Why these two stocks have been under the hammer lately?

Wesfarmers Ltd

WES Details
Declining comparable store sales growth in food and liquor business: Wesfarmers Ltd (ASX: WES) stock fell over 9% in the last one month (as of November 02, 2016) due to disappointing first quarter of 2017 performance. Coles’ food and liquor sales enhanced 2.9% during the quarter, but the declining growth of comparable store sales growth in food and liquor business added to investors’ concerns. Comparable store sales growth in food and liquor business is 1.7% for the current quarter as compared to 4% growth in the prior corresponding period. Bunnings Australia and New Zealand segment delivered an overall sales growth of 7.4% during the quarter, despite impact from the stock liquidation activities of the Masters business. 

First quarter of 2017 performance (Source: Company Reports)
 
Kmart reported an 11.2% growth driven by ongoing focus on lowest prices coupled with improving customer experience across all categories. Officeworks’ sales rose 7.5% driven by solid execution of its ‘every channel’ strategy, with positive sales growth achieved both in-store and online. But, the group’s coal division reported a production decline by 11.8% year on year (yoy) to 2,615,000 tonnes during the quarter while Metallurgical coal production lost 23% yoy to 1,647,000 tonnes. Steaming coal production declined 17.2% yoy to 968,000 tonnes mainly impacted by wet weather conditions, as rainfall surged 57% during the quarter. At the back of the above mixed results and limited prospects, we believe that the stock is ‘Expensive’ at the current price of $ 40.78

 
WES Daily Chart (Source: Thomson Reuters) 

ResMed Inc

RMD Details
Lower than estimated performance and outlook: ResMed Inc (ASX: RMD) stock declined 5.3% in the last five days (as of November 02, 2016) as the group delivered a lower than estimated first quarter of 2017 performance. RMD’s adjusted earnings per share rose 5.1% yoy to 62 cents during the quarter against prior corresponding quarter. But, EPS fell 6.9% yoy to 54 cents during the first quarter including one-time items. Even revenues missed estimates and rose 13% yoy to $465.5 million. As per geographic performance, America’s sales surged 18% yoy to $301.0 million, driven by contributions of $33.1 million from Brightree. Total EMEA and APAC region enhanced 5% at CER to $164.6 million. The group has a cash and cash equivalents of $731.4 million. But, cash flow from operations lost 30.7% yoy to $86.2 million due underlying earnings pressure coupled with decrease in net working capital balances. Selling, general and administrative expenses surged 15.9% yoy to $128.8 million, and Research and Development expenses rose 27.7% to $34.4 million. Even the outlook from the group for fiscal year of 2017 was weak, wherein the group narrowed their gross margins in the range of 58% to 60%, given the current exchange rates and likely trends in product and geographic mix. The group will conduct its AGM on November 17, 2016. We give an ‘Expensive’ recommendation for the stock at the current price of $ 7.55

 
RMD Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.