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Highlights
ASX-listed firms would once again announce their financial results in August’s earnings season.
Several firms beat market expectations in their results announced six months back.
Investors would look at drafting strategies to navigate the season successfully.
August and February are two important months for stock market investors as companies announce their earnings. As the latest earnings season kicks-off in August and 2,000-odd ASX-listed firms gear up to announce their full-year financial results, investors would look at drafting strategies to navigate the period successfully.
While several ASX firms beat market expectations in their results announced six months back, the scenario would not be too rosy this time around. Challenges due to rising inflation, interest rate hikes, surging commodity prices and geopolitical tensions are expected to weigh on the profitability of firms.
On this note, let’s discuss three points that every investor should be aware about as ASX earnings season kicks-off in August.
Reporting schedule
Every investor should keep a track of the reporting schedule of companies which are part of their investment portfolio. It could be damaging if you are caught unaware when one of your stocks opens down 15% the morning after it announced its results.
There is one simple rule. Take time out from your busy schedule and prepare a list of companies, you are interested in, and which would announce their results. You may take help from different broker reports.
Don’t blindly bank on past records
There are firms which generally surprise investors with their over performance during the earnings season. Either these companies under-promise or over-promise before the season begins. These companies have a track record of surprising with the downside or upside during the season.
It becomes imperative for investors to timely identify such firms before the latter report their earnings. Seasoned investors advice to track last earnings of these firms. You may look at their last annual general meeting (AGM) presentations or trading statements to evaluate if their share price rose or declined the following day or not.
Additionally, investors should never judge the performance of a company on the basis of a single quarter. It is not possible to evaluate the company’s performance based on a single earnings season. Investors would be better off if they review the averages sales and earnings per share (EPS) growth of the company over the quarters.
Don’t panic if firm misses market expectations
Investors getting uneasy in case of a firm falls short of market estimates is a common sight in the stock market. It generally happens with new investors who mostly run to sell their holdings. However, seasoned investors avoid such a rush.
In fact, they closely look at the reason why a particular firm fell short of market expectations. They focus on analysts’ consensus numbers in such a scenario and avoid making decisions in haste.
