Aussie earnings season 'positive surprise' so far, but tide could turn, Macquarie says

Cochlear

19/08/2024 03:15

Aug 19 (Reuters) - Australian corporate earnings have
been a "positive surprise" amid investor euphoria over
estimate-beating margins, but historical trends suggest results
could take a turn as the earnings season approaches its end,
Macquarie analysts said.
    Companies have posted better-than-expected margins, often
supported by lower tax and interest costs, with most of them
outperforming market view so far this season than in February,
Macquarie said in a note.
    The upbeat earnings have prompted investors to add back to
their portfolio, especially after reducing their equity exposure
in the recent correction at the start of the month, the analysts
noted.
    Cyclical retailers were the stand-outs last week. Shares of
JB Hi-Fi  JBH.AX  posted their best weekly gain in more than
four years after the consumer electronics retailer announced a
special dividend last week and an estimate-beating annual
results.
    Top telco Telstra  TLS.AX  also came as a positive surprise
after it raised its earnings forecast.
    Investors appeared to shrug off the drop in profit from
leading Australian banks, and instead focused on the positives
such as Commonwealth Bank of Australia's  CBA.AX  lower
provision for bad loans and National Australia Bank's  NAB.AX 
steady margin.
    Still, the biggest disappointment came from Origin Energy
 ORG.AX , whose shares crashed on a warning that profit in its
electricity generation business is likely to drop.
    The cycle is slowing and the key uncertainty is how much it
improves in reaction to rate cuts by the U.S. Federal Reserve
and the Reserve Bank of Australia, analysts said, adding that
results' upbeat momentum tend to deteriorate towards the end,
especially in the final week.
    "While the high share of beats is positive, we would caution
against extrapolating this trend to the rest of reporting
season." 
    A bulk of the earnings season still lies ahead, with iron
ore majors BHP  BHP.AX  and Fortescue  FMG.AX , energy giants 
Woodside  WDS.AX  and Santos  STO.AX  and supermarktes
Woolworths  WOW.AX  and Coles  COL.AX  reporting in the coming
weeks.
    

 (Reporting by Himanshi Akhand in Bengaluru; Editing by Sherry
Jacob-Phillips)
 ((Himanshi.Akhand@thomsonreuters.com;))