ASX Earnings Season Picks

This earnings season will likely be a volatile one, with one half of the market pricing in recession and the other half a soft landing. This makes for opportunity, but beware, it’s a double-edged sword.

Factors you should be looking for are good management, low debt and high margin, with the later 2 likely to be a severe headwind if management hasn’t got it right.

While we will take a “wait and see” approach for most company results, we are happy to buy our top picks prior to the release are Judo Bank (JDO), Corporate Travel (CTD) and Pilbara Minerals (PLS)

Judo Bank (JDO) – Australia’s newest bank, focusing on Small and Medium Enterprises (SME) has been a solid performer over the last few earnings seasons, beating expectations every time. While this one is unlikely to pay a dividend, it is sitting 30% below price consensus after seeing little recovery since the US regional banking crisis, which has little (if anything) to do with the way Judo operates. Judo runs a tight ship with the higher Net interest Margins (NIM), lower Non-Performing Loans (NPL) and a better liquidity ratio than any of the Big4 Banks

Expected Earnings Per Share (EPS): 6.9c

Expected FY Dividend: nil

Corporate Travel (CTD) – Corporate Travels gave a quarterly earnings update in mid July where the company confirmed its FY23 guidance, doubling its profit. With Business travel volumes are now back to pre-Covid levels, high margins amd no debt, the company is in fine shape to surge past 2019 levels

The outlook should be very positive with 2 large contracts from the British Foreign office and Australian government starting in FY24. The British contract alone is worth $3.1B over 5 years while the AU contract is still significant.

CTD has impressive margins at 31.5% and client retention rate of 97%!

Expected Earnings Per Share (EPS): 63.7c

Expected FY Dividend: 26.5c (3.90% or 5.07% including franking)

Pilbara Minerals (PLS) – Pilbara released their quarterly production update a fortnight ago and it was a stunning result, with increases in production and sales to record another record quarter. While group revenue declined 18% for the quarter due to lower prices, production costs remained consistent, a feat that few miners have been able to achieve in the last quarter.

With $3.3 billion in cash (24% of market cap) either a strategic acquisition or a good dividend is likely in the coming months

Expected Earnings Per Share (EPS): 74.7c

Expected FY Dividend: 20.7c (3.90% or 5.07% including franking)