Worried about a downturn? Here are 7 ASX companies with resilient earnings

LiveWire10-30 04:00

Whether you’ve been watching earnings downgrades or feeling the pinch at the checkout, we’re facing a tougher environment. It’s anyone’s guess as to how hard or soft Australia’s landing is set to be. ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2479125370?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2024-10-30 04:00","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2479125370","market":"us","top_or_hot":-1,"title":"Worried about a downturn? Here are 7 ASX companies with resilient earnings","media":"LiveWire","content":"<div>\n<p>Whether you’ve been watching earnings downgrades or feeling the pinch at the checkout, we’re facing a tougher environment. It’s anyone’s guess as to how hard or soft Australia’s landing is set to be.\n...</p>\n\n<a href=\"https://www.livewiremarkets.com/wires/worried-about-a-downturn-here-are-7-asx-companies-with-resilient-earnings\">Source Link</a>\n\n</div>\n","source":"livewire_stock","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Worried about a downturn? Here are 7 ASX companies with resilient earnings</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWorried about a downturn? Here are 7 ASX companies with resilient earnings\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-30 04:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.livewiremarkets.com/wires/worried-about-a-downturn-here-are-7-asx-companies-with-resilient-earnings><strong>LiveWire</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Whether you’ve been watching earnings downgrades or feeling the pinch at the checkout, we’re facing a tougher environment. It’s anyone’s guess as to how hard or soft Australia’s landing is set to be.\n...</p>\n\n<a href=\"https://www.livewiremarkets.com/wires/worried-about-a-downturn-here-are-7-asx-companies-with-resilient-earnings\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"FCF","symbol_name":"第一联邦金融","start_time":0,"source_url":"https://www.livewiremarkets.com/wires/worried-about-a-downturn-here-are-7-asx-companies-with-resilient-earnings","article_id":"2479125370","we_media_id":null,"thumbnails":[],"rights":{"source":"livewire_stock","url":"https://www.livewiremarkets.com/wires/worried-about-a-downturn-here-are-7-asx-companies-with-resilient-earnings","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2479125370","pubTimestamp":1730232013,"sourceInfo":{"source_id":"livewire_stock","name":"Livewire Markets"},"weMediaInfo":null,"summary":"Based on data from the Reserve Bank of Australia, Australian GDP only grew 0.2% in the June quarter – and only 1% across 2023. Ignoring COVID, that is the slowest growth since the early 1990s. It's hardly good news.With this in mind, it should be no surprise that Franklin Templeton's CIO Pulse Survey for October revealed that two of the top four concerns of Chief Investment Officers are disappointing earnings and a recession.So, with all this said, the time has come to bolster portfolios, and a key aspect of that will be using companies that can offer resilient earnings irrespective of the cycle.If you look at the All Ordinaries and exclude the companies that have huge standard deviations of over 300, the average is 15.57. But what we are after are the stable earners - the companies whose earnings are not likely to move adversely in a down-cycle. For this exercise, we identified these companies as those having a standard deviation of 0.8 or below. 18 companies fit this criteria, as the","collect":0,"end_time":0,"defaultTopTitle":"livewiremarkets.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"FCF":"第一联邦金融","BK7078":"赌场与赌博","CQR.AU":"CHARTER HALL RETAIL REIT","BK7162":"零售房地产信托","BK7005":"零售业房地产投资信托","COL.AU":"COLES GROUP LTD","BK7511":"ESG概念","TLC.AU":"Lottery Corporation Limited","BK7040":"食品零售","XAO.AU":"标普/澳交所 普通股指数","BK7082":"大卖场与超市","XJO.AU":"标普/澳交所 200指数","TLS.AU":"TELSTRA GROUP LTD","BK4211":"区域性银行","XKO.AU":"标普/澳交所 300指数","BXB.AU":"BRAMBLES LTD","BK7064":"综合支持服务","BK7103":"保健护理产品经销商","SIG.AU":"SIGMA HEALTHCARE LTD","BK7501":"新冠治疗股","WOW.AU":"WOOLWORTHS GROUP LTD","BK7042":"综合电信业务"},"translate_title":"担心经济低迷？以下是7家盈利富有弹性的澳大利亚证券交易所公司","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"WOW.AU":1,"TLS.AU":1,"TLC.AU":1,"SIG.AU":1,"FCF":1,"CQR.AU":1,"COL.AU":1,"BXB.AU":1,"XKO.AU":0.9,"XJO.AU":0.9,"XAO.AU":0.9},"content_text":"Whether you’ve been watching earnings downgrades or feeling the pinch at the checkout, we’re facing a tougher environment. It’s anyone’s guess as to how hard or soft Australia’s landing is set to be.\nBased on data from the Reserve Bank of Australia, Australian GDP only grew 0.2% in the June quarter – and only 1% across 2023. Ignoring COVID, that is the slowest growth since the early 1990s. It's hardly good news.\nWith this in mind, it should be no surprise that Franklin Templeton's CIO Pulse Survey for October revealed that two of the top four concerns of Chief Investment Officers are disappointing earnings and a recession.\nSo, with all this said, the time has come to bolster portfolios, and a key aspect of that will be using companies that can offer resilient earnings irrespective of the cycle.\nTo start uncovering which firms fit this bill, we looked at company EBIT margins through the most recent economic cycle, using standard deviation to see how much fluctuation there was over the period. \nIf you look at the All Ordinaries and exclude the companies that have huge standard deviations of over 300, the average is 15.57. But what we are after are the stable earners - the companies whose earnings are not likely to move adversely in a down-cycle. For this exercise, we identified these companies as those having a standard deviation of 0.8 or below. 18 companies fit this criteria, as the following table shows.\nCompanies with resilient earnings\n\n\n\n\n\n\n\n\n\n\nThis data was compiled by Lonsec's Tom Wegner, with the assistance of Reuters.\n\nThe next step was to interview some fundies about this issue. Joining us to discuss the concept of earnings resilience as well as to pick their favourite resilient earners are Daniel Moore of IML and Julian McCormack of Merlon Capital.\nHow these fundies think about resilience\nBoth Moore and McCormack believe it’s important to look at more than the stability of earnings over the past few years.\nMcCormack is concerned about the manipulation of data behind statutory earnings and focuses on free cash flow generation.\n“We value companies based on sustainable free cash flow, incorporating mid-cycle macro and quality (industry structure, competitive advantage etc) and free cash flow reconciliation to stated earnings measures “earnings quality” for us,” he says.\nMoore also thinks investors should consider qualitative factors and future earnings potential.\nThe factors he looks at include:\n\nEssential nature of the products and services\nIs there a recurring demand for those products or services?\nDoes the business have numerous customers or just a few large customers?\nDoes the company have pricing power? \nDoes the company have a lot of debt?\n\nFor both, part of that future evaluation must include earnings growth as a measure of resilience.\n“We analyse businesses’ track records of delivering earnings growth, and we attempt to capture long-term growth expectations in the high and low case valuation we accord the businesses we analyse. \nWhat we are really looking for are “expectation gaps” where the market may be succumbing to short-termism and unduly punishing quality, high-growing businesses,” says McCormack.\nMoore shares an example of the importance of earnings growth in inflationary times.\n“At a very simple level, if the inflation level is 5% and a business holds its margin flat, its earnings will also grow 5% (if all else remains equal). Businesses that grow their earnings less than inflation are unattractive over the long term,” Moore says.\n5 companies that fit the bill from the data we compiled\nWhile Moore and McCormack believe it's important to look beyond the stability of earnings, they did nominate five companies on which they hold a bullish view based on the list we provided.\nMoore’s picks\nBrambles (ASX: BXB)\nMoore argues that Brambles is a high-quality business and its pooled pallets are not only mission-critical to global supply chains, but demand shows consistent growth over time. It is also an industry with high barriers to entry.\n“There is a good chance of considerable upside to its free cash flow (FCF) generation (historically a weakness for the company) and the stock's P/E multiple if Brambles’ current efforts to digitise its pallet pool are successful,” Moore says.\nThe Lottery Corporation (ASX: TLC)\nWith numerous long-life high-quality state-based lottery licenses, The Lottery Corporation effectively has monopoly rights over lotteries. It also can lift prices above inflation and sell digitally to drive revenue growth with margin expansion.\n“TLC’s earnings are typically resilient through the economic cycle as lottery tickets are usually a small purchase and consumers tend to view them as even more valuable in tough economic times,” says Moore.\nSigma (ASX: SIG) and Chemist Warehouse  merger\n“Pharmacy sales are generally resilient through the economic cycle and Chemist Warehouse, as a discounter, tends to grow market share in the low points in the cycle, providing a growing and resilient earnings stream,” says Moore.\nThe merger will create the largest consolidated pharmacy wholesaler/retailer in Australia, and there are significant growth opportunities offshore. Moore adds that the management approach to expansion overseas has been highly targeted to markets similar to Australia, where it can compete with smaller pharmacy-based competitors rather than large corporates.\nMcCormack’S picks\nIt’s interesting to note that these picks are both currently in lawsuits with the ACCC relating to allegations of misleading consumers through discount pricing claims. McCormack acknowledges this and the substantial price corrections in September, noting, “It is worth remembering the resilience of the major Australian retailers.\"\nColes (ASX: COL)\nMerlon Capital bought Coles in late 2023, expecting inflation to remain persistent and interest rates high. In a recent meeting with management, Coles noted that Amazon is increasingly competing in non-food categories.\n“[This] reinforces our view that dominant market share in food is an important moat for both Coles and Woolworths,” McCormack says.\nWhile Coles is slightly behind Woolworths on margins, he is bullish on its prospects to narrow via logistics and supply chain.\n“Coles is undergoing a significant capital program to build large distribution centres in Sydney and Melbourne, and the recent full-year result showed margins improving in supermarkets and sales growing ahead of inflation,” he said.\nWoolworths (ASX: WOW)\n“We also hold Woolworths due to our view that the market is too pessimistic about the long-term impact of increased government scrutiny on supermarket pricing, over-emphasising the short-term earnings impact of high wage inflation and over-weighting the problems facing Woolworths New Zealand and Big W in the context of their contribution to the group valuation.”\nHe found his recent meeting with management reassuring in terms of the prospects. Woolworths is following a different online strategy to Coles, focusing on its store network rather than separate distribution centres.\n“Both Australian retailers are relatively well placed for an environment of lingering inflation, given their large non-discretionary offering, and demonstrated ability to pass price on to their customers,” McCormack says.\nOther ASX-listed names to watch\nMoore also suggests two names outside the list he is bullish on.\nTelstra (ASX: TLS)\nIt’s not the first time a fund manager has referenced Telstra – communications is the new recession-proof, no one is going to do without their phones and internet. Moore points to Telstra’s valuable infrastructure, superior mobile network coverage and strong brand as offering it superior pricing power and margins.\n“Telstra is well positioned for consistent earnings growth through the cycle, with its earnings driven by its mobile and infrastructure businesses. We expect the mobile industry to achieve solid growth in the years ahead as industry consolidation has led to more rational pricing and improving returns off a still-low base,” he says.\nCharter Hall Retail REIT (ASX: CQR)\nChallenges in the property sector may see investors steering clear, but Moore argues the assets in this investment are resilient, consisting largely of neighbourhood retail assets and some petrol stations and pubs. Valuation metrics are also looking attractive.\n“This portfolio of assets produces a resilient, growing rental stream backed by large and/or non-discretionary tenants with 46% of rent directly or indirectly (turnover) linked to CPI. This, combined with 4% pa fixed increases for another 43% of tenants, leads to property income growth of 3%+ pa through the cycle,” he says.\n\nWould you invest in these companies, or where are you looking for resilient earnings? Let us know in the comments.\n\n \n\n\nNever miss an update\n\n    Enjoy this wire? Hit the ‘like’ button to let us know. \n    Stay up to date with my current content by \n    following me below and you’ll be notified every time I post a wire","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2479125370"}