Visit our Week Ahead during the August reporting season to find out which companies will be shaping the market.
On the back of a positive US earnings season, markets globally have rallied 5% over the past 3 weeks. The Australian reporting season has kicked into gear, with market heavyweights disclosing their financial health, and providing critical guidance for the remainder of 2010 and future years. Will this provide the ASX 200 the extra boost it needs to convincingly break free of the important 4500 psychological barrier?
With this question in mind, here are a couple of the key themes to watch out for over the next month.
Daily Pricing Chart - Australia 200 (as at 30 July 10)
Australian Earnings Season – Key Themes
Materials sector
Over the past 6 months, the Chinese government has put in place a series of measures designed to cool their economy. The materials sector has also seen a recent moderating of spot iron ore prices. Traders will be looking for the flow on effects that these may have on current and future earnings. Expect any guidance on future commodity prices and Chinese demand to flow through to miners in the sector.
On an interesting note, our big miners have a reputation for under promising and over delivering, will we see this trend continue? At this stage Rio Tinto (RIO) and BHP Billiton (BHP) are set to report on 5 and 25 August respectively.
Financials sector
Here in Australia, much has been made of the lack of competition in the banking sector. Over recent weeks though, we’ve seen a number of international competitors looking to steal market share from the Big 4 - have they been able to capitalise on this oligopoly? Banks have also been quick to point out that their ‘cost of funds’ have increased globally. Likewise, after the RBA lifted interest rates 3 times in the past 6 months, has this flowed through to an increased number of non-performing loans? Some analysts believe these issues may have dented bank earnings.
During the next 4 weeks, CBA is the only major bank set to report on 11 August. As such, the market will be looking at CBA’s performance, along with these other themes, as a guide to how the rest of the sector is performing.
What the markets expect from this earnings season
As it stands analysts are expecting to see around 6% earnings per share (EPS) growth for FY ended 2010 and 20% EPS growth in 2011. Investors will be looking to see that earnings have been a result of solid profits and not cost cutting measures. What will be key is the outlook statements and management views on future earnings and growth opportunities, as they will drive share price momentum.
Many may also look at the last reporting season in February as a guide. Stocks that significantly beat expectations and had provided a positive earnings outlook, had a better than 80% chance of being in the top 20% of the market, over the 5 months that followed. On the flip side, whilst some of the macro issues in Europe and China are compelling investors to take on risk, they are still quite eager to hit the sell button if required. With this in mind, poor earnings and outlook statements may see individual companies punished.
Market Updates and Week Ahead
To assist your CFD trading, our Market Updates will provide key insights throughout the day on how the announcements have impacted the market. With 24-hour trading available for many popular indices, including our Australia 200 Index, you can act upon this information straight away, and place your trades even before the market opens. To also help you keep track, our Week Ahead will list the companies that are reporting, along with other key events.
Some of the major names reporting this round include:
| Company Name |
Type of Results |
Reporting Date |
|---|---|---|
| Rio Tinto Ltd (RIO) | Interim | 5 August 2010 |
| Commonwealth Bank of Australia (CBA) | Full-Year | 11 August 2010 |
| Telstra Corporation Ltd (TLS) | Full-Year | 12 August 2010 |
| Woodside Petroleum Ltd (WPL) | Interim | 18 August 2010 |
| BHP Billiton Ltd (BHP) | Full-Year | 25 August 2010 |
| WorleyParsons Ltd (WOR) | Full-Year | 25 August 2010 |
| Woolworths Ltd (WOW) | Full-Year | 26 August 2010 |
Back your view – take a CFD position
If you have a view on how markets will be impacted by the Australian earnings season, our wide range of CFDs offer a convenient way to back your judgement. You can go long or short on over 7,000 global shares, including more than 700 from Australia. We also have available global stock indices, forex pairs, commodities as well as sectors.
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Updated: 02/08/10
Disclaimer: The above material does not contain (and should not be construed as containing) personal financial or investment advice or other recommendations. The information provided does not take into account your particular investment objectives, financial situation or investment needs. You should assess whether the information provided is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision based on the material above. You can either make this assessment yourself or seek the assistance of an independent financial advisor. IG Markets Limited accepts no responsibility for any use that may be made of these comments and for any consequences that result.
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