After a relatively strong run, the markets gave a bit of it back this week as every major index finished the week in the red. The NASDAQ took the worst of it, finishing down 2.62% on the week.
As earnings season comes to a close, the bulk of Stocktrades Premium companies have reported earnings. There are a few stragglers, including Enghouse Limited, BRP Inc, and Alimentation Couche-Tard. But we’ll keep you in the loop on those when they’ve reported.
The bulk of this e-mail will contain quarterly updates from our Premium highlighted stocks. However, we wanted to go over a few things first.
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Premium earnings
First, the last U.S. Foundational Stock to report earnings this quarter.
Home Depot (HD)
The correction in Home Depot was pretty drastic when the company hit the sub $270~ mark. The market seemed to price in some significant impacts due to inflation, impacts that the company put to bed in its most recent quarter.
Home Depot’s Q2 earnings beat estimates on all fronts. Earnings of $5.05 per share, revenue of $43.79B, and EBITDA of $7.95B beat expectations by low-single digits.
The company reaffirmed guidance despite the high inflationary environment. Although traffic is dipping due to a slowdown in the housing market, average ticket prices per visit are up, resulting in strong growth.
Overall, nothing has changed with the retailer. It is a blue-chip dividend growth stock that should provide investors with solid growth for the foreseeable future.
Goeasy Ltd (TSE:GSY)
After posting a weak first quarter, Goeasy rebounded in the second quarter, topping analyst estimates on all fronts. Revenue of $251.65M came in 2.5% ahead of estimates, and earnings of $2.83 topped expectations by 3.10%. Despite fears of an economic slowdown, the company is witnessing record loan originations.
Loan originations came to $628M on the quarter, a 66% increase from the second quarter of 2021. This led to organic growth in the company’s overall loan portfolio of 191% year-over-year.
Net charge-offs – a metric that will be heavily scrutinized moving forward as it is a highlight of loans it expects to go unpaid – came in at 9.3%, which was in line with estimates. In its updated guidance, the company believes it can maintain an 8-10% net charge-off rate through 2024. The company’s automotive financing segment, which started last year, is witnessing massive growth, 451% on a year-over-year basis.
Overall, we feel patient accumulators of GSY will be rewarded in the long term.
You can read our full report on Goeasy here
Stella Jones (TSE:SJ)
Stella Jones posted a solid second quarter, topping estimates on all fronts. Revenue of $907M came in 5.38% higher than expected, and earnings per share of $1.51 crushed estimates of $1.19. EBITDA of $154M also came in much higher than the $127.5M expected.
When we look to year-over-year numbers through the first half of the year, revenue has jumped by low single digits while EBITDA and earnings have fallen by double digits. This is to be expected, as the situation in the first half of 2021 in terms of both commercial and residential lumber usage and prices was much different.
Residential lumber sales comprised around 32% of the company’s total sales and were down 14% on the year. This isn’t all that surprising, as rising interest rates and high commodity prices damper the residential housing market. The company also stated that unfavourable weather conditions attributed to the dip in sales.
Overall, the company maintained its outlook of mid-single-digit growth over the next 3 years. It aims to return over $500M to shareholders over that timeframe, likely via share buybacks and dividends.
Since our highlight not too long ago, the stock has been up by double digits. However, we still feel there is value here.
You can read our full report of Stella Jones here
Algonquin Power & Utilities (TSE:AQN)
Algonquin Power topped expectations on all fronts yet again in the second quarter. Revenue of $797.48M beat by $7M~ and earnings per share of $0.204 beat by just over a penny.
All eyes are on the closing of the Kentucky Power acquisition, and although Algonquin stated it still expects it to close in the second half, there was no update as to when in the second half.
The company reported an 18% year-over-year increase in adjusted EBITDA and a 7% increase in adjusted net earnings per share. When we look to funds from operations, they came in at $180.3M, which marks an 11.77% increase year-over-year.
It was business as usual for Algonquin Power, and the company will have many eyes on it post-closing of the Kentucky Power acquisition, as the criticism for the cost paid and dilution of shares still lingers. It may need to show some early results to break the stigma.
You can view our full report of Algonquin Power here.
Manulife Financial (TSE:MFC)
Manulife reported second-quarter earnings that marginally beat estimates. Earnings per share of $0.78 topped estimates of $0.758, and overall headwinds in Asia due to the lack of inflows into its Wealth and Asset Management business and the continued shutdowns due to the COVID-19 pandemic continue to impact the company.
The company’s core earnings came in at $1.6B, which marks a 9% decrease from Q2 2021, and Wealth and Asset Management inflows hit only $1.7B in Q2 2022, compared to $8.6 billion on Q2 2021.
On the bright side, new business value in Canada and the USA showed strong growth compared to Q2 2021 and through the first 6 months of the year. Although new business value as a whole dropped, this was primarily because of headwinds in Asia, and once those are resolved, the company is likely to head back to double-digit NBV growth.
Overall, this is a business that will need some normalcy in its Asia segment before growth returns, and we believe this is a matter of when not if. So, patient accumulators should be rewarded.
You can view our full report on Manulife here
Automotive Properties REIT (TSE:APR.UN)
Automotive Properties reported strong second-quarter results. Revenue of $20.83M was in line with estimates, and the company is showing strong, low single-digit growth in terms of funds from operations per unit through the first 6 months of the year.
Its payout ratios are also decreasing through the first 6 months of the year compared to 2021, as it is paying out 87.8% of adjusted funds from operations towards the dividend, compared to 89.5% through the first 6 months of 2021. Its debt to gross book value ratio has remained steady at 41.2%.
Our report on Automotive Properties will be ready next week.
WELL Health (TSE:WELL)
It was another strong quarter for Well Health Technologies. This past quarter the company topped estimates across the board. Earnings of $0.08 beat by $0.03, revenue of $140.3M beat by $10M, and adjusted EBITDA of $26.4M beat by $3.2M.
The company also revised revenue guidance upwards to $525M from $500M and re-iterated expectations to be profitable in Fiscal 2022. It is also worth noting that the company generated $15.4M in free cash flow, which can fund future growth. This is a sign of maturity, as in its early days, the company would have had to rely on debt, issuing shares, or a combination of both to fund acquisitions.
One key aspect for growth companies is to watch margins. Higher margins mean the company is finding greater efficiencies as it scales upwards. In WELL’s case, Q2 gross margins increased to 53.8% from 48.9% in Q2 of Fiscal 2021. This is a sign that revenue growth is outpacing expenses as the company becomes more efficient.
Overall, it was yet another solid quarter and WELL has officially broken out of its downtrend. It is now down only 16% this year, up from being down by as much as 40% in June.
