Tag: Motley Fool

In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on form again and pushing higher. At the time of writing the benchmark index is up 1.1% to 6,188.7 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The A2 Milk Company Ltd (ASX: A2M) share price has fallen 6.5% to $18.21. Investors have been selling a2 Milk Company’s shares despite the release of another strong full year result. The infant formula company delivered a 32.8% increase in revenue to NZ$1,730 million and a 34.1% increase in net profit after tax of NZ$385.8 million. This was largely in line with expectations. It appears as though investors were betting on the company outperforming expectations.

The Kogan.com Ltd (ASX: KGN) share price has fallen almost 5% to $21.90. This follows news that the company’s CEO and CFO have offloaded a considerable number of shares. Ruslan Kogan and David Shafer have sold approximately 7.3 million shares in the company. This reflects ~6.9% of the shares on issue. Despite the sales, they remain the company’s largest shareholders.

The Nearmap Ltd (ASX: NEA) share price has crashed 14% lower to $2.31. The aerial imagery technology and location data company released its full year results this morning and delivered solid top line growth. However, on the bottom line, Nearmap reported a sizeable statutory loss after tax of $36.7 million. This compares to a loss of $14.9 million in FY 2019. It was due to increased expenses as it invests across the business to build the foundations for scalable growth.

The Resolute Mining Limited (ASX: RSG) share price has plunged 19% lower to $1.09. Investors have been heading to the exits in their droves amid news that Mali’s President Ibrahim Boubacar Keïta has resigned, after being detained by mutinying soldiers. Resolute’s key Syama gold operations is based in the country.

More reading

• ASX 200 up 0.8%: ANZ to pay dividend, a2 Milk tumbles, CSL impresses
• Kogan share price on watch after heavy insider selling
• a2 Milk Company share price on watch after delivering more strong growth in FY 2020
• 5 things to watch on the ASX 200 on Wednesday
• These 2 exciting ASX 200 shares soared higher today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd and Nearmap Ltd. 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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Do you fancy making some cash when other investors are losing?

After a 10-year bull run, the year of the coronavirus will have taught many novice investors that the market can turn into a sea of blood very quickly.

But there is a way for investors to reap gains in a plunging market.

“Remember the Hollywood blockbuster ‘The Big Short’ where a bunch of investors made massive gains on the housing market crash?” Stake operations manager Sarhang Shafiq said.

“That’s what it’s all about – taking the ‘short’ or ‘other’ side of the market.”

Traditionally, taking a “short” position was only available to professionals and sophisticated investors, as it would have required creating a margin CFD account or having a broker facilitate it. The risks were considered too much for the average retail punter.

These days, though, “inverse” exchange-traded funds (ETFs) have popped up to allow retail investors to easily take a contrarian position.

While they’re not as abundant in the ASX as in the US, ETF provider Betashares has 3 local products available: Betashares Australian Equitiesbear Hedge Fund (ASX: BEAR), BetaShares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ), and Betashares US Strong Bear Hedge Fund ETF (ASX: BBUS).

These funds increase in value when the Australian or US market falls, and vice versa. 

The first one will rise roughly 1% for each 1% fall in the market, while the other 2 are leveraged to amplify the effect (about 2.4% for every 1% change in the market).

Betashares investment communications manager Richard Montgomery told The Motley Fool these products are for “experienced investors”.

“These are not ‘set and forget’ investments – investors should keep an eye on their positions on a frequent basis.”

Are inverse ETFs worth it?

Even though short trading is now very accessible through these ETFs, investors are warned to tread very carefully.

One big reason is that markets are expected to head upwards in the long term, so holding onto inverse ETFs for longer than necessary could result in losses.

That leads to the second question of when to purchase, and when to offload these shares.

“When would you decide to buy these potential hedging ideas? And when would you sell them to switch into shares?” said The Motley Fool‘s Tristan Harrison back in March, during the peak of the coronavirus panic selling.

“You could end up holding on too long to see the value fall again. You’re having to make two calls which you could get wrong.”

Montgomery warned that the Betashares products target negative market movements on a single given day.

“It’s important to understand that the return over a period longer than one day will not necessarily fall within the target short exposure range, and that a Bear fund is not expected to hit a certain price at a specific index level based on previous performance.

“For this reason, the short funds are typically more suited to short-term strategies.”

He also flagged the potential dangers of leveraged funds.

“There are the additional risks associated with gearing, which magnifies both gains and losses. Geared investments involve significantly higher risk than non-geared investments, and may not be suitable for all investors.

“An investment in a Bear fund should only be considered as a component of an investor’s overall portfolio.”

More reading

• Better Buy: Zoom Video Communications vs. Microsoft
• 3 investing strategies to profit from a second ASX share market crash in 2020

Motley Fool contributor Tony Yoo 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 Fletcher Building Limited (ASX: FBU) share price fell 3.5% to $3.02 in early trade following a disappointing FY 2020 earnings release. At the time of writing, the Fletcher Building share price has recovered slightly to now be trading at $3.05. This came following news that the company’s bottom line results were significantly impacted by the coronavirus pandemic.

Revenue and earnings decline in challenging operating environment

Fletcher Building announced today a net earnings loss of $196 million for FY 2020. This compared with a profit of $164 million in the prior financial year.

On a more positive note, the group reported strong operating cash flows of $410 million. In addition, it ended the financial year having a strong balance sheet with $1.6 billion cash on hand.

Total revenue for Fletcher Building amounted to $7,309 million, which was a fall on the $8,308 million of revenues that it generated in FY 2019.

EBIT before significant items amounted to $160 million, while net loss after tax came in at $196 million. The latter compared to a profit of $164 million during the prior financial year. Net debt totaled $0.5 billion.

Fletcher Building CEO, Ross Taylor, said:

Fletcher Building’s FY20 performance was characterised by the impacts of COVID-19 and the actions we took to ensure we were well positioned to successfully navigate the market uncertainty in FY21 and beyond. Prior to March 2020, the business was trading in line with expectations and making good progress with operating efficiencies. The subsequent lockdown in New Zealand and restrictions in Australia had a significant impact on our FY20 revenues and profitability.

Market outlook and strategic priorities

Fletcher Building noted that it expects challenging times ahead and, as a result, was forced to make some very difficult decisions. Fletcher Building has resized its business for a market downturn of around 20% in Australia and 25% in New Zealand.

This will see a reset in the cost base of the organisation and, as such, the company anticipates a permanent reduction in its cost base in FY 2021 of around $300 million per annum. 

It further admits that there is a high level of uncertainty, even with this reduction. A lot will depend on the impact on the coronavirus pandemic over the next 12 months.

However, as a result of recent actions to realign its business for a post-COVID operating environment, Fletcher Building believes it is now better positioned to achieve its future strategic outcomes. The company will continue to make investments in its digital strategy. It will also aim to grow its market share, underpinned by a solid balance sheet.

Fletcher Building noted that it has not declared a final dividend for FY 2020.

About the Fletcher Building share price

The Fletcher Building share price is currently trading more than 44% lower than the pre-pandemic levels seen in late January. The Fletcher Building share price has recovered just 1.7% from its May low and has fallen 27.6% over the last 12 months.

More reading

• Reject Shop share price dives 12% on FY20 results
• Pact Group share price up as dividend restored
• Why a2 Milk, Kogan, Nearmap, & Resolute shares are dropping lower today
• Are inverse ETFs risky or the best thing ever?
• The Dexus share price edges higher following FY20 results

Motley Fool contributor Phil Harpur 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 Dexus Property Group (ASX: DXS) share price is edging slightly higher to $8.53 this morning after the company released its FY20 earnings results.

Dexus is one of Australia’s largest Real Estate Investment Trusts (REITs) and the largest owner/manager of office buildings. As such, its results will likely be used as a performance barometer for the commercial and industrial property sector.

Commercial property has been savaged by the COVID-19 pandemic this year, particularly as the shift to working from home has left many office buildings vacant.

So how is the Dexus share price faring in this period of economic uncertainty?

FY20 performance

Dexus reported a net profit of $983 million for FY20, a 23.3% drop compared to the previous financial year. This was largely due to lower revaluations of property assets undertaken by the company compared to FY19.

The property group maintained rent collections at 98% for FY20, although this dipped to 92% in the fourth quarter. As of 30 June 2020, portfolio occupancy was 95.6%, which is lower than the 97% seen a year prior.

Despite the lower results, Dexus will pay a final dividend of 23.3 cents per share, taking its full-year dividend to 50.3 cents per security. This represents an attractive yield of more than 5% paid out to shareholders.

Dexus CFO Alison Harrop said the group enhanced its financial position by sourcing $1.85 billion of debt, including the issue of $700 million of 10 and 12-year medium-term notes. That increased debt duration to 6.9 years and further diversified funding sources.

“In this uncertain environment, we remain focused on maintaining the strength of our balance sheet,” she said.

Dexus also maintains a sturdy $1.6 billion of cash and undrawn debt facilities. The property group provided no guidance for FY21 due to the current economic uncertainty.

Should you invest?

With the Dexus share price reaching an all-time high of $13.51 in February of this year, COVID-19 has put a large hole in its current price performance. The group’s prominent exposure to office property is largely to blame for this.

I do like that the company maintained its dividend yield despite the pandemic. But with so much future uncertainty, I have my doubts about how well the Dexus asset portfolio can hold up in FY21.

In contrast, property competitors like Goodman Group (ASX: GMG) have thrived in recent weeks due to their exposure to warehousing and industrial property. This is a by-product of the unprecedented growth in e-commerce, leading to Goodman reaching an all-time high of $18.51 this week.

If I was trying to diversify my portfolio and gain some exposure to property, I’d look at a REIT like Goodman due to its quality industrial portfolio, rather than Dexus’ plentiful dead weight of office buildings. On this basis, the Dexus share price is just a watchlist item for me right now.

Foolish takeaway

The Dexus share price performance may hinge on how soon large numbers of people return to the office. With such an attractive dividend yield, a buy and hold strategy may be an option. A COVID-19 vaccine could make all the difference for a return of bustling Australian cities once more.

More reading

• 3 fantastic ASX 200 shares for retirees to buy
• Buy and hold these fantastic ASX blue chip shares
• Why I would buy CSL and these ASX 200 blue chip ASX shares
• Brokers name 3 ASX shares to buy right now
• Goodman Group share price lifts on FY2020 results

Motley Fool contributor Toby Thomas 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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At lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) is on course to record another solid gain. The benchmark index is currently up 0.8% to 6,172.1 points.

Here’s what is happening on the market today:

ANZ share price storms higher on Q3 update.

The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price is pushing higher today after the release of its quarterly update. That update revealed a solid 30% increase in cash profit from continuing operations to $1.5 billion in the third quarter. In addition to this, unlike some of its peers, ANZ has announced that it will pay a 25 cents per share fully franked interim dividend.

A2 Milk Company tumbles lower.

The A2 Milk Company Ltd (ASX: A2M) share price is tumbling lower following the release of its full year results. The fresh milk and infant formula company delivered a 32.8% increase in revenue to NZ$1,730 million. This was in line with its revenue guidance of NZ$1,700 million to NZ$1,750 million. On the bottom line, the company posted a 34.1% increase in net profit after tax of NZ$385.8 million. Investors appear to have been expecting an even stronger profit result.

CSL result impresses.

The CSL Limited (ASX: CSL) share price is storming higher after delivering a solid FY 2020 result. The biotherapeutics company posted sales revenue of US$8,797 million and a net profit after tax of US$2,103 million. This was a 7.2% and 9.6% increase, respectively, on the prior corresponding period. This was driven by solid growth from both its CSL Behring and Seqirus vaccines businesses during the year. Management is forecasting similar revenue and profit growth (in constant currency terms) in FY 2021.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Wednesday has been the WiseTech Global Ltd (ASX: WTC) share price with a 23% gain. This follows the release of a strong full year result and positive guidance for FY 2021. The worst performer is the Resolute Mining Limited (ASX: RSG) share price with a 16% decline. This follows a military mutiny in Mali where the gold miner operates.

More reading

• Why a2 Milk, Kogan, Nearmap, & Resolute shares are dropping lower today
• What if a Covid-19 vaccine never comes?
• Why Corp Travel, CSL, Domino’s, & WiseTech Global shares are storming higher
• The latest ASX stocks upgraded by brokers to “buy” today
• WiseTech share price jumps 12% on solid revenue growth and dividend

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 CSL Ltd. and WiseTech Global. 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 Covid-19 pandemic, for most people on the planet, will be the biggest global event they will experience in their lives.

The virus has so far infected more than 21.5 million and killed 770,000 people around the world.

However, the S&P/ASX 200 Index (ASX: XJO) has risen by more than 33% since the height of the initial panic in March.

So how can the share market be so optimistic? 

BetaShares chief economist David Bassanese told The Motley Fool that’s because investors are assuming a coronavirus vaccine would become available.

“It’s fair to say markets are counting heavily on a vaccine being available by at least early next year,” he said.

“We just need to look at earnings expectations by way of example – while they were revised down strongly in the immediate aftermath of the lockdowns in March and April, they have held up more recently. At present, markets are counting on only a relatively moderate decline in profits this year, and a recovery back to 2019 levels in 2021.”

But finance professionals and investors are not medical experts.

Humans have never been able to create a vaccine for the common cold and influenza. So what makes shareholders so confident that one will be created for Covid-19?

What will happen to share markets if a Covid-19 vaccine never comes?

The fact that current share prices have been inflated with the expectation of a Covid-19 vaccine makes the alternative scary.

“If there’s no vaccine we really face the prospect of an extended period of social distancing and even repeat lockdown cycles until such time as so-called ‘herd immunity’ has been built through each country,” said Bassanese.

And the trouble for equities is that continued restrictions smash confidence. Lower the confidence, lower the consumer spending, which leads to lower sales for public companies.

“This would crush hopes of a V-shaped economic recovery, and suggest corporate earnings have a lot further to fall.”

A drop in share prices would then be inevitable as it dawns on the market that a vaccine is not coming.

“While we’d likely see more monetary stimulus at this point, it’s hard to imagine the equity market could continue to ‘look through’ a more extended period of earnings weakness without some downward adjustment in prices.”

A spokesperson for Vanguard Australia told The Motley Fool that regardless of what happens with a vaccine, markets will be volatile at times.

“This can be unsettling for some investors. However, we always caution investors to expect share market fluctuations, and history shows they are better served by tuning out the market noise and sticking to a disciplined investment plan with diversification across a range of asset classes.”

Even if a vaccine comes, it’ll take years to produce and distribute

Russia has, to global scepticism, has already declared it has a vaccine.

But even when such a solution comes, years will fly by while enough quantity is produced then distributed to all parts of the globe.

“It has been estimated that to achieve sufficient levels of immunity among the global population with a two-dose vaccine, we would need between 12 billion and 15 billion doses – roughly twice the world’s current total vaccine manufacturing capacity,” University of Sydney associate professor Adam Kamradt-Scott told The Conversation.

“With the marked reduction in international passenger air travel, the movement of cargo has also slowed. This will need to be addressed with airlines ahead of any attempts to distribute the vaccine.”

More reading

• ASX 200 up 0.8%: ANZ to pay dividend, a2 Milk tumbles, CSL impresses
• The latest ASX stocks upgraded by brokers to “buy” today
• How the OZ Minerals share price is benefitting at Rio Tinto’s expense
• What you need to know about the ANZ share price and profit result today
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Tony Yoo 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 Afterpay Ltd (ASX: APT) share price has hit a new, all time high of $76.98 before edging back to its current price of $76.05. This takes its gains since March to just under 765%. The high flying buy now, pay later (BNPL) provider is knocking on the door of the S&P/ASX 20 (ASX: XTL) with a market capitalisation of more than $21 billion. Investors are pushing the Afterpay share price higher ahead of the release of the company’s full year results on Thursday 27 August. 

How has Afterpay been performing? 

Afterpay has seen significant growth in volumes and customer numbers since the start of the pandemic. The adoption of online shopping has been accelerated by lockdowns and store closures, while the economic downturn has increased focus on budgeting. Afterpay’s solution is leveraged to both these shifts. Where customers use Afterpay’s solution, Afterpay pays the merchant for customer purchases (minus merchant fees) effectively lending customers the purchase price. Customers then pay Afterpay back over equal interest-free installments. 

BNPL customers boom 

Afterpay has seen a boom in customer numbers in 2020. The BNPL provider reported 9.9 million customers across the United States, United Kingdom, Australia and New Zealand at the end of June. This was a 116% increase year on year. Other BNPL providers have seen similar increases in customer numbers – competitor Zip Co Ltd (ASX: Z1P) reported a 63% increase in customers in F20, with 2.1 million customers at 30 June. 

BNPL share prices have followed customer numbers upward. Although the sector was heavily sold off in March, investors quickly realised its resilience and bought back in. The Afterpay share price fell 78% from a February high of $40.50 to a March low of $8.90. But by May, the Afterpay share price was trading above its previous high and has continued to climb ever since. 

Transaction volumes surging 

Afterpay is gaining customers at a record rate, and those customers are spending –  transaction volumes processed using Afterpay’s platform surged 127% in Q4 to $3.8 billion. This brought full year underlying sales to $11.1 billion, up 112% on FY19. Other BNPL providers such as Sezzle Inc (ASX: SZL) and Openpay Group Ltd (ASX: OPY) have also seen sales volumes surge. Sezzle reported a 57.5% increase in underlying sales in the June quarter while Openpay saw a 119% increase in the same quarter. 

Afterpay share price continues soaring

The Afterpay share price has hit yet another all time high today as the BNPL sector goes from strength to strength. Consumers were increasingly turning to BNPL solutions even prior to the pandemic. This shift has now accelerated, sending the Afterpay share price to new highs. 

More reading

• Afterpay and Mesoblast were among the most traded shares on the ASX last week
• Tech shares race to record highs as Bank of America tips BHP and Rio shares
• New investors should do this before investing in ASX shares
• If you invested $10,000 in Afterpay shares in March, this is how much you’d have now
• Are BNPL shares like Afterpay officially recession proof?

Kate O’Brien 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’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to record a solid gain. At the time of writing the benchmark index is up 0.8% to 6,173.9 points.

Four shares that have climbed more than most today are listed below. Here’s why they are storming higher:

The Corporate Travel Management Ltd (ASX: CTD) share price has jumped 9% to $13.26 following the release of its full year results. Although the corporate travel specialist reported a loss of $8.2 million, a better than expected performance in July caught the eye of investors. The company’s bookings in July were greater than in June. It feels this suggests a broad-based recovery in corporate travel activity is underway.

The CSL Limited (ASX: CSL) share price has jumped 6% to $310.91 after delivering a solid FY 2020 result. The biotherapeutics company delivered a 7.2% increase in reported sales revenue to US$8,797 million and a 9.6% lift in net profit after tax to US$2,103 million. This was driven by solid growth from both its CSL Behring and Seqirus vaccines businesses during the year. And while plasma collection difficulties will weigh on its performance next year, management still expects to deliver top and bottom line growth.

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has stormed 8% higher to $82.83. This follows the release of a strong full year result in FY 2020. Domino’s delivered global sales of $3.27 billion, up 12.8% on the prior corresponding period. This was driven by strong online and same store sales growth. Digital sales were up 21.4% to $2.36 billion, which accounts for 72.1% of totals.

The WiseTech Global Ltd (ASX: WTC) share price has rocketed 22% higher to $25.47. Investors have been buying the logistics solutions company’s shares after it overcame COVID-19 headwinds to deliver a 23% increase in revenue and a 17% lift in EBITDA in FY 2020. Looking ahead, management provided FY 2021 guidance for EBITDA growth of 22% to 42%.

More reading

• The latest ASX stocks upgraded by brokers to “buy” today
• WiseTech share price jumps 12% on solid revenue growth and dividend
• Corporate Travel Management share price on watch
• The highest paid CEOs in the ASX 200
• Domino’s share price on watch as free cash flow surges 90%

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 CSL Ltd. and WiseTech Global. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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 Mineral Resources Limited (ASX: MIN) share price has fallen this morning despite the mining services company revealing its best full year result to date. At the time of writing, the Mineral Resources share price had dropped 1.7% to $28.36. Mineral Resources reported a 41% increase in revenue and a 127% increase in full year dividends, but this was not enough for investors who have sold off Mineral Resources shares. 

What does Mineral Resources do? 

Mineral Resources provides long-term contract services to Australia’s blue chip mining companies. The company has a portfolio of subsidiary businesses which offer a range of general mine services, contract crushing, infrastructure provision and recovery of base metals concentrate for export. Targeting stranded tenements and junior miners, Mineral Resources develops operations and secures life-of-mine contracts for its mining services business. 

How did Mineral Resources perform? 

Mineral Resources reported revenue of $2.1 billion in FY20, a 41% increase on FY19. This was driven by record mining services growth, higher tonnes in existing external contracts, and new external contracts won during the year. Statutory earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 420% to $2.01 billion with record iron ore sales and a strong achieved iron ore price. Underlying EBITDA grew by 63% to $334 million. This gave statutory NPAT of $1,002 million (up 507%) and underlying NPAT of $334 million (up 63%). 

Earnings per share increased 513% to 533 cents per share in FY20 and Mineral Resources will pay full year dividends of 100 cents per share, a 127% increase on FY19. Mineral Resources has demonstrated a strong financial performance since listing in 2006 at 90 cents per share. Over that time, earnings per share have grown at an annual rate of 30% per annum and total shareholder returns have grown at 27%  per annum. The Mineral Resources share price reflects this having gained more than 3000% over the past 14 years. 

What’s next for the Mineral Resources share price? 

Mineral Resource plans to double the mining services business over CY20 – CY22. Crushing and processing volumes are expected to increase with strong growth in contract mining and haulage thanks to new contracts signed in FY20. Mining services volumes are expected to increase 20% – 25% in FY21. In the commodity space, the company is developing mine operations with a 20 – 50 year life with a focus on iron ore. It is also working with the government to develop additional iron ore export capacity in the Pilbara. This would at least double current iron ore exports, with the first ore shipment planned in approximately 2 years.

More reading

• These record breaking ASX stocks just got downgraded by top brokers
• Here’s why the Mineral Resources share price rocketed 22% in July
• These were the best performing ASX 200 shares in July

Motley Fool contributor Kate O’Brien 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 market is holding up better than many feared during the reporting season, and these are the latest ASX stocks to be upgraded by brokers to “buy”.

The S&P/ASX 200 Index (Index:^AXJO) gained 0.4% in early trade as CSL Limited (ASX: CSL) and Domino’s Pizza Enterprises Ltd. (ASX: DMP) joined the ranks of stocks that beat profit expectations.

The number of pleasing earnings results so far have exceeded my expectations and leading brokers have just upgraded the following ASX stocks.

Upgrade on big earnings beat

One of these is the Monadelphous Group Limited (ASX: MND) share price. Macquarie Group Ltd (ASX: MQG) lifted its recommendation on the engineering contractor to “outperform” from “neutral” in the wake of its better-than-expected results.

Management posted a FY20 net profit of $36.5 million yesterday. While that represents a decline of nearly 28% over the previous financial year, the result was a whopping 34% ahead of Macquarie’s expectation.

The big beat was driven largely be expanding profit margins and the company’s dividend and cash flow also beat the broker’s forecasts.

MND share price doesn’t reflect rising iron ore prices

“Iron ore is now 32% of revenue and we see a healthy pipeline of work particularly in relation to stay in business capex to maintain high iron ore production rates,” said the broker.

“[Monadelphous] share price has substantially decoupled from iron ore price.”

While Monadelphous’ legal stoush with Rio Tinto Limited (ASX: RIO) remains a big overhang on the stock, the broker isn’t too fussed. It believes both parties will eventually reach a settlement that will avoid the worst-case scenario for Monadelphous.

Macquarie believes Monadelphous will generate a 46% growth in earnings per share in FY21 and its price target is $11.57 a share.

Superpit triggers upgrade

Another stock that’s found favour is the Saracen Mineral Holdings Limited (ASX: SAR) share price. The gold miner was upgraded to “buy” from “neutral” by UBS after Saracen unveiled its Superpit mine plan.

The Superpit project, which is jointly owned by Saracen and Northern Star Resources Ltd (ASX: NST), may not sound so super to some. This is because the miners won’t get to the high-grade Golden Pike ore until later in the mine plan.

Short-term pain for long-term gain

“In aggregate this means lower near-term production and a slightly lower peak production of ~700kozpa from ~FY28e,” said the broker.

But this isn’t putting off UBS. The broker sees value in the stock given its trading below its price target of $6.75 a share.

There’s also room for Saracen to surprise on the upside as the miner drills two exploration holes at the project. Depending on the outcome, the miner could upgrade its production forecasts in FY25 to FY27 and extend the life mine.

More reading

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• How the OZ Minerals share price is benefitting at Rio Tinto’s expense
• The highest paid CEOs in the ASX 200
• Domino’s share price on watch as free cash flow surges 90%
• CSL share price on watch after posting US$2.1 billion FY 2020 profit

Brendon Lau owns shares of Macquarie Group Limited and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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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