29 July 2024 | Weekly Snapshot

Did you know?

The below table lists the 14 major Australian resource discoveries over the past 15 years. This is a small list relative to approx. 1,000 listed exploration companies on the ASX in total. The 14 ‘discovery stocks’ rose anywhere between 2-fold (RIO including the ‘Winu’ discovery) to 100-fold (WA1’s ‘Luni’ discovery). Of the 980-odd non-discovery stocks (98% in total), combined operating losses for 2024 totalled close to $1bn (!), which is a heavy burden for investors to carry. Tough odds for investors.

Market Movements

The ASX fell 0.7% this week amidst a deeper sell-off in the USA. Energy stocks led the market lower (down 5.6%). Woodside Energy was down 7.8% after announcing a US$1bn acquisition of a US listed company, Tellurian, which has the potential to add significant LNG scale alongside existing Australian operations. South 32 fell 12.9% with a surprising US$554m write-down of their Worsley Alumina operations in WA. Driving this write-down was a more onerous assessment by WA’s Environment Protection Authority, leading to improved environmental outcomes but lower profits.

The US market was lower by 0.8%. The tech-heavy Nasdaq index (down 2.1%) led the sell-off, including Tesla, which was down 8%. Tesla reported a 2nd-quarter earnings decline by 43% (vs same time last year), however revenues and gross income were flat. 20% of S&P 500 companies have now reported Q2 results with an earnings growth rate at +10.1%, better than the +8.9% expected. On the economics front, US existing home sales fell 5.4%, which was the sharpest monthly decline since 2022. At the same time, surprisingly, median sales price climbed to a record high of $426,900. June PCE inflation rose 0.2% for the June month (2.4% annualised), building support for an interest rate cut (or two?) this year.

Portfolio Movements

Thermo Q2 results better than expected.

• Leading healthcare company Thermo Fisher reported a better-than-expected Q2 result with earnings of $5.37/share vs $5.12 expected. Full year earnings guidance of $21.60 per share was slightly above previous forecast of $21.50. The beat came from sales in laboratory and biopharma services, which generates the lion’s share of company revenues.
• “Our excellent execution enabled us to deliver another quarter of strong financial performance and market share gain,” said CEO Mark Casper
• The share price rose 13% last week.

Schlumberger reports solid Q2 results – Maintains guidance

• Offshore oilfield management company Schlumberger (SLB) reported solid Q2 results with earnings of $0.85 per share, ahead of the $0.83 expected. Q2 revenue of $9.14B was also ahead of the $9.08B expected.
• Their core divisions grew revenue by 4% whilst expanding operating margin by 120 basis points.
• Full year guidance was maintained: “Looking ahead to H2 of the year, we expect ongoing momentum in the international markets and strong digital sales. Our cost efficiency programs will enable us to expand margins and deliver our ambition to grow full-year adjusted EBITDA in the mid-teens”.

Google reports slightly better-than-expected Q2 results

• Google parent Alphabet reported Q2 results slightly ahead of expectations. Q2 earnings of $1.89 per share was a slight beat on the $1.84 expected, with revenue of $84.74B also a slight beat on the $84.22B expected.
• Google Services and Google Advertising were in line. Google Search and Google Cloud beat. While You Tube and Network Members Properties (Adsense) were a slight miss.
• Google shares were lower by 8% this week

The Week Ahead

• Tuesday: Retail sales in Australia, where the previous month showed 0.6% growth, although the data has been very up and down lately.
• Wednesday: Australia’s June-Q inflation reading, expecting a 4% annualised rate, which will add further support for an interest rate rise this year if expectations are proven correct. The US central bank will meet to decide on an interest rate cut (or not). Markets are expecting no cut at this meeting but one cut by September. Microsoft report Q2 earnings, with expectations for 26% growth (vs same time last year) and profits of US$2.93/share
• Thursday: Meta (Facebook) report Q2 earnings, with expectations for 58% growth to US$4.70 earnings per share.
• Friday: USA new jobs (non-farm payrolls) where markets are expecting 185k new jobs, which would be consistent with a luke-warm economy. Amazon will report Q2 earnings, with 58% earnings growth expected at US$1.03 per share.