.1%
• Adjusted net income of US$174.2 million, up 19%

The company said it plans to continue repurchasing shares under its US$250 million share buyback program instead of paying dividends.

In Q4, James Hardie bought back 1.9 million shares at an average price of US$39.42, costing approximately US$75 million.

What did management say? 

James Hardie CEO Aaron Erter said:

Our team’s focus remains simple: working safely, partnering with our customers, managing decisively, and controlling what we can control.

This focus has enabled us to deliver a strong fourth quarter and fiscal year for Adjusted Net Income.

Erter added that the FY24 results were “proof points” that the company was taking new market share.

He added:

We have a superior value proposition that helps our customers grow profitably and be successful.

Our team is focused on maintaining momentum and consistency to deliver strong financial results again in fiscal year 2025 as highlighted by our guidance range provided today.

What’s next?

James Hardie said the outlook for its housing markets “continues to remain uncertain”.

It expects its total addressable market in North America to decline by 2%. The company said it intended to outperform the market by growing the business and investing for long-term gains.

The guidance for FY25 is as follows:

• North American volumes to be in the range of 2,950 million to 3,150 million standard feet vs. 3,054 million standard feet in FY24
• North American EBIT margin in the range of 29% to 31%
• Adjusted net interest of US$25 million to US$29 million vs. US$24.3 million in FY24
• Adjusted effective tax rate of between 23.5% and 24.5% vs. 23% in FY24
• Adjusted net income in the range of US$630 million to US$700 million
• Capital expenditures of US$500 million to US$550 million

Broker says FY25 guidance ‘disappointing’

UBS analyst Lee Power says James Hardie’s FY25 earnings guidance is “disappointing”.

The broker currently has a buy rating on the ASX 200 stock and a 12-month price target of $66.50.

In The Australian today, Power said the midpoint of James Hardie’s FY25 net profit guidance range at US$665 million is 13% below the consensus expectations of $US762 million.

Power said:

The FY25 outlook is disappointing and while North American FY25 margin guidance of 29-31 per cent is broadly in line with UBS expectations, volumes are significantly below expectations.

FY25 volumes were 6 per cent below consensus, according to Power.

He noted the upper end of the FY25 NPAT guidance was eight percent below his estimates.

ASX 200 stock price snapshot 

James Hardie shares are down 13.5% in the year to date. By comparison, the ASX 200 is up 2.9%. 

The post Which ASX 200 stock just plunged 12% despite record full-year earnings? appeared first on The Motley Fool Australia.

More reading

• Why Infratil, James Hardie, Sonic Healthcare, and Star Entertainment shares are sinking today
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Motley Fool contributor Bronwyn Allen 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.

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is out of form and on course to record a small decline. At the time of writing, the benchmark index is down 0.25% to 7,843.8 points.

Four ASX shares that are not letting that hold them back are listed below. Here’s why they are rising:

ALS Ltd (ASX: ALQ)

The ALS share price is up 5% to $14.47. This has been driven by the release of the testing services company’s FY 2024 results this morning. ALS reported a 6.8% increase in revenue to $2,586 million and modest 0.2% increase in underlying EBIT to $491.8 million. The company’s CEO and managing director, Malcolm Deane, commented: “The Group has continued to deliver revenue growth and maintain industry-leading margins despite challenging market conditions.”

OFX Group (ASX: OFX)

The OFX Group share price is up almost 13% to $1.91. This has also been driven by the release of full year results this morning. Investors have responded positively to the foreign exchange company reporting a 6.3% increase in net operating income to $227.5 million and a 3.4% lift in underlying EBITDA to $64.6 million. This was in line with its guidance. CEO Skander Malcolm said: “Despite a tougher macroeconomic backdrop in our two largest markets, it was pleasing to deliver NOI and underlying EBITDA in line with guidance. Without the near-term impact of Paytron on our earnings, we would have delivered positive operating leverage.”

Skycity Entertainment Group Ltd (ASX: SKC)

The Skycity Entertainment share price is up 4% to $1.62. This follows news that Skycity has reached an agreement with the Department of Internal Affairs in New Zealand to settle its anti-money laundering and countering financing of terrorism proceedings. According to the release, the settlement includes an admission of guilt and a penalty of approximately NZ$4 million.

TechnologyOne Ltd (ASX: TNE)

The TechnologyOne share price is up 5% to $16.84. Investors have been buying this enterprise software provider’s shares following the release of its half year results. The company reported a 16% increase in revenue to $244.8 million, a 21% lift in annual recurring revenue (ARR) to $4423.6 million, and a 17% jump in profit before tax to $61.5 million. Management remains confident on the future and believes it is on track to surpass its ARR target by FY 2025. CEO Ed Chung said: “We are on track to surpass total ARR of $500m+ by FY25, from our current base of $424m. We will continue to invest for the long-term in R&D to build platforms for growth to continue to double in size every 5 years.”

The post Why ALS, OFX, Skycity, and TechnologyOne shares are surging today appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Technology One. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Qantas Airways Ltd (ASX: QAN) shares are racing ahead of the benchmark today.

Shares in the S&P/ASX 200 Index (ASX: XJO) airline stock closed yesterday trading for $6.07. In early afternoon trade on Tuesday, shares are swapping hands for $6.22 apiece, up 2.5%.

For some context, the ASX 200 is down 0.3% at this same time.

Here’s what’s happening.

ASX 200 airline flying high amid resurgent travel

Without any fresh price sensitive news today, it looks like Qantas shares could be catching some tailwinds from the latest ‘Domestic Airline Competition in Australia’ report.

The report, released by the Australian Competition & Consumer Commission (ACCC) earlier today, revealed that the Australian aviation sector appears to have fully recovered from the COVID-19 pandemic.

As you likely recall, pandemic travel restrictions saw Qantas shares collapse by 63% in early 2020. The ASX 200 airline stock has soared 168% since those March 2020 lows.

Today the ACCC revealed that Australia’s major airlines (Bonza, Jetstar, Qantas, Rex and Virgin Australia) carried 4.9 million domestic passengers in March. This is just 1.2% below the same air travel numbers from March 2019.

The report also noted that Australia’s major airlines flew roughly 6.2 million seats in March. This is also just below the seat capacity recorded in March 2019.

Commenting on the return to pre-pandemic air travel, ACCC commissioner Anna Brakey said, “After four years of instability, the domestic airline industry has returned to more typical seasonal levels that were last seen before the pandemic.”

Brakey noted that domestic ticket prices have been trending lower:

The increase to airline seat capacity has contributed to lower airfares for consumers on domestic routes. We hope to see this trend continue as the airline industry returns to a more stable market.

Also potentially boosting Qantas shares is that March’s strong travel figures come on the heels of an even stronger February report. In February, domestic passenger numbers exceeded 2019 levels for the first time since the pandemic.

The ACCC pointed to several “major entertainment events” in Australia in February that helped drive air travel demand.

“Most notably, this included Taylor Swift’s concert tour in Melbourne and Sydney, as well as a World Wrestling Entertainment event in Perth,” the report stated.

On the service front, the ACCC noted, “Service reliability has improved in recent months despite remaining worse than the long-term industry average.”

March 2024 saw Australia’s major airlines cancel 2.8% of flights. That’s down from 5.0% of flights that were cancelled in December.

How have Qantas shares been tracking?

Qantas shares are down 5% since this time last year.

But the recent trend has been upwards, with the ASX 200 airline stock gaining 16% over the past six months.

The post Is this why Qantas shares are racing ahead of the ASX 200 on Tuesday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It’s a day of reckoning for one ASX 200 healthcare stock. The release of an earnings update appears to have caught investors of this medical diagnostic company off guard today.

The Sonic Healthcare Ltd (ASX: SHL) share price is being eviscerated, falling 6.1% to $25.00 in afternoon trade. More than $90 million worth of shares have traded hands as shareholders decide to bounce out of the stock following the disappointing update.

Only one other company in the S&P/ASX 200 Index (ASX: XJO) is faring worse than Sonic today. Sonic’s sheer size and large fall mean the ASX healthcare sector is the second-worst performing sector, trailing behind communication services amid Telstra’s job cut plans.

Inflation and currencies cut into earnings

With two months left of the full year, Sonic had to come clean on how the final numbers were shaping up.

Previously, the pathology, radiology, and laboratory business had guided earnings before interest, taxes, depreciation, and amortisation (EBITDA) of A$1.7 million to A$1.8 billion for FY24. On its own admission, the lower bound looked more likely at the time.

Today, the Sullivan Nicolaides owner now expects even less. The new full-year guidance is for A$1.6 billion in EBITDA on revenues of $8.9 billion.

The earnings growth of this ASX 200 healthcare stock has underperformed management’s expectations. Inflationary pressures, unfavourable currency exchange rates, and delayed margin improvement initiatives have taken their toll in the second half.

Sonic Healthcare CEO Dr Colin Goldschmidt expanded on the situation leading to today’s revision, stating:

The 2024 financial year has been one of transition for Sonic Healthcare, moving away from pandemic conditions into a more normal business environment. Our current robust topline growth, organic and non-organic, in a setting of inflationary cost pressures, have combined to delay the completion of our programs to align labour costs more closely with post-pandemic conditions. These unique business conditions have also made forecasting our earnings unusually difficult this year.

Meanwhile, with the belief much of the headwinds will taper in FY25, Sonic guided for A$1.7 billion to A$1.75 billion in EBITDA for the next financial year. This would represent a 7.8% increase from FY24 at the midpoint.

Is this ASX healthcare stock a buy?

Before today’s update, Sonic Healthcare shares were being touted as a buy by some analysts.

For example, the Morgans team held a $34.94 price target on the ASX 200 healthcare stock based on ‘near/medium term drivers supporting underlying profitability’. Toby Grimm of Baker Young labelled Sonic a hold while believing FY2024 could be the bottom for earnings.

The Sonic Healthcare share price is now down 31% over the past year. Shares in the company are trading at a trailing price-to-earnings (P/E) ratio of 23 times. This is in line with the average for the global healthcare industry.

The post Why this ASX 200 healthcare stock is tumbling 6% today appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has positions in Sonic Healthcare. 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 Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Australian share market may be trading near its record high but that hasn’t stopped some ASX 300 shares from hitting new 52-week lows.

Three such shares that have made these unwelcome milestones are listed below. Is this recent weakness a buying opportunity for investors or should investors keep their powder dry? Let’s find out.

Australian Clinical Labs Ltd (ASX: ACL)

The Australian Clinical Labs share price hit a 52-week low of $2.24 this morning. This was driven by the release of a trading update from the struggling pathology services provider.

That update reveals that management continues to expect to achieve underlying EBIT at the low end of its $60 million to $65 million guidance range. This is based on unaudited management accounts to 30 April and assumes market volumes continue at current trends.

Ord Minnett is likely to see this as a buying opportunity. A recent note reveals that its analysts have an accumulate rating and $3.50 price target on the ASX 300 share.

Sonic Healthcare Ltd (ASX: SHL)

Another ASX 300 share hitting a new 52-week low on Tuesday has been fellow pathology provider Sonic Healthcare. Its shares sank to $23.58 after investors reacted badly to the release of an earnings update.

Management advised that it is now forecasting FY 2024 EBITDA of approximately $1.6 billion on revenues of approximately $8.9 billion. The former is short of its guidance range of $1.7 billion to $1.8 billion. This is due to inflationary pressures on the business, and exacerbated by currency exchange headwinds.

Looking ahead, Sonic expects to return to growth in FY 2025 and has pencilled in EBITDA of $1.7 billion to $1.75 billion for the 12 months.

Morgans is likely to see this weakness as an opportunity for investors. It currently has an add rating and $34.94 price target on its shares. Though, this recommendation could change once it has updated its financial model.

Telstra Group Ltd (ASX: TLS)

The Telstra share price dropped to a 52-week low of $3.57 after the telco released an update on its guidance.

Telstra has reaffirmed its guidance for FY 2024 and introduced its guidance for FY 2025. The latter sees the ASX 300 share target underlying EBITDA of $8.4 billion to $8.7 billion. This is up from its FY 2024 guidance of $8.2 billion to $8.3 billion. A key driver of its growth will be a $350 million cost reduction.

Goldman Sachs has responded to the update. While it was disappointed with the FY 2025 guidance, it has retained its buy rating and $4.55 price target on Telstra’s shares for the time being.

The post 3 ASX 300 shares hitting new 52-week lows: Are they cheap buys? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.