The most significant five days of the June 30 reporting season lie ahead this week, featuring 110 ASX 200 companies set to report their financials. The list is dominated by BHP, which will be unveiling its full-year figures tomorrow.
According to Shane Oliver, the AMP's chief economist, consensus earnings expectations for 2022-23 indicate a slight rise in earnings, down from the growth of 22.4% in 2021-22. He states, "Partly reflecting the cautious outlook guidance, consensus earnings expectations have been revised down since the reporting season started. The consensus is now for a +1.8% rise in earnings for 2022-23 and for a -5.4% fall in earnings in 2023-24, with both revised down from +2.5% and -0.8%, respectively, at the end of July."
Big retailers like Woolies, Coles, and Wesfarmers (Bunnings, Kmart/Target) will be closely watched, especially for their inventory levels and June six-month sales growth and margins. While there might be some growth, surpassing inflation will prove challenging. Additionally, Coles will have to explain the significant cost run on two new warehouses in Sydney and Melbourne.
BHP, however, will not be a standout performer, showing no 20% gain for the world's biggest miner for the year ending June. After reporting a sharp fall in December 31 revenue and earnings, BHP isn't expected to reach anywhere near the net underlying result of $US21.3 billion and full-year dividend of $US3.25 a share from 2021-22. First-half earnings for 2022-23 were down 32% at $US6.457 billion on a 16% slide in revenue to $US25.7 billion, with the interim dividend reduced to 90 US cents a share.
Analysts suggest that the reporting season has been somewhat better than anticipated. Shane Oliver points out that 45% of companies have surprised on the upside, slightly above the norm of 43% and a considerable improvement from the 27% in the previous February reporting season. He notes that 54% of companies have seen earnings rise compared to the previous year, a figure similar to February but slightly lower than the norm of 63%. However, only 48% have increased dividends compared to the previous year, and fewer than usual have seen their share prices outperform the market on their reporting days.
This week also sees reports from various other companies, including Ampol (half-year), Altium, Reliance Worldwide, Bluescope, A2 Milk, Breville Group, Adairs, and IAG (today). Other companies such as Allkem, BHP, Coles, Megaport, ARB, Redbubble, Monadelphous, Scentre (half-year), and Woodside (tomorrow) are also scheduled to report. Additionally, Ebos, Reece Australia, Domino’s, Woolworths, Santos (half-year), APA Group, WiseTech, Iluka Resources, and Worley (Wednesday) will present their reports. South32, AP Eagers (half-year), Lovisa, Air NZ, Stockland, Qantas, Stockland, Lynas, Whitehaven Coal, St Barbara, Tabcorp, Nine Entertainment, and Ramsay Healthcare will report on Thursday. The week concludes with reports from Wesfarmers, Pilbara Minerals, Costa Group (half-year), and Michael Hill International on Friday.
In the US, the earnings season is nearing its end, with most retailers and a few tech companies reporting. DIY giant Lowe's Cos will reveal its June figures, as will department store chains Macy's Nordstrom, and Kohl's Corp. Clothing chains Guess, Gap, and Urban Outfitters, along with footwear chain Foot Locker and cheap retailer Dollar Tree, are also set to report. Tech stocks like Zoom and Snowflake are expected to announce their results, but the spotlight will be on AI chip giant Nvidia, which is scheduled to report on Wednesday, US time.
The US earnings season has caused the S&P 500 to lose around 3.6%. This drop can largely be attributed to rising interest rates and growing concerns about the Chinese economy and its struggling property sector. Nasdaq has experienced a more significant decline of over 7% so far in August, with major giants like Tesla, Apple, and Microsoft all seeing falls ranging from 10% to 26% (Tesla).
Despite the downturn, the second quarter turned out to be strong for profits, surpassing initial forecasts. Nearly 80% of S&P 500 companies reported numbers better than those predicted by Wall Street analysts. According to data provider Refinitiv, the June quarter has shown the highest rate of companies beating expectations since the September quarter of 2021.
However, CNBC presents a more challenging assessment of the season from a prominent Wall Street analyst. Despite a relatively solid beat rate this reporting period, Barclays strategist Venu Krishna notes that the quality of this earnings season has been "low & slow." He emphasizes that despite strong surprises against consensus estimates, the quality of earnings for 2Q23 remains subpar, and the year-over-year growth remains negative despite easier YoY comparisons relative to 1Q23, leaving the earnings quality indicator materially weak.
