Downer EDI – Buy Signal

Downer EDI is now under Algo Engine buy conditions and was added into our ASX 100 model portfolio.

We are comfortable with DOW’s broader business, given the track record of earnings delivery. The recent issues DOW encountered within the solar and engineering projects were absorbed within FY19 guidance.

FY 20 earnings should deliver 8% EPS growth, which places the stock on a forward yield of 4.5%.

Downer EDI offers value within the $6.75 – $7.00 range.

 

Downer EDI – Take Profit

Downer EDI recently moved into Algo Engine sell conditions after forming a new lower high at $7.50.

Downer reported 1H FY19 revenue of $6.6bn, EBITDA of $413mn and underlying NPATA of A$146mn, up 11% on the same time last year. Full year FY19 earnings are likely to be around $330mn.

We will take another look at the buy-side of Downer on a pullback below $6.80.

 

 

 

Buy Downer EDI

During our Opportunities in Review webinar series, we’ve been suggesting Downer EDI as a buy at $6.75.

Downer EDI has confirmed 13% EPS growth for the year ahead, which should support a $7.50 to $8.00 initial price target.

Downer EDI

Downer EDI Boasts 13% Earnings Growth

Downer EDI re-affirmed 13% EPS earnings growth, which looks attractive against an average market growth rate of  5 – 7 %.

Macro conditions remain positive in DOW’s key markets across education, health, mining road & rail transport. 

Based on FY20 EPS growth we now have DOW on a forward yield of 4.4%.

Internal momentum indicators are pointing higher and we see scope for an upside move into the $7.80/90 range.

Downer EDI

Looking For More Upside in DOW & CIM

We recommend buying both Downer EDI & CIMIC Group at current levels.

Both of these infrastructure names have pulled back materially from their June highs without any negative changes to their growth prospects.

From a technical perspective, we see medium-term upside targets of $7.50 and $51.50, respectfully.

 

Keep CIMIC On The Radar

CIMIC was a stand out  during the recent earnings season with growth coming in well above market consensus, supported by large infrastructure spending.

We expect 2 – 3 years of above trend growth in CIMIC and see the current weakness as an opportunity to accumulate the stock.

Our buy range is $48.50 to $47.50.

Also keep an eye on any weakness in the share price of Downer EDI, as a buy on the dip opportunity.

CIMIC

 

Downer EDI confirms growth expectations

Our Algo Engine generated a buy signal in Downer EDI back in June at $6.60, with the stock price now pushing $8.00, most of the good news is priced in.

The FY18 earnings were announced on Thursday and the numbers were in line with consensus expectations. The highlight is the forward guidance of 13% growth.

FY18 NPATA came in at $296 & FY19 guidance now sits at $335m. This places Downer EDI on a forward yield of 4%.

Downer EDI – Buy On Weakness

Downer EDI will  report earnings on Thursday and any weakness in the share price ahead of the result, provides a buying opportunity.

We expect Thursday’s result to exceed market consensus, supported by positive industry trends. As displayed in CIMIC’s recent earnings result.

Downer goes ex-dividend $0.12 on the 11th of September.

 

Downer EDI