Morning Wrap: ASX 200 to fall, Nvidia tops earnings expectations + Pilbara Minerals, MinRes to report

The S&P 500 rallied in the last 30 minutes of trade to finish slightly higher, Nvidia smashes fourth quarter earnings expectations and issued a strong guidance, local heavyweights Pilbara Minerals, MinRes and IGO are due to release their first half results, CSR receives a massive takeover bid from French giant Saint-Gobain, January FOMC minutes stressed the need to hold rates and some nuggets from Woolies and Wisetech earnings calls.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 claws back losses to close slightly higher (Source: TradingView)

ASX TODAY

• ASX 200 futures point towards a weak start but a lot of variables at play including major miner earnings and better-than-expected results from Nvidia

• Companies due to report today include Flight Centre, Deterra Royalties, Fortescue, Lovisa, MinRes, Qantas, Tabcorp, Nine Entertainment, ReadyTech, The Reject Shop and more

• Mineral Resources reports 1H24 statutory net profit of $518m, down 33%

• Pilbara Minerals reports 1H24 net profit after tax of $220m, down 82.3%

• Corporate Travel downgraded to Neutral from Buy at Citi, target cut to $17.55 from $22.55 

• Domino’s Pizza downgraded to Neutral from Outperform at Macquarie, target cut to $42 from $48

• Iluka Resources upgraded to Overweight from Neutral at Barrenjoey, target increased to $8.40 from $7.20 

• Lottery Corp downgraded to Hold from Add, target unchanged at $5.40 

• Wisetech Global downgraded to Neutral from Overweight due to valuation concerns, target increased to $82 from $80

• Woolworths downgraded to Hold from Add at Morgans, target cut to $34.70 from $39.45

• MinRes selling 14.5% of Azure Minerals (AFR)

• Sayona Mining shareholder launches $60m block trade (AFR)

• French building materials giant Saint-Gobain lobs $4.3bn bid for CSR (AFR)

MARKETS

• S&P 500 rallied in the last 30 minutes of trading to finish slightly higher

• Bonds yields higher across the curve, both 2-and-10 years closing near 3-month highs

• Nvidia released its earnings after market close – Q4 revenue of US$22.1bn (8% beat), adjusted gross margin of 76.7% (130 bps beat) and adjusted EPS of $5.16 (11.4% beat)

• Nvidia expects 1Q24 revenue of US$24bn, well above expectations of US$21.9bn

• Nvidia shares currently up around 6% in after hours

• Markets have priced out more than 75 bp worth of rate cuts from peak easing expectations but still looking for 90 bps of rate cuts this year

• January FOMC minutes stressed the need to hold rates until the data brought greater confidence that inflation was moving sustainably towards the 2% target, participants remained highly attentive to inflation risks, some worried disinflation progress could stall

STOCKS

• Nvidia options positioning implies 10.6% share swing post earnings (Bloomberg)

• Nvidia faces high earnings bar following stock rally (Reuters)

• Hedge funds pare exposure to Magnificent 7 megacap tech stocks in Q4 (Bloomberg)

• Intel discloses forecast to overtake TSMC in making fastest chips this year (Reuters)

CENTRAL BANKS

• Fed's Barkin says US has 'ways to go' on soft landing and hot January data made things more difficult (Bloomberg)

• Fed Governor Bowman says time to cut rates 'certainly not now' (Bloomberg)

• Fed's Daly reiterates that patience, says "to finish the job will take fortitude" (SF Fed)

• Options data shows some investors hedging against chance of a rate hike (Bloomberg)

• BoE to start cutting rates in Q3, most likely August (Reuters)

• BoK expected to leave rates unchanged on Thursday (Bloomberg)

GEOPOLITICS

• EU and Biden set to impose major sanctions on Russia for Navalny's death (Bloomberg)

• Russia has regained the initiative and put Zelensky on the back foot (Bloomberg)

• Trump likely to consider two-step process to sharply lift China tariffs (Nikkei)

• China avoids US tariffs by shipping more goods via Mexico (FT)

ECONOMY

• Japan export rebound tops forecasts, underpinned by shipments of autos and chipmaking equipment (Reuters)

• Biden announces additional $1.2bn in student debt forgiveness (CNBC)

The Lithium Scenes

The sector is not as hype as before but some wild things have happened in the past 24 hours.

• MinRes Managing Director Chris Ellison sold a 14.5% stake in Azure Minerals, valued at $230 million. Ellison was happy to exit at $3.42 per share or a 7.6% discount instead of waiting a few more months until the scheme is implemented. How strange.

• Sayona flagged a $60m (1.1 billion shares or around 11% of the company) block trade after market close on Wednesday. Sources suggest the seller was Piedmont Lithium. Maybe they need the cash?

• Chinese lithium prices briefly hit limit up of 10% in early trade on Wednesday (but finished the session only 3.5% higher)

• Pilbara Minerals, MinRes and IGO are due to report first-half results today

Buckle up.

Woolworths Earnings Call Highlights

Woolworths (ASX: WOW) had its worst day since December 2021 after a softer-than-expected set of half-year earnings. The weakness was compounded by a smaller-than-expected interim dividend, an unexpected CEO departure and a cautious outlook. The stock finished the session down 6.6% to a 12-month low. You can find my summary of the results here as well as some of the nuggets from its earnings Q&A below.

• Wage (+6.3%) and other costs led to a ~9% cost growth in the Australian food business

• The $480 million cost of doing business growth was half due to wage inflation and volume/mix drivers accounted for ~40% of cost growth

• Productivity agenda ahead of expectations but the focus is on fundamental improvements rather than just cutting costs

• Gross margin benefited from eCommerce growth (larger baskets with more long-lasting products), investments in Everyday Rewards, telco business rebranding, etc

• Big W's future strategy includes cautious underlying investment approach; every store lease renewal will be critically evaluated based on performance

Wisetech Earnings Call Highlights 

Wisetech (ASX: WTC) had one of those results where you knew the stock was going to open high and close even higher. Underlying net profit for the first half was up 5% to $128.4 million or 12% ahead of Citi estimates and its 7.7 cents per share interim dividend was 33% of Citi estimates. It reaffirmed its full-year guidance but upped its margin guidance range. The stock opened 5.6% higher and finished up 11.2%.

• Volume growth in CargoWise is on trend, with a slight uptick towards year end

• Less than 10% of overall CargoWise growth comes from market

• First half revenue was $500.4 million, up 32%, and CargoWise revenue up 40%

• Product development releases have been delayed into FY25, affecting revenue projections for that year

• Capitalisation rate has increased by 86% over the last year to $71.6 million due to significant pipeline of new products.

• Integration of Blume and Envase acquisitions has been quicker and more cost-effective than expected due to Wisetech's global scale capabilities

• EBITDA margin for FY26 to be above 50%, driven by revenue growth and operating leverage rather than high capitalisation rates

ASX corporate actions occurring today:

• Trading ex-div: Deterra Royalties (DRR) – $0.149, Whitehaven Coal (WHC) – $0.07, JB Hi-Fi (JBH) – $1.58, Bendigo and Adelaide Bank (BEN) – $0.30, Virgin Money (VUK) – $0.038 

• Dividends paid: 5G Networks (5GN) – $0.02, Dexus Industria REIT (DXI) – $0.04, Dexus Convenience Retail (DXC) – $0.05  

• Listing: None

Economic calendar (AEDT):

• 9:00 am: Australia Manufacturing and Services PMI (Feb)

• 8:00 pm :Eurozone Manufacturing and Services PMI (Feb)