Incitec Pivot reports 1H19 earnings on Monday the 20th of May. We’re expecting the result to disappoint the market and we place our readers on alert.
Queensland floods and plant disruptions will offset any benefit from higher fertilizer prices. If the earnings release is as negative as we forecast, we feel that a buying opportunity will present soon after the announcement.
We see the FY19 issues largely as one-off in nature and there will likely be an opportunity to profit from a recovery in the back-half of 2019.
Keep this one in your diary and look out for next week’s update on the blog. We’ll identify the entry level, post the result.
Incitec Pivot is under Algo Engine buy conditions and is a current holding in the ASX 100 model.
The FY19 earnings of IPL will be impacted by the Queensland floods and we’ll see the numbers revealed in the coming weeks. There’s a chance the impact will be greater than current consensus, which may result in short term selling. If this occurs and an opportunity to buy IPL sub $3.00 eventuates, we would consider this a “high conviction” accumulation play.
Our Algo Engine generated a buy signal recently in IPL and the stock is currently held in the ASX top 50 model.
The stock price has pulled back to form a “higher low” at $3.30 and we see forward earnings surprising to the upside, due to the finalization of the Gibson Island gas agreements and the recent recovery in global nitrogen prices.
IPL is also set to recommence a $300m share buyback.
Our Algo Engine recently triggered a buy signal in IPL, and with the stock now retesting the $3.50 low, we consider this a buy opportunity.
Nitrogen based fertiliser prices progressively weakened through the 1Q, which helps explain the recent share price weakness, however, phosphate prices have proven more resilient and IPL will also benefit from the lower US corporate tax rate.
Spot DAP prices at US$410/t are above most analysts financial model forecasts and with IPL’searnings growth accelerating out into FY20, the stock now trades on FY20 yield of 5%.
FY20 revenue $3.6 billion, EBITDA $990 million and EPS $0.30.