Stockcharts: Foxconn Earns below Expectations as Operating Costs Rise

Analysts said that Foxconn showed a second-quarter net profit that was below the forecast. Amid this, there was a surge in component costs and unsold inventory which affected the performance of the Apple supplier and globally known contract electronics maker.

Formally known as Hon Hai Precision Industry Co Ltd, Foxconn presented on Monday its net profit of T$17.49 billion ($567.25 million). This reported net profit was 20% short on the forecasts of analysts and marginally below the year-earlier results. On Tuesday, Foxconn dropped its shares to more than 3%.

Further, analysts said the results revealed concerns on the global smartphone sales’ loss of momentum. Foxconn unit FIH Mobile Ltd reported a broader first-half loss last week. Moreover, it recognized that it handled a high risk of saturation in the smartphone market.

The results of Foxconn presented that its gross margin tightened in the second quarter. This was in part of carrying iPhone X’s unsold inventory. According to Strategy Analytics, the total smartphone shipments made a drop of 3% to 350 million units from April to June in comparison with a year earlier.

In spite of this, Yuanta Research analyst Vincent Chen forecasted that Apple’s brighter outlook would benefit and boosts Foxconn’s margins in the third quarter.

Whenever it launches new iPhone models, Apple has an estimation of above-consensus revenue eventually in the year.

“We expect Hon Hai to be the main assembler of OLED version new iPhones and we believe the OLED iPhone model will see better demand in 2H18F,” Chen said.

Moreover, the report of Foxconn exemplified its expansion moves through entering into new areas including display screens, autonomous car startups, and investments in cancer research.

Nevertheless, the earnings of Foxconn almost come from manufacturing smartphones for Apple and other brands as well as from Foxconn Industrial Internet.

“Investment in factory automation and component price hikes capped gross margin,” said Arthur Liao, an analyst at Fubon Research.

The operating costs of Foxconn surged to 18.8 percent in the quarter.

Stockcharts: Australia stocks record further high at trade close

On Tuesday, Australia stocks had recorded further high at the close of trade. Further, the gains in the IT, Telecoms Services and Financials sectors lifted the shares higher.

The S&P/ASX 200 gained 0.70% at Sydney’s close.

The JB Hi-Fi Ltd, Afterpay Touch Group Ltd, and A2 Milk Company Ltd were the best performers during the session on the S&P/ASX 200. The JB Hi-Fi Ltd increased to 5.90% or 1.380 points to reach at 24.760 at the close. Meanwhile, there were gains of 5.75% or 0.820 points in the Afterpay Touch Group Ltd which traded at 15.090 at the close. Lastly, A2 Milk Company Ltd soared to 3.48% or 0.340 points to end at 10.100.

Meanwhile, the worst performers of the session were the Challenger Ltd, Domino’S Pizza Enterprises Ltd, and Cochlear Ltd. Challenger Ltd, on one hand, dropped to 6.83% or 0.850 points to end at 11.600. On the other hand, Domino’S Pizza Enterprises Ltd decreased to 6.45% or 3.380 points to trade at 49.040 at the close. Lastly, Cochlear Ltd declined to 3.92% or 7.79 points to 190.99.