The June quarter earnings reporting season will ramp up in Australia this week as the season offshore slows again. Last week produced some average results and updates – the Commonwealth Bank, the ANZ and Westpac come to mind.
This week we move into the first of the busiest two weeks of the season for reports with 66 major companies due to report.
They will include giants like BHP Billiton, retailer and industrial group Wesfarmers (with losses), JB HiFI (which could be a big influence on the market’s strength) and a possible update on what it will do about a bid for the rival retailer, the Good Guys.
But CSL will also have a big impact, GPT, QBE and the AMP releases half yearly reports (watch the latter, its share price has been weak lately).
Insurance Australia Group, DUET, Lend Lease, Santos and Woodside Petroleum report as well.
Others reporting include Newcrest Mining, Ansell, Fletcher Building, The Reject Shop, Domino’s (one of the form stocks of the past year), Sonic Healthcare, Primary Healthcare, Automotive Holdings, Crown Resorts, Orora, Asciano, Brambles, Treasury Wine Estates, Medibank Private, Seek, Stockland, Mirvac, Shopping Centres of Australia, Aurizon and ASX. A busy week.
The AMP’s Chief Economist, Dr Shane Oliver says that after the downgrades since the last reporting season back in February the hurdle to avoid disappointment is now relatively low.
“Consensus expectations for 2015-16 earnings are for an 8% decline in profits driven by a 50% fall in resources earnings and a 2% fall in bank profits leaving profits in the rest of the market up just 1%,” Dr Oliver wrote.
"Key themes are likely to be: improved 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.
"Sectors likely to see good profit growth are discretionary retail, industrials, gaming and healthcare. Expect disappointers to be punished severely,” he wrote at the weekend.
According to Dr Oliver, the June reporting season has kicked off on a relatively ordinary note with so far only 37% of companies exceeding expectations (compared to a norm of 45%).
"However, 71% have seen their earnings rise on a year ago, 52% have seen their share price outperform the market the day results were released and 93% have either maintained or increased their dividends. It’s also still early days with less than 20% of results out so far,” Dr Oliver said.
Offshore, the season is nearing the end. In the US, Walmart, the world’s largest retailer by sales is expected to release its latest quarterly figures this week.
The retailer, which last week announced its $US3.3 billion acquisition of online retailer, Jet.com as its seeks to compete agains, Amazon, is expected to report weaker second quarter earnings and revenue, thanks in parts to the stronger US dollar and weakness in the UK supermarket chain, Asda.
Other US retailers to report include discounters, Ross Stores and TJX (which owns the TJ Maxx chain of off price stores of which Ross Stores is a major rival).
Both stocks set record closing highs on Friday ahead of TJX’s quarterly report due tomorrow night, our time. Ross is expected to report on Thursday night.
Consumer foods group, Nestle is also due to report late in the week.
