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CBA, Rio Highlight Earnings Week
BY GLENN DYER - 05/02/2018 | VIEW MORE ARTICLES BY GLENN DYER

Banks will dominate the Australian half year reporting as the interim season steps up this week.

The Reserve Bank meet on tomorrow to discuss monetary policy for the first time year (and do nothing), the CBA releases its much anticipated half year figures on Wednesday, the National Australia Bank has its first quarter trading update on Thursday, and Macquarie releases its operation update tomorrow morning.

All would normally go someway to influencing the market, but not this week with the 1.1%, 60 point fall already priced into the ASX 200 futures market and probably a bit more as the local nervous nellies panic.

But the CBA result will still be the most important of the this reporting season because investors will want to see if the board makes any provision for fines and other costs associated with the various legal actions against the bank, especially the AUSTRAC claims of breaches of money laundering and ant-terror laws.

The costs of that alone could be in the hundreds of millions of dollars - and there’s now the ASIC claims that the CBA tried to rort a key market interest rate.

The CBA's first quarter update late last year was solid with no sign of any operational problems, especially in bad debts and housing. Analysts will be watching both closely this week.

The Macquarie and NAB updates will help the message (or messages) from the CBA half year figures.

Including the CBA, around 15 major companies are due to report this week including, Rio Tinto, AGL, Argo, CIMIC (full year) , Tabcorp, REA Group, News Corp, Shopping Centres of Australia, Mirvac and AMP.

The AMP’s Chief Economist, Dr Shane Oliver still sees this reporting season seeing “ fall back 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).”

He thinks resources profit growth will slow (Rio Tinto will give us a good lead this week) to around 14% (from 130% in 2016-17) but still supported by solid commodity prices and production growth. Dr Oliver believes bank earnings will grow around 3% and industrials up 5% with strong results for insurers, utilities, healthcare, building materials and consumer discretionary.

“The main themes 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,” he wrote at the weekend.

In the US more than 90 companies listed on the S&P 500 are due to report their quarterly (and in many cases, 2017) results this week. Unlike last week with Apple, Alphabet, Amazon, Microsoft and Facebook reporting and dominating the market, there are no market changing results expected this week (in the way Netflix a fortnight ago and Facebook, Amazon and Apple impacted last week).

The list includes 21st Century Fox, News Corp, The New York Times, Bristol-Myers Squibb, Walt Disney, Chipotle, Hasbro, Michael Kors, Yum Brands, Nvidia, Kellogg, AIG, Expedia and PG&E.

US financial data group, FactSet pointed out that so far 50% of the companies in the S&P 500 have reported actual results for 4th quarter figures and corporate America is on track to do better than the average for the past five years.

"In terms of earnings, more companies are reporting actual EPS above estimates (75%) compared to the five-year average. In aggregate, companies are reporting earnings that are 4.0% above the estimates, which is below the five-year average.

“In terms of sales, more companies (80%) are reporting actual sales above estimates compared to the five-year average.

"If 80% is the final number for the quarter, it will mark the highest percentage of S&P 500 companies reporting positive sales surprises since FactSet began tracking this metric in Q3 2008. In aggregate, companies are reporting sales that are 1.4% above estimates, which is also above the five-year average,” FactSet wrote at the weekend.

But without a new deal from the Trump Administration, Republicans and Democrats, the US government is heading towards another shutdown stand off this week.



View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



 

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