February 2018 Reporting Season Wrap

Articles 6/03/2018
February 2018 Reporting Season Wrap

Right before reporting season we saw volatility creep back into markets.  This was driven by concerns over the likely increase in US interest rates (driven by a strong US economy) and investors' high expectations for company profits.  Here in Australia, a richly valued sharemarket meant there was likely to be higher sensitivity to company results, particularly results that disappointed.

 

The semi-annual reporting season in February provides a great health check for equities.  In aggregate, the profit season did not lead to a major shift in expectations. 

 

Some of the key themes from the February 2018 Australian profit season included:

  1. Across the industrials, revenue growth remains average at best.
  2. Cost reduction programs have been exhausted.
  3. Balance sheets remain strong with many companies taking the opportunity to use surplus cashflows to repay debt.
  4. Corporate tax rate reductions in the US are likely to benefit a number of companies.

The world is changing at a rapid pace and we continue to challenge the investment rationale behind a number of sectors, including banks, telecommunications, supermarkets and property.  Investors cannot afford to look to the past for tomorrow's investment idea.

 

For a more detailed overview of reporting season we encourage you to read our detailed Reporting Season Wrap.

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