The June half profit reporting season is about one third complete and really hits its peak this week with majors such as BHP Billiton and Woolworths reporting.
Others to release reports include: Qantas, Foster’s, BlueScope, Caltex Australia, Macarthur Coal, Seven West Media, Seven Group Holdings, Pacific Brands, Suncorp, Virgin Blue, Fairfax and Perpetual (See the Diary).
The AMP’s chief strategist, Dr Shane Oliver says that so far 71% of results have seen profits up on a year ago, but only 30% of results have exceeded expectations (compared to a norm of 45%) and 30% of results have come in worse than expected (versus a norm of 24%).
"There has also been more cautious than upbeat outlook statements,” he says.
"However, the good news is that profit results haven’t been nearly as bad as feared.
"Stocks outperforming the market on the day of their profit release have been roughly matched by stocks underperforming the market when their results were released."
Friday proved to be a bad day to be reporting anything, let alone weak earnings growth or worse.
Companies like the ANZ and Billabong in particular were hammered for disappointing with their reports.
Even automotive products retailer Super Retail Group saw its shares lose more than 4%, despite sales topping a billion dollars for the first time, a higher dividend and earnings.
The ANZ reported a 1.3% increase in third-quarter profit to $1.4 billion and the shares fell 4.5% or 93c to $19.50, after being down almost 6% in early trading.
The wider market fell 3.5%.
The small improvement came on a small lift in revenue and margins and a 10.3% drop in the charge for bad debts.
The bank also reported a 2.3% increase in deposits from the March quarter, while overall lending grew by 1.5%
The quarterly result for the three months to end June takes ANZ’s result for first nine months of the current financial year to $4.2 billion, up 16.1% on the first three quarters of the 2010 financial year.
Last week the NAB reported a third-quarter cash profit of $1.4%, up slightly from the $1.3 billion earned in the first and second quarters of this financial year.
The CBA lifted cash profit 12% to a record $6.84 billion, while Westpac reported a 2% drop in third-quarter cash profit to $1.55 billion.
QBE Insurance shares fell sharply on Friday, despite the insurance giant revealing a 53% jump in first-half profit that was boosted by investment income.
The company reported net earnings of $US673 million ($A643.2 million) compared with $440 million in the first half of 2010.
Revenue rose 34% to $US9.07 billion in the latest six month period.
But it cut its full-year insurance profit margin outlook thanks to the continuing cost of record catastrophe losses and official interest rates and bond yields falling to record lows in July and August, which will remain for some time and cut investment income flows this half.
Not helping QBE and other insurers is the news from the US Federal Reserve that official interest rates will be at their current record lows of 0-0.25% for the next two years at least.
QBE has to hold its premium and other reserves (its so-called float) in highly liquid, high rated securities like US Treasury notes and bonds (and the same in the UK, Europe and Australia).
Yields on UK 10 year bonds hit all time lows this week and those on US bonds fell to 61 year lows, while yields on short dated notes (three months to a year) are barely above zero.
That means QBE’s flow of interest payments this half will fall sharply, after the company had earlier in the year forecast a rise because it saw official rates firming.
QBE shares dropped 1.50, or 11%, to $12.25 in early trade.
They closed the day on Friday down 5.6% at $12.98.
While QBE in June warned that first-half earnings would come below what the market was expecting, investors were focusing on its full-year margin outlook after the company said it was seeing significant increases in premiums which would flow into higher earnings in the second half.
It now says it is targeting an insurance profit margin of 11%-14% for 2011, below the previous outlook of a minimum of 15%.
Gross written premium, the standard measure of policy sales in the insurance industry, jumped 30% to $8.94 billion.
QBE’s insurance profit fell by 8% to $US762 million.
The insurance profit margin fell to 11.2%, from 15.8% the year before, on the record levels of large individual risk and catastrophe claims in Japan, Australia, the US and NZ.
The fall in insurance profit would have been bigger but for the boost from the income earned on policy holders’ funds, which jumped to $US471 million.
An unchanged interim dividend of 62c a share will be paid franked to 10%.
Shares in surfwear retailer Billabong copped an absolute hammering on Friday, losing more than a quarter of their value after it reported an 18% fall in annual profit, and withd
