The good the bad and the ugly ASX200 Earnings Season review

The Australian earnings season is in the home stretch, with reports left from just a handful of stocks after reports this week from Fortescue Metals (FMG), Crown (CWN), and Harvey Norman (HVN).

Australia

Results overall have been solid. A standout feature of this reporting season has been many companies are flush with cash and have not hesitated to reward shareholders through dividend payments and share buybacks. 


Dividend payments are on track for a record $34bn, which will exceed the August 2019 record of $27bn and over $20bn in buybacks. 

Another noticeable feature has been that lockdowns are weighing on outlook statements. Many companies have elected to provide no guidance, and analysts and investors have been somewhat surprised at the level of caution expressed where guidance statements have been provided. 

This reporting season has also delivered its usual volatility, with stocks rerated sharply higher after a "beat" or punished for a "miss, highlighted by several stocks that moved by more than 10% after delivering reports last week. 

Winners last week included travel stocks such as Flight Centre (FLT) +21%, Webjet (WEB) +17%, and Qantas (QAN) +16.1%. As well as Blackmores (BKL) +20.5% and Nanosonics (NAN) +21.5%. 

Losers last week included Seven Group (SVW) -10.1%, Cochlear (COH) -10.9%, Kogan.com (KGN) -14.7%, Appen (APX) -11% and A2 Milk (A2M) -11%. 

With Sydney's lockdown likely to extend into October and Victoria’s into Mid-September, more downgrades than upgrades are expected to impact the FY22 earning season. 

An excellent example of this is Wesfarmers. Despite delivering a strong FY 2021 outcome last week across its range of businesses, including Bunnings, Officeworks, and Kmart, the share price of Wesfarmers has sagged over 5%, a reflection that ongoing lockdowns will suppress sales.

Nonetheless, the ASX200 is on track to lock in its 11th straight month of gains in August and is up 16.6% in 2021. 

With a roadmap to reopening in NSW in place courtesy of the strong vaccination rate, supportive monetary and fiscal policy, and attractive dividend yields, the preference is to buy a dip in the ASX200 towards 7300, looking for a rally towards 7700 into year-end. 

ASX200 Daily Chart

Source Tradingview. The figures stated areas of August 31st 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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