The Australian December half 2017 earnings reporting season ramps up this week, while the US 4th quarter season slows.
Locally, nearly 60 major companies are reporting including Bendigo and Adelaide Bank, Amcor, Transurban, Orora, Aurizon, Cochlear, CSL, IAG, Woodside Petroleum (full year), ASX, Origin, Telstra and South32.
First up today the strength of retailing will be tested by the half year report by JB Hi-Fi. It will need to be good with a solid outlook, for worried investors not to sell off the stock.
This could be the most important result of the week so far as investor sentiment about a key sector is concerned (see the problems at Myer and its weak sales performance and fears about the impact of Amazon).
Domino’s Pizza tomorrow is another report to watch from a company that is now a faded star.
And Telstra’s half year results on Thursday will feature the lower dividend and probably news of the restructure of its pay TV interests. But the outlook, especially in the competitive mobile phone sector, will be of key interest for investors, and the problems at the NBN.
The AMP’s Chief economist, Dr Shane Oliver says he still expects the reporting season to see a return to single digit earnings growth (after the resource driven surge seen in 2016-17) with overall earnings growth around 7% (compared to around 16% in the last financial year).
Resources profit growth slowing to around 14% (from 130% in 2016-17) but still supported by solid commodity prices and production growth, bank earnings growing around 3% and industrials up 5% with strong results for insurers, utilities, healthcare, building materials and consumer discretionary.
Rio Tinto produced an outsized yearly performance last week, with a sharp increase in dividend and a new buyback for some shareholders.
The Commonwealth Bank reported a solid result which was overshadowed by its own estimates of the cost ($575 million) for a fine over the money laundering offences and remediation policies.
The NAB’s first quarter update confirmed that bank earnings look solid but not spectacular.
Investors though had better keep a close eye on the Banking Royal Commission, starting this week.
Dr Oliver says the main themes from the reporting season will be continued strength in companies exposed to housing construction and the infrastructure spending boom, the impact of the US tax cut on companies exposed to the US and the potential for some special dividends and capital returns.
In the US 4th quarter earnings season continues with results expected from companies including ConEdison, Credit Suisse, Nestlé, Coca-Cola, Cisco, Dana, CBS, Shire, Bunge, Kraft Heiz, HSBC, VF Corp, Campbell Soup and PepsiCo.