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The industrial sector comprises companies that are involved in business activities such as production and distribution of capital goods that include aerospace & defence, electrical equipment, engineering & building products, and construction, among others. The sector also includes businesses that are engaged in providing commercial services and supplies as well as providers of transportation services.
Australia’s industrial sector is one of the most significant sectors hiring ~19% of the total workforce and contributing to approximately 24% of the country’s GDP. While the sector has struggled in the early part of 2020 affected by the various challenges faced by the economy, it has generated impressive returns on a 1-year (11.34%) and 3-years basis (10.36%), as on 25 February 2020.
In this article, we will throw some light on three industrial stocks that have recently updated the market with their latest earnings release – QUB, SEK, JLG.
Qube Holdings Limited (ASX:QUB)
Qube Holdings Limited offers comprehensive logistics solutions across several facets of the import and export supply chain.
Latest financial Story of QUB
The company recently notified the market with the results of the first half of the financial year 2020 and highlighted the following:
- The company experienced consistent growth in earnings, even with economic headwinds. For 1H FY20, the company reported underlying revenue of $970.1 million with an increase of 12.9%, and the underlying NPATA stood at $76.3 million, reflecting a growth of 5.1%.
- Qube inked major contracts with Shell Australia and Bluescope Steel, which underpins the company’s medium-term growth. Import/Export (IMEX) terminal and rail operations have started at Moorebank Logistics Park (MLP).
- The company began a monetisation/partnering process, which is focused on Moorebank Logistics Park MLP. This process might allow the company to realise some of the substantial value, which has already been created and to reduce future funding requirements of QUB.
- The company reported robust earnings from its 50% stake in Patrick Terminals. Patrick contributed with underlying NPAT of $17.9 million and underlying NPATA of $22.0 million.
- During the period, the company received $5.0 million in cash distributions from Patrick along with an additional amount of $15.0 million distributed to Qube in February 2020, which has balanced Patrick’s high cash flow generation as well as ongoing capex requirements.
- Despite continued rate pressures and weakness in overall market volumes, with market growth (lifts) declining by 4.4% in 1H FY20, the company reported strong financial performance from Patrick.
- The company declared fully franked interim dividend amounting to 2.9 cents per share, reflecting a rise of 3.6%.
The company is optimistic and believes it is well-positioned in delivering sustainable, long-term earnings growth from its strategic assets as well as strong market positions. Underlying earnings growth for FY20 might be impacted by recent bushfire, coronavirus outbreak globally.
Stock Performance
The stock of QUB was trading at $3.245 per share on 26 February 2020 (03:16 PM AEDT), indicating a fall of 5.14% against its previous closing price. The company has a market capitalisation of $5.22 billion, and the total outstanding shares of the company stood at 1.63 billion. QUB’s 52-week low and high are $2.660 and $3.630, respectively. The company has generated returns of -2.13% and 0.31% in the last three months and last six months, respectively.
Seek Limited (ASX:SEK)
Seek Limited is involved in the matching candidates and hirers online with career prospects and other associated services.
Decent Growth in Earnings
Recently, the company released its operational and financial performance for the first half FY20 ended 31 December 2019:
- During the period of six months, the company made steady progress towards its aspiration of achieving A$5 billion revenue by FY25.
- For 1H FY20, the company reported revenue of $875.5 million as compared to $757.2 million for 1H FY19, reflecting a growth of 16% despite the challenging economic conditions. Seek reported EBITDA of $247.4 million with a growth of 4% as a result of prioritizing the investment to unlock future growth opportunities.
- Concerning the ANZ segment, the company witnessed resilient result as weak economic conditions have impacted ad volumes. Depth revenue surged 17%, which implies the benefits of product investment during 1H FY20.
- The Board of the company declared interim dividend amounting to 13 cents per share, which is payable on 09 April 2020 with the record date of 26 March 2020.
- On the back of the performance of first seven months of FY20, the company was on track to attain its original Revenue and EBITDA guidance even with numerous adverse short-term external events such as US-China Trade Tensions and Political unrest in Hong Kong.
Concerning the outlook, Seek stated that its near-term results would be impacted by temporary events such as the coronavirus outbreak, softer economic conditions as well as its investment bias. The company expects no direct material impact outside China and Hong Kong.
Stock Performance
The stock of SEK was trading at $21.695 per share on 26 February 2020 (03:16 PM AEDT), indicating a fall of 4.888% against its previous closing price. The company has a market capitalisation of $8.03 billion, and the total outstanding shares of the company stood at 352.06 million. SEK’s 52-week low and high are $16.970 and $24.090, respectively. The company has generated positive returns of 1.74% and 12.64% in the last three months and last six months, respectively.
Johns Lyng Group Limited (ASX:JLG)
Johns Lyng Group Limited is a Victoria, Australia-headquartered company engaged in building and restoration services. The company was officially listed on the Australian Stock Exchange in 2017.
Johns Lyng recently reported a period of strong earnings growth in the first half of FY20 and outlined the following:
- During the first half of the 2020 Financial Year, total revenues stood at $233.7 million, an increase of 53.1% compared to 1H FY19
- The company reported normalised EBITDA of $20.0 million with the robust growth of 77.7%. This growth is mainly fueled by a consistently high volume of business-as-usual (BAU) activity in the Insurance Building and Restoration Services (IB&RS) segment of the group, which experienced a rise of 1.5% in sales revenue. The strong first half result has proved as a primary driver of the 11% forecast for EBITDA upgrade for FY20.
- The Group also completed several significant acquisitions during 1H FY20, which are anticipated to be earnings accretive for the full FY20.
- JLG declared a fully franked interim dividend amounting to 1.8 cents per share with a record date of 02 March 2020, and it would be paid to shareholders on 17 March 2020.
- For FY20, Johns Lyng is anticipating sales revenue and EBITDA of $420 million and $35.6 million, respectively.
Stock Performance
The stock of JLG was trading at $2.500 per share on 26 February 2020 (03:16 PM AEDT), indicating a fall of 5.303% against its previous closing price. The company has a market capitalisation of $586.73 million, and the total outstanding shares of the company stood at 222.25 million. JLG’s 52-week low and high are $1.165 and $2.820, respectively. The company has generated positive returns of 32.00% and 60.49% in the last three months and last six months, respectively.
