This week the December 31 reporting season for interim and full year profits hits full stride with nearly 100 major companies due.
That will lift the number of companies reporting to around 70% of the ASX 200.
They include miners large and small, media companies, retailers, financial groups, insurers and industrials.
Despite the weak jobs report and bad publicity around the news of the Toyota closure last week, the local market had its strongest week in two years, thanks mostly to the higher dividends.
From the ANZ’s surprise first quarter update, to the Commonwealth Bank’s much stronger than expected interim, to Telstra’s hoped for dividend lift, and Rio Tinto’s surprise full year result and higher payout, investors were surprised on the upside.
A week ago today, before the news started flowing, not too many people would have expected such a positive run of reports from leading companies or the dividend hikes. It does help explain the turnaround in investor sentiment to the point where by the close on Friday, the ASX 200 was up only 0.1% for the year so far.
After the growing tide of higher payouts to shareholders so far in the reporting season (4% of reporting companies have lifted payouts), analysts are looking for more good news this week.
The mining services company will again be an area of weak to bad news – as the collapse last week of Forge Group showed.
According to market consensus, expectations are for 13% earnings growth in 2013-14 led by 35% growth in resources profits on the back of the lower dollar, lower investment spending, cost control and 8% growth for industrials.
A feature of the reporting season has been higher dividends from the likes of the Commonwealth Bank, Telstra, Rio Tinto, JB Hi Fi, Goodman Fielder and Country Road (both returning to the dividend lists), while some companies have cut payments, such as metal basher Bradken and gambling group, Tabcorp.
This week analysts are looking for higher payouts this week from companies such as BHP, Suncorp, IAG, Wesfarmers, Invocare and Fletcher Building.
Today sees half-year results from Ardent Leisure Group, Aurizon, Ansell, Bendigo & Adelaide Bank, NIB Holdings and Specialty Fashion Group, while Australand Property Group and G8 Education report full-year results.
Tomorrow is a full day with interim results from Asciano, Amcor, Amcom Telecommunications, Arrium, CFS Retail Property Trust, Challenger, Commonwealth Property Office Fund, GWA Group, Hills Holdings, Mt Gibson Iron, McMillan Shakespeare, Monadelphous, Pacific Brands, Sonic Healthcare and Southern Cross.
Full-year results are expected from Coca-Cola Amatil.
The most important result of the week is the interim figures for BHP Billiton, especially after Rio’s surprisingly bullish report last week.
Wednesday brings half-year results from APA Group, ARB Corp, Brambles, Dick Smith Holdings (the first as a separate company), Pharmaxis, Ridley Corp, Suncorp, Seven West Media, Toll Holdings, The Reject Shop and Wesfarmers. And Woodside Petroleum releases its full-year results and could surprise with a slightly higher final payout to shareholders.
Thursday sees interim results from Alumina, Drillsearch Energy, Emeco Holdings, Fletcher Building, Federation Centres, Fairfax Media, iiNet, Investa Office Fund, Invocare, Mirvac, Nuplex Industries, Origin Energy, Seek, SMS Management, Super Retail and Treasury Wine Estates. Full-year results are due from Adelaide Brighton, AMP, APN News & Media, OceanaGold and PanAust.
On Friday, the struggling Billabong International reports, while the stronger Insurance Australia Group, Crown Resorts and Qube Holdings also release half-year earnings.
Full-year results are due from Iluka Resources and Santos, while National Australia Bank will hold its first-quarter trading update, which has a high standard to meet after the bullish update from the ANZ last week and the solid interim report from the CBA.
The AMP’s Dr Oliver says "the news from corporates has been very good. It’s early days as we are only 20% or so through the December half earnings reporting season, but so far the results have been impressive".
"So far 55% of companies have exceeded expectations (compared to a norm of 43%); 73% of companies have seen their profits rise from a year ago (compared to a norm of 66%); a whopping 78% of companies have increased their dividends from a year ago (compared to an average of around 62% in the last two years); and 53% of companies have seen their share price outperform the day they released results.
"Key themes are a massive turnaround for the resources stocks (notably Rio), banks doing very well (with great results from CBA and ANZ), help coming through from the lower $A, ongoing cost control, improved outlook comments from cyclicals (like Boral) and soaring dividends.
"The surge in dividends is a good signal that companies are confident about the outlook. The bottom line is that Australian earnings look to be on track for strong growth this financial year," Dr Oliver wrote at the weekend.
Even if companies are reluctant to give guidance for the rest of the financial or calendar years, the high payouts in many cases represent a defacto type of positive guidance.
