Australian reporting season: strong start with surprises on dividends and upgrades
In this week’s video insight, I discussed the latest updates from Australia’s reporting season, where earnings and dividends have generally exceeded expectations. So far, companies reporting above forecasts outnumber those missing, contributing to the market’s performance in February. Analyst upgrades have also been more frequent than downgrades, with several well-established companies maintaining their competitive position.
Transcript:
Hi, I’m Roger Montgomery, and welcome to this week’s video insight. Well, more than a third of Australia’s market cap has already reported this reporting season, and the initial picture is encouraging.
So far, companies delivering better than expected earnings have outnumbered those falling short by a healthy margin. According to sell-side reports, almost four companies have beat estimates for every company that is missed.
While the ratio typically evens out as lesser quality companies report results towards the end of the season, the results thus far underscore a buoyant start that has supported the market’s modest rise in February.
Dividends have also been a pleasant surprise. The proportion of dividend per share results surpassing forecast is outpacing misses by more than two-to-one. And this reflects more substantial cash flows and healthy balance sheets for many companies, another indicator that the Australian macroeconomic backdrop may be more robust than some anticipated. For the last few years, the magnitude of share price reactions to beats and misses has been increasing. So the upbeat story is important. Results also reinforce this. Post-report earnings upgrades for the coming 12 months currently outnumber downgrades by about two-to-one. On average, companies that have reported are seeing analysts raise their one-year forward earnings per share (EPS) forecast by between one and one-and-a-half per cent.
As we reported early in the season, a handful of popular and dominant companies are once again demonstrating that they can outpace industry peers in earnings growth and share price performance. The Commonwealth Bank of Australia (ASX:CBA), JB Hi-Fi (ASX:JBH), and REA Group (ASX:REA), companies we’ve written about this reporting season are reinforcing their competitive advantages and streaking away from competitors in terms of earnings momentum and market share, simultaneously justifying the premium valuations they currently command.
Although the final verdict on this reporting season still awaits the full slate of releases, the early takeaways point to an improving Australian economy.
Earnings have outpaced expectations, dividends have outshone forecasts, and the analyst community is broadly revising numbers upward. The stage is set for further positive shifts in earnings per share forecast and share prices.
Well, we’re gonna get back to those earnings reports now. That’s all we’ve got time for, and we look forward to seeing you next week. In the meantime, please continue to follow us on Facebook and X.
The Montgomery Fund and Montgomery [Private] Fund owns shares in the Commonwealth Bank of Australia. This article was prepared 20 February 2025 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade the Commonwealth Bank of Australia, you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
