Pre-reporting season catalysts
About the author:
- Author name:
- By Tom Sartor
- Job title:
- Senior Analyst
- Date posted:
- 29 June 2020, 1:35 PM
- Sectors Covered:
- Junior (Emerging) Resources, Bulk Materials
- With COVID-19 wreaking havoc on the ability to forecast corporate earnings in the current half year, we're seeing a much larger than usual number of companies seeking to keep the market informed via trading updates, guidance updates and/or unaudited results well ahead of their full financial results due in August.
- We've seen recent updates from several large caps including Coles, Woolworths, JB-Hi-Fi, Transurban, Seek and a swathe of retailers. In a climate of elevated uncertainty, many of these updates have driven sharp, and sometimes counter-intuitive share price reactions.
- In this piece the research team nominates stocks that may surprise or disappoint based on various potential catalysts in the lead-up to reporting season. These lists will be updated via our reporting season previews in late July.
Quick views on the market
Our recent work has shown how far equities have surged ahead of traditional value fundamentals, with a flood of liquidity into the financial system a clear driver. Momentum is also perpetuated by the rise of ETFs (where value judgements don't apply) and a sense of FOMO given perceptions that central banks have a "whatever it takes, no matter the cost" attitude to supporting asset values, which has been a common theme since the GFC.
Given the ultra-low outlook for interest rates, it's easy to argue the market is pricing equities increasingly on a relative basis, rather than on an absolute view of return versus risk, explaining the crowded growth trade.
No investor alive has seen this type of rates outlook nor this scale of monetary and fiscal stimulus.
So we’re cautious around potential potholes in the coming months that could easily trigger a reality check for the market including:
- FY20 results/FY21 outlooks that are worse than current share prices imply;
- re-escalation of the CV19 outbreak;
- un-coordinated removal of fiscal stimulus;
- risks to global trade/relations;
- US election uncertainty.
Some stocks that have updated the market in recent weeks with stronger than expected 1H20/FY20 unaudited results have received a tepid response from the market.
This suggests that it may prove better to travel than to arrive at August financial results for many stocks benefitting from the recent rally.
Potential pre-reporting season catalysts
Disappoint candidates
- Travel stocks (including FLT & WEB)
- Link Administration
- AMP Limited
- Treasury Wines
- Origin Energy
- Coronado Global Resources
- Whitehaven Coal
- Bingo Industries
Surprise candidates
- Data#3
- Medibank
- NIB Holdings
- Reliance Worldwide
- Adairs
- AP Eagers
- Collins Foods
- Monash IVF
- ALS limited
- Mitchell Services
- Mach 7
- Impedimed
- Volpara
Morgans clients can login to view further analysis and commentary on these stocks in our full Pre-reporting season catalysts report.
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