A big profit number just doesn't count for what it used to. The Worleyparsons Limited (ASX: WOR) share price crashed even after it posted a sizable double-digit increase in earnings.
The Worley share price fell 5.5% to $13.66 in morning trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index shed 1.1% in value.
But the oil and gas engineering group isn't the only one cast aside despite posting a bigger than expected profit and revenue figure. The A2 Milk Company Ltd (ASX: A2M) share price also suffered the same fate after it posted a close to 50% increase in earnings before interest, depreciation and amortisation (EBITDA) with the stock becoming the second worst performer on the ASX 200 with a 15.3% crash at the time of writing.
In case you are wondering, the Nearmap Ltd (ASX: NEA) share price has taken the wooden spoon while Brambles Limited (ASX: BXB) is in the third worst spot.
The cracks in the good growth story
Coming back to Worley, investors are probably hitting the sell button based on its outlook with management flagging the dreaded "macroeconomic global uncertainty".
Worley must be worried as it wasn't giving anything away in terms of growth expectations in FY20 – and that is concerning because analysts have pencilled in around a 60% earnings per share (EPS) surge for the current financial year.
The company may be trying to temper growth expectations – at least that's what I am hoping because if management had unwittingly introduced doubt, that would be unforgivable.
The sombre outlook that contained not much more than pointing out the elephant in the room had overshadowed what I thought to be a good FY19 result.
Profit and sales beat expectations
Full year underlying net profit before amortisation (NPATA) jumped 42.7% to $259.8 million (including the two-month contribution from the newly acquired Jacobs ECR business), while NPATA margin inched up 0.2 percentage points to 4% and aggregated revenue improved 35.6% to $6.44 billion.
The capital raise and acquisition meant that underlying EPS dipped despite the profit increase to 62.2 cents from 66.2 cents per share in FY18.
But this isn't unexpected and the figure is still ahead of consensus on Reuters of 59.6 cents. The topline was also a beat as brokers were expecting revenue of $6.31 billion.
Worley also upgraded its cost synergy target from the US$3.2 billion acquisition of Jacobs ECR to $150 million from $130 million and said that its backlog of work has increased by 10% to $18 billion.
I own shares in Worley because the stock looks inexpensive as it sits on a FY19 price-earnings multiple of 22 times. That's cheap for a stock that can grow EPS by a large double-digit number this year.
Even if this growth figure is pared back for FY20, the stock still looks good value in my view.
