Reporting Season

Reporting season madness: Whipsaw price action from CSL, Codan and Treasury Wine

Thu 18 Aug 22, 2:47pm (AEDT)
Source: Rollercoaster

Key Points

  • CSL and Treasury Wine shares experienced a V-shaped recovery after posting their FY22 results
  • Codan briefly recouped most of its losses before rolling over again
  • All three results were in-line with analyst or company expectations

A company's share price should rally on a good result and fall on a bad one - if only it were that simple.

CSL (ASX: CSL), Codan (ASX: CDA) and Treasury Wine (ASX: TWE) shares all tumbled at least -5% as the market opened and responded to their FY22 results.

CSL and Treasury Wine managed to recoup the losses and V-line back into positive territory. Codan shares experienced a brief rally before sellers pushed the stock back towards session lows.

Here's a recap of the earnings and some food for thought.

CSL: Plasma collections recover but at higher costs

CSL posted its FY22 results on Wednesday, with its shares falling to session lows of -5.9% before closing just -1.3% lower. The things to note about its earnings were:

  • Profits fell -5% to US$2.25bn, in-line with Bloomberg estimates of US$2.26bn and ahead of Morgans estimates of US$2.18bn

  • Cashflow from ops was down -27% to US$2.63bn as a result of the profit decline and significant increase in inventories

  • Inventories rose 14.6% to US$4.33bn as plasma collections recovered albeit at higher prices

  • Plasma collections rose 24% year-on-year, volumes now exceed pre-pandemic levels, expected to drive "future sales growth"

  • FY23 net profits expected to be between US$2.4bn to US$2.5bn, up 6.4% to 10.9% compared to FY22

CSL share price chart
CSL share price chart (Source: TradingView)

Treasury Wine: Apparently wine is an inflation hedge

Treasury Wine shares experienced a much more wild intraday swing, surging from session lows of -4.8% to 3.5% at the time of writing.

  • Net sales revenue fell -3.6% to $2.48bn but revenue per case rose 16.1% to $97.3

  • EBITS margin rose 1.3 percentage points to 21.1%

  • Net profit after tax rose 5.3% to $263.2m, profits before material items and SGARA was $322.6m

  • Supply chain optimisation program is now complete, confirmed to deliver savings of $90m (up from 75%m previously)

  • Luxury inventory will be sold in FY23 from 2020 Australian and Californian vintages which bear lower yield and at higher costs

The profit before material items and SGARA was ahead of Bloomberg estimates of $315m and in-line with Morgans estimates of $322.3m.

Treasury Wine share price chart
Treasury Wine price chart (Source: TradingView)

Codan: The odd one out

Codan (ASX: CDA) shares teased at a comeback, rallying from session lows of -13.1% to -2.6% by noon. The bounce proved to be a dead with, now back towards session lows, down -9.2%.

Revenue was up 16% to $506.1m and net profit rose 3% to $100.5m, which was in-line with Codan's May guidance of $100m. Some interesting snippets from its results include:

  • Metal detection segment sales down -20% (52% of Group sales, 75% a year ago)

    • Segment sales are cycling through an 'unprecedented' FY21 and disrupted business conditions in Northeast Africa

  • Communications segment sales up 153% (48% of Group sales, 22% a year ago)

  • Codan flagged that metal detection sales in the first-half of FY23 "may not reach the level achieved in H1 of FY22"

Codan share price chart
Codan price chart (Source: TradingView)

Food for thought

Results met expectations: The three results were largely in-line with analyst or company expectations. Still, the open was rather brutal.

A few soft spots: CSL flagged higher costs for plasma collections, Treasury Wine warned that supply chain and cost inflation pressures are expected to continue and the unfavorable luxury wine inventory, and Codan experienced a sharp decline in metal detection's contribution to Group revenues. Perhaps the market was really taking a stab at the results' weak links

Look out for momentum: CSL shares continued to rally post earnings. The shakeout seems to have created a bit of momentum behind the stock. Will we see the same momentum for Treasury Wine and Codan?

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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