Result Season | Full Time Scorecard
EQUITY STRATEGY
Need To Know
- A weak reporting season for earnings. S&P/ASX 200 EPS estimates have been revised lower by 2-3% through August. Revenue upgrades have been overwhelmed by higher cost and interest expense.
- Dividends saw smaller downgrades. Almost $5bn of new buybacks were announced, in spite of the higher cost of debt in 2023 vs 2022, led by CBA and NAB buybacks.
- Aussie equities performed broadly in line with global equities, despite soft earnings. S&P/ASX 200 was down -4% mid-August, before rallying into the end of the month to finish -1.5%.
- Anticipating mid-cycle recovery in earnings until 2024/25, based on: 1) low starting point; 2) resilient domestic economy; 3) better China demand/commodity prices. Expected mid-2024 stage 3 tax cuts and stable RBA rates to support.
Weak earnings season as S&P/ASX 200 EPS estimates fell 2-3% in August due to higher costs, though Aussie equities rebounded slightly by month-end; potential mid-cycle recovery expected with resilient domestic economy and improved China demand.
Figure 1: S&P/ASX100 top 10 EPS revisions through August. Company specific stories dominated the upgrades.
Figure 2: S&P/ASX100 bottom 10 EPS revisions through August. Weakness in Resources earnings and higher interest costs impacting Industrials featured.
Figure 3: S&P/ASX 200 Sector performance August. Consumer Discretionary the best performing sector, primarily due very low earnings (recession like) expectations for 2024.Fears were unfounded.
Figure 4: Sandstone Insights rating changes over results season.
Figure 5: Close to $A5bn of buy backs announced through August, dominated by Financials. Westpac (WBC) will likely join buy back club in Nov 2023 at FY Results.
Figure 6: Global oil demand continues to recover post Covid, despite softer than expected China demand in 2023. Energy prices are appearing increasingly vulnerable to supply and demand shocks in the upcoming years of 2023/24.
Figure 7: The key debate on Hold rated WES over FY24 is whether Bunnings sales (60% of Group) growth will remain positive through FY24? Rarely does hardware spending go negative.
Companies Mentioned
| ALU | Altium |
| ARB | ARB Corporation |
| CBA | Commonwealth Bank of Australia |
| ING | Inghams Group Limited |
| NAB | National Australia Bank Limited |
| NWS | News Corporation |
| PMV | Premier Investments |
| QAN | Qantas Airways Limited |
| SUL | Super Retail Group |
| SUN | Suncorp Group Limited |
| WES | Wesfarmers Limited |
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