Beats and Misses
Week one of the reporting season saw nine companies beat expectations (CSL, RMD, TWE, JHG, AGL, IEL, MGC, NWS, MIN) and six companies miss (CBA, AMP, TAH, NVT, AQG, RIO).
There were more positive dividend surprises than negatives at 4 (MFG, CIM, IEL, MIN) vs 3 (TAH, GMA, RIO) and most companies have had expected earnings revised for FY18, with downgrades (11) outnumbering upgrades (8). Significant downgrades have come from GMA, AQG, AMP, MIN, TAH and CBA.
Aggregate growth expectations for FY18 have fallen from 8.4% to 6.8%, driven by downgrades to the banks, which is mostly about CBA including one-off charges in the cash earnings line.
Small caps have seen smaller downgrades so far than mid to large caps, but that’ll change – the small companies tend to hold back the bad news and generally report late.
Growth expectations for FY19 have risen since the beginning of reporting season (from 4.5% to 5.3%), with the largest changes to EPS growth coming from small cap resources and the banks. There continues to be a lot of optimism built into the next financial year for the industrials (ex-resources, LPTs and banks), with estimates (+13% EPS growth) still rising strongly, unlike at this point in previous years.
All up, so far so good from the reporting season and no sign of anything yet to get worried about.
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