The Australian earning season wraps up this week with a flock of stragglers and a handful of big ASX 200 companies due to release June 30 figures.
A big mix of companies are on the reporting list – from Lend Lease which ’self-reported’ some of its results a couple of weeks ago, to Boral, the building products giant, Caltex Australia (half year), Dower EDI (it was down to report two weeks ago), Australian Vintage, Billabong, Retail Food, Webjet and Speciality Fashion which was down to report last week.
Slater and Gordon, the legal services company that blew itself up expanding into the UK is also down to report.
Harvey Norman is another of those and its results on Thursday will be looked at closely by investors and analysts given the continuing controversies about the retailers accounting treatment of franchisee sales, property income and how they translate to profits.
In fact there are a few retailers reporting this week – Adairs is due to release today – a trading update two weeks ago was positive, especially the strong rebound in sales performance in the early weeks of 2017-18.
Retail Food Group is another due to report – it could surprise either way after shares fell sharply after a June trading update that disappointed.
Speciality Fashion Group is down to report – it had been on the list last week but slipped into the final week of the season. Perhaps it will update the market on that supposed offer from Qatar that emerged in February.
Temple Webster, the online homewares group is also reporting tomorrow and are the losses over?
The most intriguing report comes late in the week from Webjet which is in the profess of completing its big $330 million move into the UK travel market.
Blackmore’s will report tomorrow and investors will be looking for an update on how its Chinese sales are going. Downer EDI also reports tomorrow and analysts are wondering about the impact of the costs of the Spotless bid (still unresolved) and how they will impact earnings.
The AMP’s Chief Economist and head of investment, Dr Shane Oliver says the current season’s profit growth of 5% for Australian listed companies outside the over-earning mining sector “is all right.”
"We are now about 85% through the Australian June half earnings reporting season and results have remained a little disappointing.
"At a high level profits look good: they are up with 70% of companies reporting higher profits than a year ago, which is the strongest since 2010, and 69% have increased dividends from a year ago, which is a good sign regarding the quality of earnings.
"Overall earnings per share growth for 2016-17 is coming in at around 17.5% which is a huge improvement after two years of declines. However, dig beneath the surface and it’s not quite so good.
"First, the huge upswing in earnings owes to the rebound in the fortunes of the big resources stocks with resource sector profits up around 130% and there is no doubt that the turnaround here is impressive and reflecting this they have increased their dividends substantially.
"However, profit growth in the rest of the market is more modest at around 5-6%. What’s more only 38% of companies have surprised on the upside (which is less than normal and the weakest since 2012) and 32% have surprised on the downside. Outlook guidance has also been a bit soft,” Dr Oliver said.
He wrote at the weekend, “What’s more only 38% of companies have surprised on the upside (which is less than normal and the weakest since 2012) and 32% have surprised on the downside. Outlook guidance has also been a bit soft.”
“While the market as a whole has been relatively stable through the reporting season – it’s basically flat for August to date – and a roughly equal number of companies have seen their share prices outperform and underperform the market on the day they released results, beneath the surface there has been intense volatility with some very sharp declines in share prices for companies who disappointed (eg Dominos, Telstra, Suncorp, QBE, Bluescope and Healthscope) either in terms of the result, outlook comments or dividends.
"The problem of course is that PEs are relatively high and so much has been factored in. As a result, expectations for earnings growth for the current financial year have been revised down a bit to 1.8%, although again it’s worth noting that profit growth for the market excluding resources is expected to remain relatively stable at around 5%.
“Key themes have been: large caps doing better than small caps; resources stocks back to strength; constrained revenue growth with the domestic economy just okay with housing still strong but retailing mixed; some disappointment from foreign earners; and dividends (ex Telstra) continuing to roar ahead."
