The Australian June quarter earnings reporting season hits its biggest week with 87 major companies due to report full year or interim figures.
And it will be dominated by two loss-strewn reports from the country’s two biggest retailers – Wesfarmers and Woolworths, plus a string of reports from smaller retailers.
The other retailing stocks reporting this week include Harvey Norman, Speciality Fashion Group, The Reject Shop, Billabong, Godfrey’s as well as half year reports from centre owners, Scentre and Westfield.
After last week saw an improvement with better than expected figures from the likes of Treasury Wine Estates, JB Hi-Fi, Villa World, Whitehaven Coal and Webjet, analysts are looking for a mixture of good and bad – and some big losses this week.
The AMP’s chief economist, Dr Shane Oliver says key themes this reporting season include: improving conditions for resources companies following a stabilisation in commodity prices; constrained revenue growth for industrials; ongoing cost cutting; continuing headwinds for the banks; and an ongoing focus on dividends.
“So far 51% of companies have reported with 46% exceeding expectations which is around the norm of 45%. 68% have seen their earnings rise on a year ago, 56% have seen their share price outperform the market the day results were released and 92% have either maintained or increased their dividends.
“While overall profits look to have fallen 8% in 2015-16 thanks to the slump in resource profits, they are on track for a return to growth in 2016-17 as the slump in resources profits reverses and non-resource stocks see growth,“ he wrote at the weekend.
Woodside produce a lower half year profit on Friday, but Santos reported a half year loss after another asset impairment loss taken against its Queensland LNG project.
The BHP Billiton loss grabbed the headlines and a lot of silly comment to start with, but then analysts and media looked deeper and found that even at its worth result since being forced 15 years ago, BHP remains a highly profitable, low cost resource company.
Watch for Fortescue’s results today.
Qantas reports on Thursday and although it produced a very strong interim result, it looks as though the market expects the company’s performance softened in the six months to June.
Qantas shares are down nearly 18% (to last Friday) so far in 2016. The market expects the rebound in oil and fuel prices to have hit second half profits.
But Westfield and Woolworths will grab the headlines this week with big losses or weak underlying profits. Both have already provided guidance for the weak full year results, with billions of dollars in losses expected to be reported.
Woolworths is expected to produce a settlement of its dispute with US hardware company, Lowes, its partner in the Masters hardware disaster. There were high level talks last weekend in the US aimed at producing a settlement.
Investors will also be looking for news of the sale of some of the unwanted hardware assets and a timetable on closing or selling off the Masters chain.
Woolies has also separated its Big W department store chain and it is considered to be on the market at the right price.
Wesfarmers will finalise the size of the losses from the writing down of the value of its struggling Target chain and from its Curragh coal mine in Queensland – the total could be more than $2 billion.
The Reject Shop will show both giants a clean pair of retailing heels this week with what is expected to be a very solid full year figure after a strong rebound in the six months to December.
And Harvey Norman is expected to follow the solid result from rival, JB Hi-Fi with a top full year result later in the week.
Nine Entertainment reports its full year results on Thursday, with Prime Media out today and Southern Cross later in the week. APN news and Media also produces its interim figures later in the week.
Nine’s result will be weak (it has already warned of a slide in profit)and analysts will be looking to see if there is any guidance for 2016-17, and if there is any sign of rumoured management changes.
Other reporting companies this week will include Qantas, Oil Search, Fortescue, and a host of other June 30 full year balancing companies.
As well the likes of Godfrey’s Breville, Billabong, Amcor, PMP, Mayne Pharma, Select Harvests, Super Retail Group, Waterco, Speciality Fashion, Pact Group, Caltex Australia, Healthscope, UGL, BlueScope, GWA, Greencross, Monadelpheous, Boral, Bega Cheese, Worley Parsons, Flight Centre, Harvey Norman, Spotless, Perpetual Ilulka Resources and Qube.
Those with interim reports include Westfield, APN, Coca Cola Amatil and Scentre Group.
Offshore the reporting list is down to stragglers in the US, Europe and Asia. The major Canadian banks, such as the Royal Bank of Canada, are due to report their interim figures this week, while top five global resources group, Glencore produces its latest half year figures which should tell a better story than a year ago.
Looking at the US, FactSet says that with 95% of the companies in the S&P 500 reporting earnings to date for Q2 2016, 71% have reported earnings above the mean estimate and 54% have reported sales above the mean estimate.
FacSet says that for Q2 2016, the blended earnings decline for the S&P 500 is -3.2%. “the second quarter marks the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since Q3 2008 through Q3 2009.”
And for the third quarter, FactSet says 72 S&P 500 companies have issued negative Earnings Per Share (EPS) guidance, and 30 S&P 500 companies have issued positive EPS guidance.
