Four things I learned from the market today – Tuesday, 6 May

The "things I Learned from the market today" is a daily series sharing insights from my coverage of the ASX 200 Live blog. It highlights key observations drawn from company announcements, market expectations, and price action.

Guidance downgrades are never pretty

HMC Capital (ASX: HMC) faced a tough session after slashing its full-year operating EPS guidance by 5.7%, from 70 cents to 66 cents, due to fair value adjustments in its HMCCP and financial assets. The stock opened 0.4% lower and slid as much as 7.9% during the day.

A part of me had a neutral bias towards the earnings downgrade because the stock has roughly halved since its February half-year FY25 result. I also assumed that there would be some analysts out there that have already assumed a downgrade in HMC's assets.

However, the market treated this downgrade as fresh news, driving a sharp selloff. It’ll be worth watching tomorrow’s analyst updates to see if ratings or target prices shift as they reassess the new guidance

NextDC's bullish set up

NextDC (ASX: NXT) delivered a standout performance, opening 3.7% higher and peaking at a 9.3% gain by noon, fueled by a robust utilisation and order book update. Key highlights include:

• Victoria’s data centres led with the company’s largest AI deployments, reaching 114MW in pro forma contracted utilisation (161% of the 70.5MW built capacity as of 31 December 2024).

• Group-wide contracted utilisation jumped 30% to 228MW since 31 December 2024.

• The forward order book soared 54% to 127MW, up 45MW in three months.

• New contract revenues are set to start in FY27.

• FY25 capex guidance rose by $100 million to $1.4–$1.6 billion.

Why was the announcement so good?

• The numbers exceeded Goldman Sachs’ FY25 utilisation forecast of 229.2MW with three months left in the year.

• Victoria’s demand outpacing capacity counters recent oversupply fears, particularly after Microsoft’s reported cancellation of 2,000MW in projects.

• The 54% order book growth in just three months marks a "record result for the company"

The fundamentals are looking strong at a time in which those Microsoft and other bearish related developments in the data centre space have crippled NextDC shares around 30% since last October, creating a springboard for the share price to bounce higher.

Always watch the second day

Endeavour Group (ASX: EDV) and Westpac (ASX: WBC) continued to feel the sting of Monday’s disappointing earnings. Westpac’s 1H25 results showed:

• Net profit after tax (ex-items) down 1% to $3.5bn, in-line with market expectations

• CET1 ratio of 12.2%, in-line with market expectations

• Earnings per share flat year-on-year at 101 cents vs 98 cents UBSe (3.0% beat)

• Interim dividend of 76 cents per share vs. 82 cents UBSe (7.3% miss)

• Group NIM down 1 bp to 1.88% vs. 1.94% UBSe (6 bp miss)

Endeavour Group’s third-quarter results included:

• Retail sales down 1.3% to $2.33 billion vs. UBS ests $2.4 billion (2.9% miss)

• Hotels sales up 4.9% to $512 million vs. UBS ests $508 million (0.7% beat)

• Group sales down 0.3% to $2.84 billion vs. UBS ests $2.91 billion (2.4% miss)

• Targeting flat to modest retail sales growth in the fourth quarter of FY25, cycling a 0.2% decline in comparable sales for Dan Murphy's and BWS last year

Westpac missed on two of the most important metrics for banks – dividends and net interest margins. While Endeavour’s ongoing challenges—Woolworths’ industrial action, weak alcohol consumption, and intense promotional competition—drove further declines.

On Tuesday, Endeavour and Westpac shares continued to falter, down around 4.3% and 2%, respectively. Broker downgrades also followed, with consensus target prices cut by 3.1% for Endeavour (to $4.54) and 2.2% for Westpac (to $28.09). This underscores how earnings misses can ripple into subsequent sessions, as analysts recalibrate and momentum shifts.

The dividend effect

Southern Cross Media (ASX: SXL) announced it will resume dividends in FY25, its first payout since March 2024, driven by a strong operational and financial turnaround. Key highlights include:

• Audio revenues surged ~9% in the first four months of 2025, exceeding guidance.

• Cost-saving measures reduced FY25 non-revenue-related costs to ~A$265 million, outperforming the prior forecast of below A$270 million.

• The leverage ratio is projected to drop below 1.5x by 30 June 2025.

In FY24, the company's trailing twelve month dividend was yielding approximately 3%.

The combination of robust revenue growth, better-than-expected cost savings, declining debt, and the return of dividends paints a bullish picture.

SXL’s shares reflected this optimism, opening 4.3% higher and closing up 7.9%, decisively breaking above its 200-day moving average for the first time since May 2024. As income-focused investors take note, the stock could sustain its upward momentum in the coming weeks.