Although the overall results were slightly weaker than usual, they were not as disastrous as feared, AMP chief economist Shane Oliver said in a recent update.
Profits for the last financial year fell 4.3 percent, beating the initial consensus of a 3.5 percent decline.
The energy sector led the slowdown, as expected, with significant downside surprises coming from the industrials, telecommunications and utilities sectors. However, consumer stocks provided a glimmer of hope with results that were not as bad as expected.
“The increase in the proportion of companies increasing their dividends is positive, but commentary on the outlook has been more cautious and this, combined with the weaker than expected overall results for 2023-2024, has led to a downward revision consensus earnings expectations for this financial year at a level below expectations. A 4 percent increase compared to a 5.4 percent increase in early August,” Oliver said.
“Despite the downward revision in overall earnings expectations, investors appear to be looking at it with the hope of coming relief from a possible interest rate cut,” he added.
Interestingly, 38 percent of companies beat earnings expectations, slightly below the 40 percent norm, while 34 percent fell short of expectations, which is also below the 41 percent usual.
Additionally, 55 percent of companies reported higher profits than the previous year, although this was slightly lower than the average of 56 percent.
Dividends also painted a cautious picture, with 56 percent of companies increasing their distributions, slightly below the norm of 59 percent.
“The good news is that fewer companies are talking about inflation, but unfortunately there is more and more talk about job cuts,” Oliver said.
“Beware of the banks”
VanEck portfolio manager Cameron McCormack noted that amid tough economic conditions, the ASX earnings season saw shares of companies that beat earnings expectations rise by an average of 4.5 per cent. percent, while those who did not respond fell 3.1 percent within 24 hours of their earnings. release.
“We remain confident the S&P/ASX 200 will reach 8,300 by the end of the year,” McCormack said.
“We see midcaps continuing to show strength for the remainder of 2024 after being the most notable this season. They have reported the most net overruns, upward price target revisions and offer the highest 12-month consensus target returns.
Looking ahead, McCormack warned investors to “beware of banks and watch out for miners.”
“Investors should be wary of heavy exposure to ultra-large cap Australian banks and mining companies. CBA is significantly overvalued, with no sell-side analysts recommending it at the current price. It remains the most expensive bank in the world, with stagnant profit growth and a gradual increase in non-performing loans,” McCormack said.
“As China’s steel industry slows, major players like BHP Group have expressed concerns about falling demand after decades of growth. The only bright spot is Australian gold mining companies, whose balance sheets, cash flow generation and capital allocation strategies have never been stronger. The global cycle of monetary easing has been beneficial for gold prices and, therefore, for gold mining companies.
