The Australian June 30 earnings season wraps up with only 12 major companies left to release data this week for either the June full or half years.
And looking out into the current financial year, analysts are more upbeat, especially for mining and energy companies.
As well there are hundreds of smaller mining, health, tech, education and other industrial groups due to report by close of business on Wednesday, with the spillover heading into Thursday morning.
Leading the way among the majors will be Harvey Norman today and Adelaide Brighton midweek.
Other mid ranking groups down to report include Infigen, Cardno, Infomedia, Austal, Buderim Group, Gazal Corp, iSelect, Salmat, Novogen, Senetas, Temple & Webster, Ausenco, Resolute Mining, Redflex, Emeco and FlexiGroup.
These companies won’t alter the overall impression expressed by Dr Shane Oliver, the AMP’s Chief Economist, that “2015-16 was a bad year for listed company profit growth in Australia.”
Results last week from the likes of Prime Media, APN News and Media, Woolworths and Wesfarmers told that story – their write downs and losses were as bad as anything reported by some of the big miners and oil gas groups.
But he qualified that at the weekend by wondering if “the worst may be behind us."
"As is often the case with profit reporting season, the quality of results deteriorates towards the end and we have seen that over the last week.
“With nearly 95% of results having been released the past week has seen the total number of companies exceeding expectations fall back to 41%, which is below the norm of around 45%,” Dr Oliver wrote.
Dr Oliver said that key themes in the latest reporting season have been “a horrible year for resources stocks (with a 48% profit plunge) but improving conditions ahead on the back of improving commodity prices, cost controls and supply side discipline; constrained revenue growth for industrials; ongoing cost cutting; continuing headwinds for the banks; and an ongoing focus on dividends with 86% of companies raising or maintaining their dividends.”
In fact the big message from the reports of Rio Tinto, BHP Billiton, Fortescue Metals, Woodside and a host of smaller resources groups, is that the sector has whipped itself into shape in a major way and has its costs well under control.
The big banks and big retailers are the questionable groups at the moment with investors and analysts wondering f they will have more work to do on costs in the coming year as the marketplace becomes tougher for them.
Media was especially weak – the best performer was Southern Cross Austereo,while Seven West Media was the gloomiest about its outlook, forecasting a 15% to 20% fall in earnings because of the costs of the Rio Games and the start of the new AFL broadcast contract.
Property companies are another sector worth watching – some of the big groups (Mirvac and Stockland for example) had solid underlying results made to look a bit more solid by one off revaluation gains being taken into their accounts for the year to June.
Insurers such as QBE, IAG and Suncorp are another group worth keeping a close eye on as they battle low investment returns (in some countries, negative interest rates), rising costs in NSW third party and rising competition in commercial property coverage.
Dr Oliver says that “While overall Australian listed company profits have fallen by around 8.5% in 2015-16 thanks largely to the resources slump, it is notable that 62% of companies have actually seen their profits rise on a year ago and the median company has seen profit growth of around 4%.”
He says that 54% have seen their share price outperform the market the day results were released which adds to the view that results haven’t been worse than expected.
"Overall profits are on track to return to growth in 2016-17 as the slump in resources profits reverses and non-resource stocks see growth.
“2016-17 earnings growth is expected to be around 8%, with mining companies now seeing the fastest rate of upgrades,” he wrote at the weekend.
Meanwhile the US sees its its June 30 quarterly reporting season peter out this week with only a handful of small groups to report.
Quite a few Chinese companies are looking to release June 30 reports this week and there are a scattering of groups with July balance dates, such as Campbell Soup.
FactSet said at the weekend that with around 98% of the companies in the S&P 500 reporting earnings to date for Q2 2016, “ 1% have reported earnings above the mean estimate and 53% have reported sales above the mean estimate."
For the three months to June 30, FactSet says the blended earnings decline for the S&P 500 is -3.2%.
"The second quarter marks the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since Q3 2008 through Q3 2009. On June 30, the estimated earnings decline for Q2 2016 was -5.5%.
Seven sectors have higher growth rates today (compared to June 30) due to upside earnings surprises, led by the Information Technology and Consumer Discretionary sectors.”
And for the current September quarter, FactSet says 77 S&P 500 companies have issued negative EPS guidance and 33 S&P 500 companies have issued positive EPS guidance.
