General | Feb 03 2006
With the Australian dollar having fallen significantly over the past few weeks, with the March drop of 3.5% against the US dollar the biggest fall in around two years, analysts at Macquarie and JP Morgan thought it would be opportune to evaluate likely winners and losers from a weaker Australian dollar.
On Macquarie’s calculations, a sustained rate of around US70c for the rest of this year would boost the average ASX200 EPS by around 1.3%, with the broker highlighting resource stocks as “clear winners” along with several international stocks, with airlines flagged as the “major losers.”
As a lower Australian dollar is likely to have potentially positive impact on exporters and negative for importers and those whose majority of sales are offshore, the analysts feel the companies with the greatest upside to EPS growth are Iluka (ILU), Rinker (RIN), Santos (STO), Amcor (AMC), Oxiana (OXR), Woodside (WPL), Newcrest (NCM), James Hardie (JHX) and Zinifex (ZFX).
Meanwhile, Virgin Blue (VBA), Qantas (QAN), Sky Network Television (SKT), Pacific Brands (PBG) and Goodman Fielder (GFF) are highlighted as having the greatest EPS growth rate risk.
If the AUD fell by 1c against the USD, the analysts calculate that Iluka’s EPS would see a positive 4.6ppt improvement, while if the AUD were to decline by 4c, Macquarie estimates an 18.2ppt positive movement in the company’s EPS.
On the negative side of the fence, a 1c AUD fall would see Virgin Blue’s EPS movement decline by around 5.7ppt, while a 4c shift would pull EPS 22.8ppt lower, the broker calculates.
In the mean time, JP Morgan has focused its attention on Australian consumer stocks, with Foster’s (FGL), McGuigan Wines (MGW) and AWB (AWB) all seen as likely export sales winners and Fantastic Furniture (FAN) expected to benefit due to domestic production, the broker says.
Lion Nathan (LNN), Coca Cola Amatil (CCL) and Woolworths (WOW) are viewed as likely losers due to the translation of New Zealand earnings, while Pacific Brands (PBG), Colorado (CDO), Just Group (JST), Coles Myer (CML) and Woolworths are expected to benefit as they are direct sourcing retailers and apparel companies.
JP Morgan has cut its AUD assumptions to US71.53c from US75.7c.
