Three stocks that have seen big moves since the end of June are scientific instrument group Judges Scientific (LSE: JDG), miner Anglo American (LSE: AAL) and chemicals group Johnson Matthey (LSE: JMAT).
All three have updated the market this morning, triggering fresh share price moves. In this article I’ll take a closer look at today’s developments.
Another profit warning
Shares in Judges Scientific fell by as much as 15% when markets opened this morning. In a trading update, the firm warned that profits will be “substantially below market expectations” this year.
Judges said sales fell by 3.4% compared to the same period last year. This reduced the firm’s order book from 11.4 weeks of sales in January to just 10.7 weeks of sales at the end of June.
However, sales did improve substantially in June. As an exporter, Judges also stands to benefit from the weaker pound.
The board says it’s confident that the second half will produce better results. However, I’m disappointed they didn’t provide any idea of the impact of today’s profit warning on forecast earnings.
Use of the word “substantially” suggests the news will be bad. I’m guessing that forecasts will fall by at least 10%, which would put Judges’ stock on a forecast P/E of 13.5. I think things could improve from here, but I’d like more detail on the numbers.
A Brexit star
Today’s trading statement from Johnson Matthey prompted a modest rise in the shares, which touched a new 52-week high of 3,212p before settling back slightly.
The group’s share price has risen by nearly 10% since the Brexit vote, thanks mainly to currency shifts. Johnson Matthey confirmed today that if exchange rates stay as they are, underlying operating profit will be £40m higher than current expectations this year.
That’s good news, but I wouldn’t rely too heavily on this prospect, as exchange rates can change rapidly. A more objective measure is that sales rose by 2% on a constant currency basis during the firm’s first quarter. Excluding currency effects, the firm says trading is in line with expectations.
At 3,190p, Johnson Matthey stock trades on a forecast P/E of 17 and offers a 2.4% prospective yield. While I rate this as a quality business, I think the shares are probably fairly valued at the moment.
Today’s pull-back doesn’t concern me
Shares in Anglo American fell by 7% this morning after boss Mark Cutifani said that the was maintaining “a cautious outlook” for its diamond business.
The comments were made in Anglo’s second-quarter production update, which showed production broadly in line with expectations across the group’s portfolio of mines.
Anglo owns diamond giant De Beers, which reduced production last year to try and shore up falling diamond prices. The evidence so far suggests De Beers’ strategy is working, but the group has had to cut diamond production by nearly 20% to achieve this.
Anglo is continuing to focus on selling non-core assets and maximising cash generation from its core assets. The group’s shares are up by 153% so far this year and now trade on a 2016 forecast P/E of 21, falling to a P/E of 18 for 2017.
This may seem pricey, but progress has been strong so far. I plan to continue holding.