Evening Wrap: ASX 200 higher, Fortescue and Woodside rally + Lithium stocks bounce

The Index hits a one month high thanks to rally across the Resource sector, a better-than-expected quarterly from Pilbara Minerals inspires a bounce for lithium miners, banks continue to pull back after an eight day winning streak plus Macquarie's take on a few recent results.

Let's dive in.

ASX 200 Session Chart

ASX 200 higher and closes near best levels (Source: Market Index)

Markets

The ASX 200 finished higher and near best levels as strong gains from Materials and Energy helped offset weakness across most other sectors. Are we beginning to see a bit of a rotation back into the Resource space? And if so, is this the catalyst that'll help the Index move out with a little bit more conviction? Microsoft, Alphabet and Visa report tonight (after the close) so buckle up.

Economy

No major economic announcements.

Latest news

What happened today?

The resource sector is beginning to heat up. It just needs Chinese economic data and stimulus expectations to follow through.

Lithium stocks bounced thanks to a better-than-expected quarterly from Pilbara Minerals (ASX: PLS). In summary, the lithium major posted an operationally strong June quarter but its average realised lithium price fell 33% to US$3,256 a tonne.

Core Lithium (ASX: CXO) finished 2.8% lower after getting dumped as much as 14.6% in early trade. The PLS result is a reminder that not all lithium miners are made equal. Will this see capital rotate into those with better/more reliable operational performances?

Retail stocks including Baby Bunting (ASX: BBN), Adairs (ASX: ADH) and Kogan (ASX: KGN) sold off. Most of these stocks have bounced in the past couple of weeks. Now pulling back.

The S&P/ASX 200 Financials Sector fell for a third straight session after an eight day winning streak. The run was buoyed by better-than-expected US bank earnings.

Interesting news and movers

Trading higher

• +30.4% AMA Group (AMA)

• +5.4% Monadelphous (MND) – Contract award

• +5.2% Pilbara Minerals (PLS) – Q4 production and sales

• +4.8% Chalice Mining (CHN) – Australian reports buyers circling

• +3.6% Mader Group (MAD) – Earnings

• +3.5% South32 (S32) – Q4 production and sales (Mon)

• +2.8% West African (WAF) – Earnings

• Iron ore sector move: Grange Resources (+7.4%), Hawsons (+5.0%), Champion Iron (+5.0%), Fortescue (+4.6%), Rio (+3.4%), BHP (+3.3%)

Trading lower

• -40.9% Bionomics (BNO) – Plans to delist

• -9.9% EML Payments (EML)

• -6.6% 29Metals (29M) – Q2 production and guidance

• -4.3% Credit Corp (CCP)

• -3.6% Cobalt Blue (COB)

• -3.6% Southern Cross Media (SXL)

• -3.5% Centaurus Metals (CTM)

• -2.8% Core Lithium (CXO) – Q4 production (Mon)

• Retail sector move: Baby Bunting (-5.3%), Kogan (-3.8%), Adairs (-2.8%), Temple & Webster (-2.2%), ARB Corp (-1.7%)

Broker notes

Macquarie’s take on a few recent results:

Core Lithium (CXO) – Outperform with $0.90 target ($0.72 prev close)

•  “CXO's production guidance for Finniss for FY25 was materially below our estimates, and we have slowed the ramp up assumptions for the project.”

• “We now expect Finniss to hit peak production rates of 170ktpa in FY27, with the ramp up of the BP33 underground key to achieving this target.”

• “Our estimated FY23 earnings loss narrows 30% while FY24, FY25, FY26 and FY27 earnings fall 11%, 70%, 62% and 36%.”

• “The material cut to our earnings outlook drives a 25% reduction in our price target from A$1.20 to A$0.90/share.”

Pilbara Minerals (PLS) – Outperform with $7.30 target ($4.59 prev close)

• “PLS has released its 4QFY23 result with beats in production and shipments offsetting softer realised prices.”

• “The company reported a total cash balance of A$3.3b which was 28% higher than we had anticipated.”

• “• PLS is generating strong cash flow, with free cash flow yields of 22% and 14% for FY23 and FY24 on our forecasts.”

South32 (S32) – Outperform with $4.60 target ($3.73 prev close)

• “The 4Q FY23 was mixed, with strong manganese, nickel, and silver production offsetting weaker-than-expected copper, lead, zinc, and coal production.”

• “S32 trades on a FY24E EV/Ebitda multiple of 3.1x and FCF yield of 14%; in a spot price scenario these change to 3.8x and 10%, respectively.”

Scans