The profit reporting season is entering its final week with a flood of results to come, many which will be rather red-stained.
The reporting season wraps up on August 31 (Today week).
The losses will be among the real estate sector (GPT and Mirvac), and some of the other reports will probably be not as encouraging as the early reporters.
Companies with poor results still tend to hold back to the last days of the period.
Watch the media sector for some mixed figures, and of course, the real estate trusts sector.
But this season so far, like the US, has been notable for being better than expected.
Even though earnings are down, as are dividends in many cases, investors are happy.
Companies have done the right thing in updating guidance as soon as they can (there have been very little surprises from reporting companies so far) and many groups have actually met lowered guidance issued as part of recapitalisation moves during the year, especially in the June half.
The fact many groups have rebuilt balance sheets shattered by incompetence and poor decision making by management and boards, is a sign of the maturity of the local market and investors, compared to the continuing angst in some offshore markets.
Many companies to release results in coming days have already raised funds from the market, so their reports should, on the whole, get a positive reception.
Among those reporting this week are Fairfax, Worley Parson, Suncorp, Westfield, GPT, Toll Holdings, Asciano, Virgin Blue, the Seven Network, Consolidated Media, Crown, Woolworths.
As well Salmat, Hastie Group, Mirvac (and its associated trust) report, along with Prime Media, Aristocrat (interim), Fosters, Valad, Melbourne IT, Oil Search, Macarthur Coal, Goodman Fielder, TransPacific Industries and Transurban.
Looking at the reporting season so far, the AMP’s chief economist and strategist, Dr Shane Oliver says that profit results have continued to surprise on the upside, with good results relative to expectations from companies such as Newcrest, James Hardie, OneSteel, United Group, Qantas, Woodside, Brambles, Downer EDI and QBE.
"So far we are about 60% through the reporting season and 46% of results have come in better than expected compared to only 11% below. (See the prev chart.)
"This is a big improvement on the last two reporting seasons when there were more companies surprising on the downside than the upside.
"In fact the net balance of positive less negative surprises of 35% is the best it has been since the August reporting season 3 years ago.
"Similarly 55% of companies have seen their share price outperform the market on the day their result was released.
"While the results to date are consistent with an 18% fall in profits in 2008- 09, making it the worst slump since 1990-91, this is less negative than consensus estimates from a few weeks ago for a 23% fall in earnings.
"Other key themes have been strong margins thanks to cost control, far more positive outlook statements than was the case during the February reporting season and dividends coming in somewhat above expectations.
"Asset write downs remain a feature and related to this capital raisings are continuing as companies seek to reduce gearing or pursue takeover opportunities."
In the US, the picture is not as encouraging, but equally, not as bad as some analysts had thought.
Thomson Reuters says earnings for the second quarter look like being down 27.8% from a year ago compared with a forecast for a decline of 28% a week ago. In early July, estimates showed an earnings decline of 35.5%.
Of the 480 S&P companies that have reported second-quarter results, 73% have beaten expectations, while 9% were in line with expectations and 19% were below expectations.
Thomson Reuters says that compares with 61% of companies beating expectations in a typical quarter.
The stronger-than-expected results have lifted Wall Street, and its expectations about the third and 4th quarters.
The S&P 500 has risen about 11% since July 1.
But Thomson Reuters points out that the second quarter’s decline in earnings will be the first time the S&P 500 has recorded eight straight quarters of negative growth since 1998 when Thomson first started compiling the figures.
