A big test of the recovery in local investor sentiment and confidence looms in the form of the June half Australian earnings reporting season, which hits full pace this week with around 60 major companies revealing their results, led by BHP tomorrow.
Up to last Friday about 30 major companies had reported so far with the Commonwealth Bank’s four year high result and slightly higher final dividend the stand out.
Insurers Suncorp, QBE and Insurance Australia Group all cut their dividends after being hit by higher natural peril costs or very weak investment returns (especially in the case of QBE).
The AMP’s chief economist Shane Oliver says “so far 42% of results have surprised on the upside which is about average, but only 56% have seen earnings up on a year ago & 44% have increased dividends both of which are well below average reflecting the cost pressures some business are facing.”
“Consensus expectations are for around 20% earnings growth for the 2021-22 financial year but with this boosted by energy earnings (+275%) and industrials averaging around 9.5% growth. The focus will likely be on outlook statements given cost pressures, labour shortages and slowing consumer demand.”
Companies reporting this week include BlueScope, Argo investments and JB HiFi , BHP and Seven West Media, Amcor, Dexus, Domain and Santos, ASX, and Cochlear, Blackmores and Stockland, Downer EDI, Bapcor, James Hardie (first quarter), Cleanaway, Newcrest, AGL, Shopping Centres of Australia, Vicinity Centres, GWA, Challenger, Temple & Webster, Seek, Super Retail Group, Goodman, Medibank Private, Transurban, Origin Energy, Brambles and CSL.
BHP’s result will be the biggest – analysts are forecasting the company’s profit to come in at $US16.4 billion on an underlying basis. Other big estimates include JB HI Fi with around $545 million, Beach Energy, $546 million, Goodman Group, $1.5 billion, Stockland, $833 million, CSL, $US2.26 billion, BlueScope Steel, $US2.26 billion and Newcrest, $US843 million, Vicinity Centres, $600 million.
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Meanwhile, the dying embers of the US June 30 earnings season see a couple of major US retail stocks report, with the most awaited figures of all from industry Number 1 Walmart Tuesday night, Sydney time and Target, the Number 2, the next day.
Up to last Friday, more than 91% of US S&P 500 companies had reported June quarter earnings and AMP chief economist, Shane Oliver says that the figures have been better than forecast.
“With 75% ahead of expectations and earnings growth expectations for the quarter rising from 5%yoy at the start of the reporting season to now 10%,” he wrote at the weekend.
“This is far stronger than expected. Outlook comments have been mixed reflecting the uncertainty regarding the growth outlook but not overwhelmingly negative, although earnings expectations for the current half are being revised down.”
After Walmart’s surprise earnings downgrade last month, investors and analysts in the US are uncertain about what Walmart will reveal after its after hours trading downgrade for the three months to June and for the rest of 2022 on July.
While the world’s biggest retailer didn’t put numbers of the sales and earnings impact, it focused on the impact of higher inflation (double digit for fresh food) and said cost pressures were seeing the company’s gross margins “negative impacted”
That’s a nice way of saying that profit margins are under pressure, meaning earnings will be lower for the rest of this calendar year at least.
Walmart said it now anticipates adjusted earnings per share for the second quarter and full year to to decline around 8% to 9% and 11% to 13%, respectively. It had previously expected them to be flat to up slightly for the second quarter and to drop by about 1% for the full year.
Paradoxically, Walmart said comparable store sales will be up around 6% in the quarter (which is better than the 5.5% peak forecast in May). That will be due to prices forced higher by rising inflation, not volumes.
“Food inflation is double digits and higher than at the end of Q1. This is affecting customers’ ability to spend on general merchandise categories and requiring more markdowns to move through the inventory, particularly apparel.
Target’s results will be also closely watched for signs it is getting on top of its overstocked position.
Cisco’s quarterly results will be out on Thursday – after flat third quarter figures earlier this year, the company slashed its June quarter revenue outlook, forecasting a contraction of between 1% and 5.5%, versus expectations for growth of 5.7%, as it reduced its full-year forecasts.
The company cited the effect of lockdowns in China and other supply chain issues as reasons for the shock downgrade. As some lockdown restrictions in China were lifted in June, the hope is that the Q4 results may not be as bad as feared.
Other US retailers reporting this week include Guess?, Urban Outfitters, Burlington Stores, Dollar General, Dollar Tree (both cheap as chips chains), Williams Sonoma (homewares), Dicks Sports Goods, Gap and Shoe Carnival.
Tech stocks, Snowflake, Dell and Salesforce are also due to release results, along with homebuilder, Toll, jam and spreads group, J Smucker and Canadian group, Dye and Durham which is trying to bid for Link Administration in Australia.
