The S & P / ASX 200 (Index: ^ AXJO) (ASX: XJO) is set to follow Wall Street lower this morning, but there is one stock that can ease market weakness. Investors will look at the price of Codan Limited (ASX: CDA) today, after the metal detectors company and industrial communications solutions posted a profit improvement after the market closed yesterday. Codan's stock price dropped 1.9 percent on Wednesday to $ 3.19, with total earnings since the start of the 2019 calendar barely below 10 percent when ASX 200 is over 15 percent. The increase in management's profit reported that sales in the second …
Mostly, S & P / ASX 200 (Index: ^ AXJO) (ASX: XJO) the index is ready to follow Wall Street lower this morning, but there is one stock that can shorten the weakness of the market.
Investors will watch on Codan Limited (ASX: CDA), the stock price is released today after the metal detector and industrial communications company has posted a profit improvement after the market closed yesterday.
Codan's stock price dropped 1.9 percent on Wednesday to $ 3.19, with total earnings since the start of the 2019 calendar barely below 10 percent when ASX 200 is over 15 percent.
The management reported that sales in the second half of FY19 are ahead of expectations and the company expects the current half to be as strong as the first half result. This means a big push for her full year net profit!
Codan now predicts net profit to reach $ 42 million to $ 45 million a year compared to its previous $ 25 to $ 30 million.
Part of the strong performance can be explained by metal detector sales with the company less dependent on the GPZ7000 gold detector, after developing a new platform that allowed the company to diversify its range of products for the gold and entertainment segments.
The Communications Department also contributed to a better-than-expected result after the company won several new contracts. This means that this business will generate sales at the top end of sales at a base level of $ 75 million in FY19.
But Codan does not shoot on all cylinders. Minetec's business will not meet sales expectations for the current financial year and will suffer a small operating loss, although it has successfully completed a trial using its technology and Caterpillar's Minestar system at the Tanami mine in Newmont in the Northern Territory.
Decrease ratings to override the upgrade
I think investors will tend to ignore this, given the amount of profit improvement. Codan is also a rare share of ASX, given that most companies are releasing profits during this "recognition season", which usually lasts until July, as the boards review their financial results for FY19 and issue updates on investors according to their ongoing disclosure obligations.
We have already seen some high-ranking victims that have lowered their expectations for FY19. This includes Virgin Australia Holdings Ltd. (ASX: VAH) Reliance Worldwide Corporation Ltd (ASX: RWC), and Flight Center Travel Group Ltd. (ASX: FLT).
While the surprising federal outcome of the election, returning Morrison's favorable government investment, and the potential cuts in RBA rates, has improved our market prospects, we still see more earnings warnings (outside the resource sector) in the coming weeks due to global economic shocks.
This also means that Codan's profit improvement is more likely to be an exception – not a rule.
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Brendon Lau has no position in any of these stocks. Motley Fool's parent company in Australia Motley Fool Holdings Inc. holds shares of Reliance Worldwide Limited. Motley Fool Australia owns shares and has recommended Flight Center Travel Group Limited. At Motley Fool, Australia recommends Reliance Worldwide Limited. We, the fools, do not all have the same opinions, but we all believe that considering a wide range of insights makes us better investors. Motley Fool has a disclosure policy. This article contains only general investment advice (AFSL 400691). Authorized by Scott Phillips.