Australia’s August reporting season has delivered results below expectations, with only 20 to 30 per cent of companies surpassing earnings forecasts. This contrasts sharply with the US, where over 80 per cent of companies exceeded expectations, according to Global X senior product and investment strategist Marc Jocum. “This disparity underscores the challenges Australian companies face in meeting investor expectations amid a moderating earnings outlook,” Jocum noted. Median earnings downgrades of 3.6 per cent exceeded upgrades of 2 per cent, while several large-cap stocks experienced significant corrections.
Despite the overall weaker performance, some sectors and companies stood out. Consumer-focused businesses like JB Hi-Fi, Nick Scali, and Coles posted stronger results, buoyed by market positioning, effective cost management, and dividend resilience. Technology businesses and mid-cap companies also generally outperformed, with names such as Stockland, Aussie Broadband, The Lottery Corp, Life360, and Seek meeting or exceeding market expectations.
However, several prominent companies faced significant setbacks. James Hardie experienced a roughly 40 per cent drop following a weak forecast. CSL, a global biotechnology company that develops and delivers innovative medicines, saw its stock decline due to soft guidance and the anticipated Seqirus demerger. WiseTech Global, a software company providing solutions for the logistics industry, dropped 17 per cent after missing earnings targets, while Domino’s suffered due to rising costs and slower international sales.
Despite these mixed results, the ASX reached a record high in August. Jocum suggested this highlighted the importance of diversification, cautioning against concentrating portfolios in individual names, referencing the performance of stocks like James Hardie and CSL. He stated that with only around 7 per cent of Australian companies outperforming the broader market over the past 20 years, the chances of consistently picking winners are low.
