Reporting Season: Results Roadmap, August 2021
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 31 August 2021, 9:00 AM
- Sectors Covered:
- Equity Strategy and Quant
Reporting Season – a season for stock pickers
Overall the ASX 200 index appears to be immune from the COVID-19 impact, shrugging off the near-term uncertainty up 1.4% month to date. However, individual price reactions highlight the risks for companies operating with frequently moving goalposts.
FY21 reporting season has been marked by extreme price volatility. Result reactions have been evenly split between positive (48%) and negative (52%) reactions, but it is the magnitude of reactions that has been most surprising underscoring the need for investors to be selective in market exposure.
Only a small cohort of companies (16%) have provided quantitative guidance so far which highlights the immense short-term challenges management teams are facing. Surprisingly, companies that have guided are down on average 2% since their result.
The perceived certainty of earnings means very little with the market looking through the next 12 months and what appears to be the last round of debilitating lockdowns.
In our view, the mixed price reactions show that this is a season for stock pickers with the big macro thematics taking a back seat in August. Structural growth, technology, cyclicals, re-opening trades, COVID beneficiaries have all had their share of winners and losers but what is clear is the market is prepared to reward companies on performance rather than group winners according to themes.
Reporting Season Scorecard
Small and mid-caps continue to exceed expectations, with 31% exceeding consensus estimates and just 10% missing well under the average of 20%. While the large cap ASX 50 beat rate is lower than average, the index’s concentration in Financials and Resources (59% of the ASX 50) is a poor reflection of the rate across the rest of the market.
Result reaction appears rational, with beats rewarded 5% on result day while misses duly punished down 8%.
Notable beats : CTD, LOV, CAR, AMC, DMP, QBE, SUN, PNI, TWE, AMS, TPW, GNC, WTC
Notable misses : TCL, AGL, MFG, COH, OML, KGN, A2M, MND, AX1
Looking at companies that have reported to Friday, FY22 earnings have been revised down 3.5% on average. However this comes on the back of 8.2% upgrades from the February reporting season, and the downgrades are not surprising given cautious management outlook commentary.
Share price reactions have mostly shrugged off the negative earnings outlook up 1.1% since the result but as we highlighted above, there is a high degree of volatility among results.
Find out more
You can find further detailed analysis of company results this reporting season by browsing our reporting season tag, and view a full list of upcoming results on our Reporting Season Calendar.
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Disclaimer: Analyst may own shares. The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.