The Australian December half profit reporting season hits full steam this week with 61 major companies reporting. By the end of the week we should know what sort of season it will be, especially for shareholders.
Some of the biggest names in Australian business are down to report – companies like JB Hi-Fi, Commonwealth Bank, CSL, Boral, Ansell, Wesfarmers, Origin and Telstra, Seven West Media, Amcor, Newcrest, Santos, Tatts, Star, Argo Investments, Treasury Wine Estates, IAG, Treasury Wine Estates, Domino’s, Sonic Health Care, Primary Healthcare, ASX, The Reject Shop, Mirvac, Virgin Australia, Whitehaven Coal, and Cochlear.
Besides the CBA on Wednesday, two other bank reports will help update investors on how the most important sector in the Australian market is travelling.
Regional giant, Bendigo and Adelaide reports later this morning, and on Friday the ANZ issues its first quarter trading update.
After the soft update a week ago from the NAB, and the flat result from Suncorp’s Metway Bank on Thursday, investors will be looking to this trio to provide evidence of stronger trading conditions than have been reported so far.
The dividend level from the CBA will be especially important – an increase will support hopes for a better year (even though home lending is slowing), no change will be a bit gloomy.
The CBA held its 2015-16 interim steady at $1.98 a year ago. A repeat of that will not be positive. Investors are hoping for at least a small rise to $2 a share.
The other factor to watch will be the net interest margins (NIM) of all three and what the banks say about them. The NAB suggested the recent rise in some lending rates had helped stabilise its NIM in the first quarter.
Domino’s meanwhile will be worth watching after more bad publicity about its pay policies for younger employees and an investigation by regulators into those practices. Domino’s is facing increased market concerns about the impact on its cost base and profits.
The AMP’s chief economist, Dr Shane Oliver says “Earnings upgrades for resources stocks on the back of the rise in commodity prices has seen the consensus expectation for 2016-17 earnings growth rise to 17%."
"Resource company profits are expected to more than double, but profit growth across the rest of the market is likely to be around 5% led by retailers, utilities, telcos and building materials companies.
“Key themes are likely to be: a massive turnaround for resources companies; constrained revenue growth for banks and industrials; and an ongoing focus on dividends,” he wrote at the weekend.
“It’s too early to read much into the December half profit reporting season because less than 20 major companies have reported to date,” Dr Oliver wrote in his first semi annual report on the health of the reporting season
“But so far so good with 67% exceeding earnings expectations compared to a norm of 44%, 67% of companies seeing profits up from a year ago and a stronger than expected result from Rio Tinto confirming that the turnaround in resources sector profits is on track.”
Meanwhile elsewhere the US earnings reporting season slows this week, with a step up from Europe. Among the majors reporting are euro banks such as Credit Suisse and ABN Amro, as well as Fortis and Credit Agricole. Cisco, the tech giant also reports, along with Danone, Heineken, Kraft Heinz, Rolls Royce (a huge loss), AIG, Discovery, Liberty Global, Pepsi, Devon Energy, Deere and Co and Campbell Soup Co.
