Boeing And Qantas

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Shares of aerospace giant Boeing dropped more 3% after reporting lower revenue numbers in both its commercial aircraft and defense industry units.

The company’s EPS rose to $2.72 per share compared to expectations of $2.66, and revenue was announced at $24.3 billion versus expectations of $23.9 billion.

Boeing also announced that they paid over $2.5 billion to repurchase 11 million shares, which leaves $6.5 billion in its buyback program.

Based on the daily charts, the next relevant support level is near $205.00.

Keeping with the aviation theme, shares of QAN opened 6% lower after CEO Alan Joyce warned that Q2 revenue is likely to slow compared to Q2 last year.

After posting a low of $5.94, shares have rebounded as the details of the current report are supporting new buying.

The company said underlying profits before tax were close to $900 million, and international revenue rose .2% compared to a 6.9% loss in the year-ago quarter.

We had an ALGO engine buy signal on QAN on July 24th at $5.25. We consider QAN a “hold” at these levels and see resistance in the $6.75 area.

Boeing

 

QANTAS

ANZ Drops On Guidance Warning

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Despite meeting the street’s expectations on top line profits and earnings, shares of ANZ are down over 1% to $30.00.

The bank’s chief executive, Shayne Elliott, warned that forward revenue growth in the banking industry will be constrained due to increased regulation and the banking tax.

Net profit was announced at $6.4 billion, which was up from $5.7 billion over the previous year. Cash earnings rose 18% to $6.9 billion, which was inline with expectations and the full-year dividend was unchanged at $1.60 per share.

From a technical perspective, ANZ has traded as high as $32.40 in January before slipping to $27.35 in early June. Within the measure of a “lower high” pattern, we consider the recent bounce to $30.80 to be corrective in nature and not a reversal of trend.

We see the next key chart point near the October 5th low of $29.05.

ANZ

 

Wesfarmers Weaker After Q1 Report

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In their quarterly report released today, Wesfarmers announced that sales growth in their food and liquor area continues to disappoint.

The owner of Coles reported that food and liquor sales grew by only 0.4% in Q1 2018, which is down from last year’s 1.8% gain. In addition, lower fuel sales has also slowed convenience store sales growth.

On a brighter note, the report showed continued strong performance from its Bunnings, Kmart and Officeworks chains.

Bunnings total sales growth was 11.7%, Kmart lifted 4.9% and sales at Officeworks rose by 7.8%

Shares of WES are down over 2% to 41.80 in early trade. We see the next key support level in the low $40.00 range.

Wesfarmers

 

Sector Update: Gaming Stocks

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Australian Gaming stocks look set to move higher on increased seasonal interest and improved market conditions.

The three names we prefer in the gaming sector are: TAH, SGR and CWN.

Our ALGO engine triggered a buy signal in CWN on September 28th at $11.10. The company has gotten some bad press relating to machine tampering, but has rebounded as the accusations are being dismissed as “political fanfare.”

Our medium-term target on CWN is $12.75.

Shares of TAH have been firming off the $4.00 support area as the long-awaited merger with TTS enters the home stretch.

It’s widely believed that the government would like to consolidate corporate bookmaking and this merger would achieve that goal.

Our medium-term target for TAH is $5.25.

SGR is more of a technical play. After breaking out of a “triple top” pattern at $5.30 yesterday, the share price now has a upside measured target of $6.00.

Crown

TabCorp

Star Entertainment

 

Building Stocks Approach Key Resistence Levels

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Reports about the health of the Aussie housing market vary depending on who is writing them; the RBA is suggesting the market is softening as household debt increases, while real estate agents look to foreign buyers to support higher prices.

Within this mix we have seen building stocks rally hard and are now beginning to look overbought.

Of the three major companies, CSR, JHX and BLD, our ALGO engine has triggered a sell signal on both CSR and JHX.

The internal momentum indicators on all three of these names are in extreme valuation ranges and and near their 52-week highs.

We believe it’s reasonable to expect a pullback from current levels and look for downside targets of $17.75 in JHX, $4.30 in CSR and $6.50 in BLD.

 James Hardie

CSR

 

Boral

ALGO SIGNAL: Sell James Hardie

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On August 8th, our ALGO engine triggered a buy signal on JHX at $17.90.

At the ASX close last Thursday, the ALGO engine gave us a sell signal at $18.83.

Looking at the daily chart, the price action fits the “lower high” pattern based on the July 27th intra-day high of $19. 80. In addition, internal momentum indicators have now crossed into overbought territory.

Investors who took the August buy signal on JHX should look to exit the stock around the current $19.00 level.

 James Hardie

 

Major Banks Set To Report Earnings

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The ANZ will announce its annual results on Thursday as the first of the major banks to report over the next three weeks. NAB will report next Thursday and WBC will report the following Thursday.

ANZ is expected to announce a full year cash profit of $6.89 billion and a DPS of 83 cents on revenue of $20.7 billion. Much of this gain is based on stronger owner-occupied home lending.

Analysts are expecting ANZ to be the first of the major banks to return capital to shareholders given its pro-forma position outlined by APRA last month.

At this point, the NAB’s profit forecast is expected to be $6.6 billion with a DPS of 99 cents.

MQG will report their half-yearly results this Friday. The numbers on the street are reflecting a profit of $1.1 billion with a DPS of $2.10 per share.

ANZ

NAB

 

Westpac

MQG

BHP Weaker On Production Miss

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The Q1  production numbers for BHP were on the soft side with weaker production and shipments of Iron ore  and coal offsetting slightly better output in Copper and Crude Oil.

The company has left its full year guidance unchanged for FY18, despite recent reports that they could miss those production levels by up to 10%.

We expect the recent price volatility in Iron Ore and Coal to impact shares price trajectory well into FY18.

The newly appointed Chairman, Ken MacKenzie, addressed shareholders for the first time yesterday as the share price was pressured back below $26.50.

On balance, we believe that Iron Ore prices are at the upper end of the price range and a pullback into the $25.00 range is a reasonable buy level for BHP. 

BHP

 

QBE Is Approaching Technical Resistance

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With 30% of QBE’s insurance business in North America, the 20% drop in the share price after Hurricanes Harvey and Irma now looks excessive.

It’s estimated that the net impact of these events for QBE was $600 million, comfortably short of the $1.1 billion gross costs implied as the storms made landfall.

However, based on after-tax earnings of the Australia and New Zealand operations only, we estimate that QBE’s 2H17 dividend will fall from 33 cents per share down to 10 cents.

After posting an intra-day low of $9.65 on October 3rd, the share price has recovered back over $10.80 in early trade.

In our view this bounce back is approaching technical resistance and internal momentum indicators are suggesting a move lower in the near-term.

Investors should exit long QBE positions and look to reenter in the lower $10.00 handle.

QBE

 

 

 

ALGO UPDATE: Look To Take Profits In Rio Tinto

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Based on the production numbers released earlier this week, RIO Tinto will produce over 300 million tons of Iron ore this year.

The price of Iron Ore has seen an increase in week-to-week volatility which has kept RIO’s share price active.

With Spot Iron Ore prices around USD $63.00, a drop back into the $50.00 area represents a material risk to the company’s cash flow, and to the share price.

Our ALGO engine triggered a buy signal in RIO back in April at $61.40.

Even though we have not seen a sell signal generated, proper money management suggests that taking profits over $70.50 is a reasonable strategy.

We will look for a pullback in price to reenter long positions.

RIO Tinto