Investigation: What is driving Elders’ Share Price Decline?

eld
Daniel Ortisi
Written by

Daniel Ortisi

Equities Analyst

Apr 9th, 2024
Related topics

Agribusiness Elders (ASX:ELD) shocked the market on 8th April 2024 with an earnings update that was ~28% below analyst expectations for 1H24. ELD reports out of the traditional reporting cycle with a March interim period, hence the timing of this announcement.

At its Investor Day in November 2023, ELD management were positive on the outlook for inorganic growth (acquisitions). However, with today’s trading update, the level of gearing on the balance sheet is unlikely to support any material acquisition opportunities which in our view, is cascading negative sentiment for the stock.

What You Need to Know: FY24 Earnings Downgrade?

Management called out domestic weather patterns as a major driver of the downgrade, as an El Nino forecast saw more conservative crop planting and activity from Australian farmers. This has a flow on impact to ELD’s Rural Products business segment which accounts for ~60% of the company’s gross profits and includes the sale of chemical formulations for crop protection, seeds and fertiliser.

Persistently low livestock prices appears to be impacting its Agency Services business also.

elders business

Source: Company filings

What Lies Beneath: Understanding ELD’s Financial Health 

Stock Doctor’s quantitative Financial Health model has assessed ELD as being in Early Warning for multiple periods, meaning that we do not have enough confidence in the company’s financial statements to warrant an investment in the stock – despite its optically cheap price to earnings (P/E) ratio and historical dividend yield.

Agriculture businesses are highly cyclical and are often exposed to demand shocks seen as today’s announcement, which is why Stock Doctor often considers them “Value Traps”.

early warning

Source: Stock Doctor

Daniel Ortisi
Written by

Daniel Ortisi

Equities Analyst

Apr 9th, 2024
Related topics
Information in this communication is current as of publication unless otherwise stated. It is provided for educational purposes only and may not reflect current market data or opinion. It should not be relied upon in respect to any current investment decision. Investments can go up and down. Past performance is not a reliable indicator of future performance.

Important: This communication is provided by or on behalf of Lincoln Indicators Pty Limited ABN 23 006 715 573 (Lincoln), as Corporate Authorised Representative of Lincoln Financial Group Pty Ltd ABN 70 609 751 966, AFSL 483167 for information and educational purposes only. This content may contain general financial product advice. It has been prepared without taking account of your personal circumstances and you should therefore consider its appropriateness in light of your objectives, financial situation and needs, before acting on it. Investments can go up and down. Past performance is not a reliable indicator of future performance. Shares and other investments may go up and down in value, and their past performance may not be repeated and gives no guarantee of future performance. Information in this communication was current as at the date of its preparation, unless otherwise stated, and may be subject to change.

You should read and consider our Important Information and our Financial Services Guide (FSG) which sets out key information about the services we provide. Where our advice relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Lincoln Australian Income Fund Product Disclosure Statement (PDS), Lincoln Australian Growth Fund Product Disclosure Statement (PDS) and Lincoln U.S. Growth Fund Product Disclosure Statement (PDS) for the product at www.lincolnindicators.com.au before making any decision.

At the date of preparation of this communication, Lincoln, Lincoln Financial Group Pty Ltd or directors, employees and/or associates of these entities "may hold" interests in these ASX-listed companies. Further information about particular stocks held by these entities or persons from time to time is disclosed within the Stock Doctor program and may change at any time without notice.

Lincoln, Lincoln Financial Group Pty Ltd, any directors, employees and agents of these entities, make no representation and give no warranty as to the accuracy of this communication and do not accept any responsibility for any errors or inaccuracies in, or omissions from, this communication (whether negligent or otherwise) and are not liable for any loss or damage howsoever arising as a result of any person acting, or refraining from acting, in reliance on any information in this communication. No person should rely on this communication as it does not purport to be comprehensive. This disclaimer does not purport to exclude any rights under, or warranties implied by, law which may not be lawfully excluded.

Lincoln has taken precautions to minimise the risk of transmitting software viruses, but we advise you to carry out your own virus checks on any downloadable content. We do not accept liability for any loss or damage caused by software viruses.

Copyright © 2024 Lincoln Indicators Pty Ltd. All rights reserved.

All financial services are provided by Lincoln Indicators Pty Ltd ABN 23 006 715 573 (Lincoln) as the Corporate Authorised Representative of Lincoln Financial Group Pty Ltd ABN 70 609 751 966, AFSL 483167.

  • Show Popular Searches
  • Lincoln Indicators
  • Managed Funds
  • Investment Funds
  • Mutual Funds
  • Growth Funds
  • High Return Investments
  • Long Term Investments
  • Shares to Invest in Australia
  • Stock Portfolio Manager Software
  • Highest Dividend Stocks ASX
  • Highest Dividend Shares
  • Growth Stocks
  • ASX Stocks to Buy
  • Stock Research Reports
  • ASX Research Reports
  • Equity Funds
  • Hide Popular Searches