The CMC Markets team kicks off the reporting season as we take a close up look at corporate results. Companies and anticipated results that have the potential to move share prices and the broader market are in the spotlight.
Reporting season officially closes today. Overall earnings growth around 12% eases concerns about a market trading at ten year highs. Data manager Next DC has missed consensus estimates and may come under pressure today. Harvey Norman’s result will speak not only to the company’s prospects but also the retail environment. With 10% of the HVN’s shares short sold and expectations modest the announcement may fuel volatile trading.
After a rally in Shanghai trading base metals surged in London. Aluminium and Zinc led with gains close to 2%. This may see the Australia 200 index surprise investors today. Although there are no local data releases the strength in resources and some solid corporate reporting could overcome the 6 index points shed in overnight trading.
The Australian reporting season is in its final week. Speedcast, Appen and Blackmores all missed Bloomberg consensus estimates, and may restrain buying today. Better news from Orocobre or Caltex may offset the reported negatives.
The Australian reporting season enters its final week. Plumbing group Reliance Worldwide showed a 0.6% profit increase and earnings at the bottom end of guidance. This could bring a sharp share price reaction as the stock is trading close to all-time highs. Higher gold, copper and aluminium may see investors return to the Materials sector after a fortnight of sustained pressure.
The Australian energy sector may indicate whether local political threats can outweigh the positive international impulse. The sector came under heavy pressure as it became clear political turmoil means it’s unlikely there will be an energy policy framework anytime soon. The better than 3% overnight gains for crude oil are supportive, and the sector’s loss or gain today will give clues to investor thinking.
More than 75% of top Australian companies have unveiled earnings this season showing 7% sales growth and almost 13% earnings growth. Today 20 more corporates will front shareholders. They include Qantas, South 32 and Nine Entertainment.
Australian investors may ignore all international influences in favour of political turmoil and a busy reporting day for corporates. The potential for a change of Prime Minister is rattling investors, and policy paralysis in energy is thumping retailers like AGL and Origin. Around 25 top companies will report earnings on the busiest day of the season so far.
Resource stocks are likely to feature in today’s session after overnight rallies in industrial and precious metals, and oil. BHP Billiton reported a 33% in underlying profit this morning, driven by higher realised prices for oil and copper. This dynamic may see analyst revising estimates upward, and could catalyse a break through 4 year highs for BHP.
Other reports today include Healthscope, Super Retail Group and Oilsearch. The reporting season passes the half way mark today. Sales so far are broadly in line, but write downs mean profits are lagging forecasts.
A potential resolution of trade disagreements between China and the US by November helped lift market sentiment into last week’s close. After a soft European session for metals and stocks the reports rescued US indices from early losses. The US dollar eased back and bonds held steady as investors sought more concrete news. The positive momentum is particularly important as the economic calendar is largely bare until Thursday, although corporate reports in Australia may influence trading.
Around 40% of Australia’s top 200 companies report to shareholders this week. BHP on Tuesday is a stand out event, but the likes of A2 Milk, Wisetech, Oilsearch, Qantas and Nine Entertainment will ensure a sleepless week for analysts. The Australia 200 index has traded to ten year highs on the early company earnings releases, and a continuation of the stronger news may see the further moves towards the all-time highs around 6,850.
News of new trade talks between China and the US and an easing of emerging market fears brought markets back to life overnight. Shares in Europe and the US rallied, and base metals bounced back from recent losses. Qatari assistance helped stabilise the Turkish Lira, although Turkish stocks continued their tumble.The easing of concerns may see a surprisingly strong turn around today.
Australian jobs numbers today are expected to show an increase of 15,000 positions in July. Market reactions are hard to predict given the notorious volatility of the data. Another mixed report card for corporate Australia could also flavour trading. Sonic Healthcare is a stand out, and Telstra and Treasury Wine Estates also beat forecasts. However these results are somewhat offset by misses from Estia, GWA and Downer EDI.
The release of Australian wages data this morning could drive market action. Wages growth is the missing ingredient in the inflation pie. Any deviation from the forecast 2.1% annual growth rate will raise speculation around interest rates. Company reports this morning are mixed. Fairfax swung to a loss on further write downs, CSL and Woodside Petroleum came in just above estimate.
Here are the reports so far this morning
Reports so far this morning from AGL, Mirvac, Orora and Suncorp are broadly positive and above consensus estimates. This may see the Australia 200 index outperform the region and test the ten year highs around 6,300.
The financial sector may see a larger correction as AMP announced a drop in underlying profit, and the Commonwealth Bank reported lower actual Earnings Per Share.
US reporting overnight continued the positive pattern of the season. Overall earnings growth of 25% is supporting US stocks at elevated levels. Australian corporates delivering results today include Transurban, Shopping Centres Australia and Lynas Group – please see the table below.
The US reporting season remains a bright spot for global markets. However a number of indicators suggest all is not well with the outlook.
Apple became the first company in history to top the US $1 trillion mark after a positive investor response to its quarterly result. This pushed the Nasdaq composite index up by more than 1%, and it is now within a day’s trading range of its all-time high. If the current investor mania for tech and growth moderates a correction may strike.
Rio Tinto reported overnight, and despite lifting underlying profitability by 12% its shares dropped 4%. The weakness comes despite a stronger US reporting season. With little data due and no Australian companies reporting today there may be little to countermand the negative sentiment.
The Australian corporate reporting season starts today with Rio’s aftermarket release a feature. Over the month we’ll detail the expected releases for the day, with a consensus earnings estimate. Investors should take care, as the information provided is uncertain and subject to change.
US investors are falling away from the tech sector after a string of disappointing quarterly statements. While macro-economic data remains broadly positive the re-adjustment to a more realistic assessment of the tech outlook is weighing on stocks.
Facebook’s share price plunge as the social media giant missed revenue estimates for the first time in three years and the CFO guided growth expectations lower. The pressure on Facebook and other tech stocks meant the tech-heavy Nasdaq reported loss.
In Australia Rio Tinto is the first major company to report earnings. On consensus analyst are looking for earnings of around US $2.50 per share. Resmed and Janus Hendersen will also release numbers ahead of the first full week of annual and semi-annul reports starting Monday.