Austal Swings to Loss in Fiscal 2026, Impacted by 'Onerous' US Contracts

Austal (ASX:ASB) posted a loss in fiscal 2026, impacted by "onerous" US contracts, while the company said it's committed to delivering a return to profitability in fiscal 2027.

"The Group result was influenced in the near term by the previously announced non-cash provision relating to onerous contracts at Austal USA, where its request for accelerated contractual relief was not agreed to by the US Department of War, despite previous positive discussions," said Chief Executive Patrick Gregg.

The shipbuilder and defense contractor logged AU$0.127 in loss per share for fiscal 2026, compared with a profit of AU$0.233 a year ago, while revenue increased to AU$2.03 billion from AU$1.82 billion previously.

Euroz Hartleys, which has a buy rating on Austal with an under review price target of AU$6, said in a note that the results were largely anticipated after the company's August trading update.

"The Board and management are committed to delivering a return to profitability in FY2027. We have a strong contractual position in relation to the onerous contracts, and other programs and sustainment business in the US remain profitable with a strong order book and outlook," said Gregg.

The company said earlier in the month that it received a non-binding, conditional proposal from a unit of South Korea's Hanwha Group to acquire its US operations for an indicative enterprise value of up to $1.2 billion.

"The [proposal] was a major development. Austal has determined that it merits further evaluation and approved Hanwha to undertake due diligence to improve the certainty of any proposal." Gregg added.

Update: Equities Fall as Warsh's Remarks Boost Rate-Hike Bets

(Updates with market moves at the end of the day, and other changes, if any.)US stocks fell Friday, though they still locked in weekly gains, as bets for a September interest rate hike increased after Federal Reserve Chair Kevin Warsh expressed worries about inflation.The Nasdaq Composite declined 0.5% to close at 26,402.42, while the S&P 500 dipped 0.3% to 7,711.76. The Dow Jones Industrial Average ended just below the flatline at 53,559.99. Among sectors, technology led the laggards, while consumer discretionary saw the biggest gain.Despite Friday's declines, all three indexes logged weekly gains, with the Nasdaq up 0.9%. The Dow and the S&P 500 advanced 0.5% each.In his debut Jackson Hole speech as Fed chief, Warsh said Friday that inflation numbers were concerning, citing the Fed's preferred metric -- the personal consumption expenditure price index -- which was unchanged at 3.7% year over year in July."The comparable measures from the consumer price index are also elevated, as are the core measures of both PCE and CPI inflation," Warsh said. "None of these measures are perfect, but they all tell a similar story: Inflation is running above our 2% target. So the Fed's predominant focus right now should be on prices."The odds of a quarter-point rate hike next month rose to about 58% on Friday from 35% the day before, according to the CME FedWatch tool. The probability that the Federal Open Market Committee will keep the benchmark rate steady fell to about 43% from 65%.US Treasury yields jumped, with the two-year yield up 12.6 basis points at 4.36% and the 10-year yield rising 5.6 basis points to 4.73%."Warsh came out blazing with a mostly hawkish message and interpretation of the recent data. In essence, he said that the 2% target on PCE prices was firm and there was work to be done to get there, since policy is not restrictive," BMO Chief Economist Douglas Porter said in a report. "The net result of Warsh's stern remarks was that the market is now back to pricing in roughly 50-50 odds of a hike at the mid-September FOMC meeting."US consumer sentiment dropped in August amid concerns that inflation will continue to be high for the "foreseeable future," final results of a University of Michigan survey showed Friday.In company news, Paypal (PYPL) shares slumped nearly 13%, the worst performer on the S&P 500, after Bloomberg News reported that buyout firm Advent and payment-processor Stripe have ditched their bid to buy the company.Marvell Technology (MRVL) followed Paypal on the index, down 10%, despite reporting stronger-than-expected second-quarter results late Thursday.Marvell's (MRVL) fiscal third-quarter gross margin outlook came in a bit soft amid a higher custom product mix, B. Riley Securities said in a note e-mailed Friday.Workday (WDAY) was the top gainer on the S&P 500, up 5.8%. The finance and human resources solutions provider raised the low end of its full-year subscription revenue outlook after it recorded fiscal second-quarter results above Wall Street's estimates.West Texas Intermediate crude oil edged down 0.1% to $83.41 a barrel in Friday late-afternoon trade, while Brent dipped 0.4% to $89.31.Spot gold fell 3% to $4,459.42 per troy ounce, while silver lost 4.5% to $67.08 per ounce.

Dow JonesNasdaq CompositeS&P 500$MRVL$PYPL$WDAY

Restaurant Traffic Likely to Stay Stable in Second Half After Depressed Quarterly Trends, UBS Says

Traffic at US restaurants remained depressed in the second quarter amid a difficult consumer environment, though there are signs that point to a stable performance in the second half, UBS Securities said in a note sent Friday.Restaurants reported "solid" comparable sales in the quarter, with growth accelerating to 1.7% from 1.1% in the first quarter, UBS analyst Dennis Geiger wrote. But that was driven by a sequential improvement in the amount spent by consumers even as traffic fell 1.9%, Geiger said.The traffic weakness came despite a boost from the US co-hosting the FIFA Men's World Cup, UBS said.Restaurant demand remained pressured by affordability challenges amid high gas prices, according to Geiger, who recently attended a quarterly webinar hosted by restaurant industry data and market insights provider Black Box Intelligence."BBI believes (same-store sales) stability in recent months is likely driven by consumers protecting restaurant spending and improved consumer sentiment in June, (with) declining recession odds supporting expectations for stable (second-half) sales and traffic performance," Geiger wrote.Earlier this month, Restaurant Brands International (QSR) reported better-than-expected second-quarter earnings amid strong comparable sales growth at Burger King. McDonald's (MCD) second-quarter revenue fell short of market expectations as comparable sales growth in the US slowed on an annual basis. Wendy's (WEN) second-quarter earnings fell year over year amid weak traffic trends.Upscale casual restaurants led the industry in the second quarter, delivering 3.2% same-store sales growth even as traffic slipped 0.2%, according to UBS. Casual dining logged a 2.3% increase in sales and a 0.9% drop in traffic. The quick service and fast-casual segments also saw sales growth despite lower traffic, while family dining reported declines in both.The impact of high gas prices is still the most pressing concern for the restaurant industry."Elevated gas prices continue to pressure an already stressed consumer, (with) dining-out habits changing after prices surpassed the $3.50 (per) gallon threshold in early March," the UBS said.US retail gasoline prices averaged $4.0898 per gallon Friday, compared with $3.2103 a year ago, according to AAA motor club data.US consumer sentiment dropped in August amid concerns that inflation will continue to be high for the "foreseeable future," final results of a University of Michigan survey showed Friday.Price: $78.20, Change: $+0.13, Percent Change: +0.17%

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Marvell Technology Issues Soft Quarterly Gross Margin Outlook on Greater Custom Mix, B. Riley Says

Marvell Technology's (MRVL) fiscal third-quarter gross margin outlook came in a bit soft amid a higher custom product mix, following "solid" results for its just-concluded quarter, B. Riley Securities said in a note e-mailed Friday.Late Thursday, the chip designer's second-quarter results rose above Wall Street's estimates amid a surge in data center revenue. For the ongoing quarter, the company expects non-GAAP gross margin between 57.5% and 58.5% versus 58.9% reported for the prior quarter."Revenue levels and product mix remain key determinants of gross margin in any given quarter, with the forecasted acceleration of our custom business creating the sequential headwind in the fiscal third quarter," Marvell Technology Chief Financial Officer Dan Durn said on an earnings conference call, according to a FactSet transcript.The company expects to maintain fourth-quarter gross margin "in this range," Durn said.The third-quarter gross margin outlook was below B. Riley's estimates amid "greater custom mix," analyst Craig Ellis said in a note to clients. "Overall, a solid (second) quarter in our view, with the diversifying data center base led by interconnect strength."Gross margin for the second half of fiscal 2027 is likely "a little below" on mix, while operating expenditures are a little higher on growth investments for Amazon (AMZN) Web Services Trainium, Alphabet's (GOOG, GOOGL) Google XPU, and Nvidia (NVDA) NVLink Fusion deals, Ellis said."While (operating margins) should still strongly enter the 38%-to-40% range in (the fourth quarter), that's a little below our prior forecast given (gross margin) action," the analyst wrote.B. Riley lowered its price target on the Marvell Technology stock to $315 from $345, with a buy rating.The company's shares were down 9.9% in Friday late-afternoon trade. The stock has jumped about 156% so far this year."We believe investors will get much more of the long-term growth outlook they'd like in six weeks at analyst day, with the model now defensively set on (gross margin) and OpEx," Ellis said. "We thus see a buy-the-dip opportunity, though acknowledged shares could trade sideways or even a bit lower into early (fourth quarter)."Earlier in the week, Morgan Stanley said chipmaking giant Nvidia offered a surprisingly strong fiscal 2028 revenue outlook, while its gross margin guidance provided clarity amid rising memory costs.Semiconductor manufacturer Broadcom (AVGO) is scheduled to report its fiscal third-quarter results Wednesday."Overall, (Marvell Technology's) leverage is dented a bit near term as large customer programs get going, though longer-term growth and EPS seem strongly on track to what could be $10 to $11 in (2029 EPS), and much greater thereafter," Ellis said.Price: $217.54, Change: $-23.91, Percent Change: -9.90%

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Update: Equities Fall as Warsh's Remarks Boost Rate-Hike Bets

Restaurant Traffic Likely to Stay Stable in Second Half After Depressed Quarterly Trends, UBS Says

Marvell Technology Issues Soft Quarterly Gross Margin Outlook on Greater Custom Mix, B. Riley Says