What these 5 bellwether ASX company results taught us this reporting season

Before the ASX half-yearly reporting season began, we suggested a handful of companies investors might watch for broader indications about key Australian economic sectors.

Most of the five companies have now delivered their half-year FY2024 results - except the out-of-cycle James Hardie Industries (ASX: JHX), which reported its activity for the third quarter ended 31 December.

In the following, we wrap up February management announcements made by each of them. We also take a look at their current Market Index Broker Consensus guide and how brokers rate them on the back of the latest earnings results.

The a2 Milk Company (ASX: A2M) – 19 February

The a2 Milk Company’s share price hit a 10-month high last week, in the wake of a half-yearly result that beat almost all expectations. With China a key market for the maker of dairy products and infant formula, this reflects signs of stability returning to the Middle Kingdom’s economy.

A2M management lifted its annual sales guidance after posting solid first-half revenue and earnings growth, as reported by Market Index.

"The combination of a better-than-expected result, FY24 guidance upgrade, and new product development is likely to trigger investors who have been underweight the stock to revisit it, which should mean the recent strong share price performance is likely sustainable," Citi analysts said in a note released on Monday 19 February.

A2M 12-month price chart (Source: Market Index)

What the brokers think

Market Index Broker Consensus: STRONG BUY (7 buy, 3 hold, 0 sell)

Notable views from sell-side analysts include a maintaining of positive ratings at UBS and Barrenjoey.

• UBS analyst Marcus Curley left his rating of BUY unchanged but lowered his price target to NZ$7.05 from NZ$7.30.

• Barrenjoey analyst Tom Kierath left his rating at OVERWEIGHT and lifted his price target to $6.80 from $6.

• Macquarie maintained its NEUTRAL rating but raised their price target to $5.50 from $4.40.

A2 Milk’s share price closed at $5.81 on Wednesday 28 February.

James Hardie Industries (ASX: JHX) – 14 February

We singled out James Hardie as a company to watch because of the important read-through it tends to provide on the housing market, particularly in the US. The building materials manufacturer has successfully lifted prices across its all-important home interior renovations and remodelling business. This was reflected in the earnings result for the third quarter ended 31 December 2023, with net profit up 45% to $US145.1 million ($222.3 million).

James Hardie 12-month share price (Source: Market Index)

What the brokers think

Market Index Broker Consensus: BUY (12 buy, 4 hold, 1 sell)

• Views among brokers remain overwhelmingly positive but Jarden was among the few rating upgrades, lifting to OVERWEIGHT from Neutral on the back of the result.

• Macquarie maintained its OUTPERFORM rating and lifted its price target to $65.80 from $65.60.

• UBS maintained its BUY rating but analyst Lee Power dropped his price target to $66.50 from $68.70.

James Hardie Industries shares closed at $59.74 on Wednesday 28 February. Having dropped 5% in early trading on the day of the quarterly result, the share price is up 9.8% since 13 February.

Wesfarmers (ASX: WES) – 15 February

One of Australia’s 10 largest firms by market cap and the biggest within the consumer discretionary sector, Wesfarmers delivered a predictably positive half-yearly result on 15 February.

The firm’s exposure to lithium via its Mt Holland mine provided the only drag on earnings, as MPC Markets’ Kai Chen told Livewire on the day of the result.

Wesfarmers 12-month share price (Source: Market Index)

What the brokers think

Market Index Broker Consensus: HOLD (8 buy, 7 hold, 3 sell)

There were few ratings changes among sell-side analysts. Some see the housing slowdown impacting Bunnings from here, while others are looking for an FY25 rebound on the back of an improved housing cycle.

• Morgans downgraded its rating to HOLD from Add but analyst Alexander Lu lifted his price target to $62.30 from $55.15.

• Barrenjoey maintained its UNDERWEIGHT rating while lifting its price target to $50 from $45.

• Macquarie maintained its NEUTRAL rating but lifted its price target to $61.20 from $56.30.

Wesfarmers' share price closed at $65.76 on Wednesday 28 February.

Woodside Energy Group (ASX: WDS) – 27 February

Australia’s largest integrated oil and gas company booked a 74% net profit for the half-year 2024 but still beat its 80% dividend payout ratio. That’s one of several reasons Martin Currie’s Michael Slack still regards the company as a HOLD, as he explained to Livewire’s Sara Allen on the day of the result.

Woodside's 12-month share price (Source: Market Index)

What the brokers think

Market Index Broker Consensus: BUY (9 buy, 3 hold, 2 sell)

• Morgan Stanley added Woodside to its coverage list again on 27 February, resuming the same OVERWEIGHT rating it held previously. Analyst Rob Koh has set a price target of $34.

• Goldman Sachs also again picked up coverage of the company, but prior to the result on 19 February. Analyst Henry Meyer resumed Goldmans’ prior BUY rating set a price target of $32.40.

• Also prior to the result, on 28 January, Morgans analyst Adrian Prendergast upgraded Woodside to ADD from Hold and lifted his price target to $34.30 from $33.50.

Woodside shares closed at $30.15 on Wednesday 28 February.

Pilbara Minerals (ASX: PLS) – 22 February

One of the Australian mining companies most leveraged to the battery metals boom, which appears to have imploded in the last 18-plus months, Pilbara’s half-yearly result was closely watched this year. Management delivered a positive cash flow (after adjustments) despite the near 80% drop in lithium prices during the period.

Katana Asset Management’s Hendrik Bothma still described PLS as “fantastic” when he spoke with Livewire’s Kerry Sun last week. Livewire's Carl Capolingua quizzed CEO Dale Henderson soon after the results announcement.

The share prices of PLS and several other local lithium producers also rallied in recent days in response to moves in the lithium carbonate futures market, as discussed earlier this week.

Pilbara Minerals 12-month share price (Source: Market Index)

What the brokers think

Market Index Broker Consensus: HOLD (10 buy, 7 hold, 4 sell)

• On the back of the recent price rally, Citi on 26 February downgraded Pilbara Minerals to SELL from Neutral – which reverses the broker’s upgrade of the stock on 22 January. Analysts Kate McCutcheon and Alexander Papaioanou left their price target at $3.60.

• Macquarie, on 22 February, maintained its OUTPERFORM rating on the back of the half-yearly result but trimmed it price target to $4.40.

• Morgan Stanley analyst Rahul Anand, CFA, maintained his UNDERWEIGHT rating and left his price target at $3.

PLS shares closed at $4.18 on Wednesday 28 February.