Buy, Hold, Sell - 4 Blue chip Stocks

Commonwealth Bank of Australia

CBA Details
 
Appointment of Key Personnel: Commonwealth Bank of Australia (ASX: CBA) has appointed Matt Comyn as the new Chief Executive Officer, effective from 9 April 2018. He will replace Ian Narev, who will retire after being with the bank for more than six years. Meanwhile, CBA stock has risen 0.03% in three months as on January 25, 2018 and is trading at a price to earnings ratio of below 15x. CBA is currently facing a range of reputational, regulatory and legal issues and the bank has to respond to the current review by APRA, the Royal Commission, and the legal proceedings with AUSTRAC.
 

Credit Provisions (Source: Company Reports)
 
Meanwhile, 1Q18 (ending September 2017) trading update revealed operating income growth of 4%, with banking income supported by improved margins. Home lending growth was managed within regulatory limits. While the credit quality of the Group's lending portfolios is decent, the macro-level headwinds cannot be ignored. We have an “Expensive” recommendation on the stock at the current price of  $79.19
 

CBA Daily Chart (Source: Thomson Reuters)
 

National Australia Bank Ltd

NAB Details
 
Planned an estimated $1.5 billion increase in investment over the next three years: National Australia Bank Ltd. (ASX: NAB) has planned an estimated $1.5 billion increase in investment over the next three years and has a key focus to drive a major uplift in innovation and capabilities in the Group’s leading Australian SME franchise. The cumulative cost savings, which the bank is currently targeting are expected to be greater than $1 billion by 30 September 2020, as the bank is significantly simplifying and automating processes, that reduces procurement and third-party costs, and leads to a leaner organizational structure. On the other hand, NAB as other Australian Banks was impacted when the government announced plans for a Royal Commission into the alleged misconduct of Australia’s banking and financial services sector. Therefore, NAB stock has fallen 11% in three months as on January 25, 2018, while it still trades at a reasonable P/E. Based on the group-specific potential in the banking sector, we give a “Buy” recommendation on the stock at the current price of $29.26


NAB Daily Chart (Source: Thomson Reuters)
 

BHP Billiton Limited

BHP Details
 
Operational performance in the first half: BHP Billiton Limited (ASX: BHP) has maintained the full year production and unit cost guidance for Petroleum, Copper, Iron Ore and Energy Coal. However, the production guidance for Metallurgical Coal is reduced to between 41 and 43 Mt due to the challenging roof conditions at Broadmeadow, that are expected to continue through the March 2018 quarter, and geotechnical issues that grew due to the wet weather impacts at Blackwater. As a result, the unit cost guidance will be negatively impacted and is currently under review.
 

Production for the December 2017 half year and guidance for FY18 (Source: Company Reports)
 
Moreover, the Los Colorados Extension project has successfully ramped up during the December 2017 quarter. It contributed to a 17% rise in copper output, and production records were achieved at a number of Western Australia Iron Ore and Queensland Coal mines. Additionally, BHP continues to progress a number of alternatives to divest the Onshore US assets for value and all its major projects under development are tracking to plan. BHP expects the December quarter to lead to a stronger second half operating performance. Overall, together with incremental production from latent capacity projects in iron ore and copper, BHP expects the volume growth of 6% for the full year. Therefore, BHP stock has risen 15.03% in three months as on January 25, 2018. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $30.73
 

BHP Daily Chart (Source: Thomson Reuters)
 

ResMed Inc

RMD Details
 
Net income fell 88% in the Second Quarter: ResMed Inc. (ASX: RMD) in the second quarter ended December 31, 2017 has reported 13% increase in the revenue to $601.3 million, as compared to the same period of the prior year. However, the gross margin in the second quarter was 58.2%, which is slightly lower than the prior year’s quarter gross margin of 58.3% mainly due to declines in average selling prices. Further, the net income fell 88% to $9.5 million in the second quarter. Additionally, RMD has repurchased 100,000 shares at a cost of $8.5 million, as part of its ongoing capital management program. The company has declared a quarterly cash dividend of $0.35 per share, payable on March 15, 2018. Meanwhile, RMD stock has risen 21.10% in three months as on January 25, 2018. Based on the foregoing and trading levels, we give an “Expensive” recommendation on the stock at the current price of $12.66
 

RMD Daily Chart (Source: Thomson Reuters)

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