UBS: The ASX reporting season is 'disappointing' as major companies downgrade earnings forecasts

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With earnings season for the ASX200 now in full-swing, the UBS equities team has issued its half-way scorecard.

Strategists David Cassidy and Dean Dusanic said it’s been “marginally disappointing” so far.

And that’s partly to do with a lack of optimism.

While the majority of company profits were in line with forecasts, the pair said that a number of big Australian companies have forecast a relatively glum outlook for the year ahead.

The table below illustrates one theme that’s emerged; it lists each of the bigger companies on the ASX200 who have downgraded their forward guidance for earnings per share in the 2018 financial year:

UBS

Cassidy and Dusanic said this relatively pessimistic outlook wasn’t necessarily reflective of weakness in the Australian economy.

“Some of the cautious guidance relates to quite globally focussed companies and some of the guidance disappointment relates to the cost of ‘investing for growth’,” they said.

By Friday morning, 73 companies on the ASX200 had reported to the market. That figure includes 47 large-cap (ASX100) stocks and 26 small-caps, which represents around 40% of all ASX200 companies due to report in August.

Among large-cap stocks, the two analysts assessed that nine companies had beaten expectations, while 13 fell short and the remaining 25 were in line with their estimates.

More broadly, Cassidy and Dusanic said the results so far confirmed the current backdrop for the Australian share market — one of moderate earnings and growth.

That’s been reflected in the performance of the ASX200 this year. Australian stocks have under-performed against their global peers, and the market has traded within a narrow range between 5,650 and 5,800 since the start of July.

This table summarises UBS’s view of the positive and negative earnings surprises so far this reporting season:

UBS, Business Insider

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