Three things I learned from the market today – Monday, 5 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.

Bank Margins and Dividends

Westpac's (ASX: WBC) half-year FY25 report serves as another reminder to pay attention to these two metrics for bank results:

• Dividends, which drive the flow of funds for income-oriented investors and funds.

• Net interest margins, a core indicator of profitability and operational efficiency.

While the result showcased a largely in-line net profit outcome and a strong balance sheet, the stock still sold off due to below-consensus dividends and net interest margins.

Here are the key numbers.

• 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)

From a price action perspective, Westpac shares opened 2.0% lower and sold off as much as 3.7% in early trade.

Pay Attention to Price

Reliance Worldwide (ASX: RWC) downgraded its FY25 guidance, reflecting declining economic conditions in the US and tariff impacts. A key change was a cut to adjusted FY25 EBITDA (excluding Holman), now expected to be slightly below FY24 levels, against prior forecasts of single-digit growth

To add some perspective, Macquarie analysts (Apr-25) expected revenue and underlying EBITDA growth of 6.5% and 6.2% respectively.

Reliance's unexpected U-turn would typically exert significant downward pressure on its share price. However, after opening 3.5% lower, the stock is currently trading down just 1%. This resilience may stem from several factors:

• Prior Price Adjustment: Reliance shares have already declined approximately 19% since the FY25 half-year results, likely reflecting some of the headwinds announced today.

• Tempered Expectations: Macquarie analysts, while forecasting growth, had already moderated their earnings outlook in an April note. They assumed 125% tariffs on Chinese imports and 10% on other imports, factoring in potential trade challenges.

• Improving US-China Trade Relations: US-China trade tensions are showing promise. China’s Commerce Ministry is exploring trade talks with the US, following US officials’ willingness to discuss tariffs. Additionally, China has quietly exempted around US$40 billion in imports in recent weeks, accounting for roughly 24% of its total US imports.

Reporting at Rock Bottom

Much like the example above, Endeavour Group (ASX: EDV) reported a weaker-than-expected third-quarter update (6 January to 6 April), yet its share price briefly rallied 3.6% in early trading before settling back to breakeven levels.

Over the past 12 months, Endeavour shares have fallen 20%, and over the past three years, plummeted nearly 50%, driven by a series of disappointing earnings and declining alcohol consumption trends. As a result, the market appears relatively unfazed by the latest slightly below-par results.

• 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

Endeavour is currently trading at a one-year forward PE of 15 times, or a 34–37% discount to peers like Coles and Woolworths, according to UBS.