ASX reporting season wrap: CBA, JB Hi-Fi, REA and more
A round up of notable stories and reactions as ASX earnings season gathers steam.
Mentioned: REA Group Ltd (REA), CAR Group Ltd (CAR), Light & Wonder Inc Chess Depository Interest (LNW), Life360 Inc Chess Depository Interest (360), Commonwealth Bank of Australia (CBA), JB Hi Fi Ltd (JBH), SGH Ltd (SGH), QBE Insurance Group Ltd (QBE), AGL Energy Ltd (AGL)
This is the first of three ASX reporting season wraps being sent in August and early September.
This edition includes a selection of results covered by our analysts from Wednesday August 6 to Wednesday August 13. Let’s start with some results that the market seemed to like.
REA Group (REA)
- Moat rating: Wide
- Fair Value estimate: $134 per share
- Star Rating: ★
REA Group, which owns the property listing platform realestate.com.au, reported annual EBITDA from its property and advertising segment of over $1 billion for the first time.
The shares rose by almost 7% following the results before settling around 5% higher. Our analyst Roy Van Keulen, however, expressed caution at the company’s plans to flex its market dominance through further price hikes.
You can see why Roy thinks that REA Group is materially overvalued and “skating on thin regulatory ice” in this article.
CAR Group (CAR)
- Moat rating: Narrow
- Fair Value estimate: $31.50 per share
- Star Rating: ★★
CAR Group, owner of Carsales.com.au, is another niche marketplace leader and another share that Roy thinks trades at a high premium to Fair Value.
What Roy doesn’t refute, though, is CAR Group’s strong competitive position and ability to innovate. These qualities were on full display in CAR’s recent results, with highlights including a reacceleration in growth in its North American business.
The shares are up by around 8% since the results were released, pushing it further into overvalued territory versus Roy’s Fair Value estimate.
The point of difference here, he suggests, is how quickly markets expect CAR’s revenues to grow in the coming years. While Roy’s forecast bakes in an average of 9% per year sales growth over the next decade, markets appear to be pricing in double-digit growth.
Light & Wonder (LNW)
- Moat rating: No Moat
- Fair Value estimate: $135 per CDI
- Star Rating: ★★★★
Light & Wonder is one of the biggest pokie machine providers worldwide. Its shares have been weak lately but its QX results were not as bad as markets feared. This led to a 13% rally but the shares are still lower than they were going into August.
Our LNW analyst Angus said the quarter was better than expected, with profit margins rising above the business. The company also raised its guidance for future profits slightly.
Longer term, Angus thinks LNW is unlikely to gain material market share but is well positioned to defend what it already has. At a recent price of $135 per ASX listed CDI, Light & Wonder traded 24% below our Fair Value estimate and had a Star Rating of four.
Life360 (360)
- Moat rating: No Moat
- Fair Value estimate: $21 per share
- Star Rating: ★
Life360 reported strong second-quarter results, with sales growing 36% compared to the same period last year. The firm also raised its guidance and announced that its founder CEO Chris Hils will step aside into the position of Executive Chair.
There was plenty for investors to digest, then, and they seemed to like what they saw. Life360’s market darling status carries on for now, with shares up by more than 13% after the update.
Our analyst Roy Van Keulen raised his Fair Value estimate by 5% after factoring in the company’s updated guidance but thinks the shares remain overvalued. You can read more about why in this article.
Now onto some companies that seem to have fallen short of expectations.
Commonwealth Bank (CBA)
- Moat rating: Wide
- Fair Value estimate: $100 per share
- Star Rating: ★
Let’s start with one of the week’s biggest stories: CBA’s post result wobble.
Our analyst Nathan Zaia said there were no surprises in the result, and that Wednesday’s share price fall likely reflects CBA being priced for perfection (and more) beforehand.
You can read more about CBA’s earnings and why Nathan is still baffled by its recent share price here.
JB Hi-Fi (JBH)
- Moat rating: No Moat
- Fair Value estimate: $45.50 per share
- Star Rating: ★
JB Hi-Fi is another high-flying ASX share that our analysts have viewed as being overvalued for some time. And it is another company that saw its share price fall after it updated investors.
As it happened, the result itself was actually rather good. Our analyst Johannes Faul was especially impressed with what he called “stellar” revenue growth over the year, with sales coming in 10% higher than in fiscal 2024.
Faul thinks that the 8% fall in share price on the day was more to do with the announcement that CEO Terry Smart will step down. You can read Johannes’ thoughts on the result and management change here.
SGH Ltd (SGH)
- Moat rating: Narrow
- Fair Value estimate: $38 per share
- Star Rating: ★★
Labelling Seven Group Holdings as Australia’s Berkshire Hathaway would be a bit wide of the mark given that it isn’t underpinned by insurance companies. But as an owner-operated conglomerate with several industrial businesses, there are some similarities.
SGH hiked its dividend but underlying earnings growth fell short of the company’s guidance as conditions in its end markets were mixed. Given what our analyst Mark Taylor saw as a high starting valuation, the resulting sell-off is not a huge surprise.
Despite a 10% fall following the results, Mark continues to view the shares as being overvalued. They still trade at more than a 20% premium to his $38 per share Fair Value estimate.
QBE Insurance Group (QBE)
- Moat rating: No Moat
- Fair Value estimate: $16.50 per share
- Star Rating: ★★
Insurers have had things very good of late. Fewer natural catastrophe events have coincided with widespread increases in premiums, leading to bumper profits. This set lofty expectations for QBE, and a strong update wasn’t enough to support the shares.
Our analyst Nathan Zaia raised his Fair Value estimate for the shares by 3% but still thinks they are overvalued. He doubts that industry conditions are likely to remain this good forever, while juicy profits could attract pricing competition.
AGL Energy (AGL)
- Moat rating: No Moat
- Fair Value estimate: $12 per share
- Star Rating: ★★★★
AGL’s underlying profit of $640 million was in line with expectations but the shares fell some 13%. Adrian Atkins thinks this was likely due to softer forward guidance on account of higher operating costs and cheap energy supply contracts coming to an end.
While Adrian sees the roll-off of cheap coal and gas contracts as a long-term headwind, he thinks the sell-off was overdone. At recent prices of around $9.20 per share, AGL traded roughly 25% below Adrian’s estimate of Fair Value.
You can see Adrian’s take on AGL’s result and its future prospects here.
Stay up to date this reporting season
August will see the vast majority of ASX listed companies report their latest results to shareholders.
For a long-term take on developments in the companies and industries our analysts cover, subscribe to our daily email and get our latest reporting season articles straight to your inbox.
