Earnings Season - Tipping point and road to sustainable investments

  • Feb 13, 2020 AEDT
  • Team Kalkine
Earnings Season - Tipping point and road to sustainable investments

Earnings season is on a full-throttle with the market movers starting to disclose results. Initially, let’s discuss the developments between July 2019 and December 2019. For the said purpose, we refer to the NAB Quarterly Business Surveys for the two quarters.

September quarter 2019

In Q3 2019, the overall survey results indicated an ongoing weakness in the business sector. Business conditions depicted an improvement, but conditions were tracked below average with stress on retail and wholesale industries.

Business confidence dipped sharply during the Q3, reaching below-average levels. In Q3, the capacity utilisation and employment intentions improved, expected capital expenditure over the next 12-month declined.

Price pressure was weak as retail prices were rising at low rates while labour and other input costs were tracking at a slightly higher rate. Firms reckoned difficulties in finding suitable labour despite an uptick in the unemployment rate in 2019, suggesting that wage growth would be modest.

December quarter 2019

Economists at NAB noted that the deteriorating business conditions might have bottomed as the business conditions improved sequentially, but remain below the recent peaks, suggesting a slowness in the business sector.

It was noted that despite business condition bottoming, the firms are sceptical for a material improvement in the near term. The survey continued its indication that costs are growing at a higher rate with mute pressure in end-prices.

Overall growth in retail prices was soft, but it has recovered in the last two quarters. It was mentioned that weak inflation had been driven by slow wage growth, and with robust employment demand, there could be some improvement.

Firms continued to face difficulties in finding suitable labour, but it remains well below the levels recorded in the build-up to GFC, and it coincided with significantly robust wage growth.

Earnings Season – when reality knocks expectations

In January, the downgrade cycle was started with Mosaic Brands Limited (ASX:MOZ), reflecting weakness as a result of bushfire. Later, the industrials duo CIMIC Group (ASX:CIM) and Downer EDI Limited (ASX:DOW) followed with their respective downgrades.

During the month, the coronavirus fears started to grapple expectations and markets took a toll. As a result, the education, travel, leisure and entertainment stocks took a beating, but spillover impacts were seen in commodity heavyweights too.

SeaLink Travel Group Limited (ASX:SLK) has tanked 18 per cent since the start of the year, and the company has not disclosed any disruption due to coronavirus as of now. However, SLK has completed an acquisition.

On a YTD basis, Flight Centre Travel Group Limited (ASX:FLT) is down by 12.85 per cent. Recently, the company noted that it achieved a record TTV with an underlying PBT slightly above the mid-point of the guidance for the six-month period ended 31 December 2019.

Specifically, on coronavirus, FLT said that it is early to quantify the potential impact of the outbreak, but adverse effects have been noticed in its China, Singapore and Malaysia business, which accounted for $625 million in TTV in FY2019.

Webjet Limited (ASX:WEB) is down by around 3 per cent since the start of the year, and there has been no disclosure on coronavirus impact particularly. However, the company has clarified on an analyst report as investors made queries pertaining to claims made in the report.

Shares of Qantas Airways (ASX:QAN) are down 9.64 per cent on a YTD basis, and the airlines have not disclosed any impact due to coronavirus.

Crown Resorts (ASX:CWN) is down slightly by 1.83 per cent on a YTD basis, and no disclosure has been made in relation to the coronavirus, but the company has other problems pertaining to a share sale agreement between two parties.

Shares of Blackmores Limited (ASX:BKL) are down 14.57 per cent in the last five days. BKL has reported that its newly acquired Braeside production facility has suffered adverse consequences.

BKL said the demand for immunity products has increased in Australia and Asia, but supply chain disruptions across the region are adversely impacting the business.

Stocks surpassing market expectations

Commonwealth Bank (ASX:CBA) may have justified the premium against its peers, with a $2 interim dividend. CBA closed 4.08 per cent higher on the day the results were disclosed.

JB Hi-Fi Limited (ASX:JBH) increased its total sales by 3.9 per cent to $4 billion, and raised guidance for the full-year. Shares of the company ended around 11.5 per cent higher on the day announcement was made.

Bapcor Limited (ASX:BAP) posted record revenue and earnings for the half-year ended 31 December 2020. However, the margins of the automotive aftermarket tumbled as competition grew fierce.

Over 4 million shares changed hands on the day Bapcor reported results and it ended 6.1 per cent higher on the same day.

Markets are likely to overreact, you should believe in your process

Algorithm and momentum traders need an opportunity to drive the price of the stock either way and sometimes, it could make the incumbent stock cheaper or expensive. Thus, an investor should be patient, rational and believe in the process.

As an example – Shares of IDP Education Limited (ASX:IEL) were tanking since the start of coronavirus threats. On January 20, the stock ended at $20.45, and by February 11, it ended at $16.68. On 12 February 2020, the company disclosed its results with solid growth in revenues, profits and dividends.

At around 3:38 PM AEDT, on 13 February 2020, IEL was trading at $22.705, up around 5.999 percent.

This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.


All pictures are copyright to their respective owner(s).Kalkinemedia.com does not claim ownership of any of the pictures displayed on this website unless stated otherwise. Some of the images used on this website are taken from the web and are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it below the image.


There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK