Aussie Stocks Milestone Hangs in Balance as Covid Damps Outlook
Earnings Beat Expectations in Australia as Stocks Eye Milestone
(Bloomberg) -- A milestone for Australian stocks hangs in the balance as investors weigh better-than-expected corporate earnings results against a resurgence in Covid-19 concerns.
Of the 78 companies that have reported full-year results this month, 65% have met or exceeded earnings estimates, according to data compiled by Bloomberg. That’s three percentage points higher than for the same period last year.
The results have helped the S&P/ASX 200 Index cling to its 1.2% advance for August, even as Sydney’s delta-variant outbreak worsens. That leaves it with a shot of posting an eleventh straight monthly gain, which would be the longest winning streak on record.
Yet a lot still depends on the very fluid situation surrounding the virus. Prime Minister Scott Morrison has conceded it’s unlikely the country will ever return to zero cases and Australia is reviewing its elimination strategy. Given the virus uncertainty, company guidance has been “neutral, absent or negative,” UBS Group AG analysts led by George Tharenou wrote in an Aug. 19 note.
Resources firms mostly beat profit expectations, and companies including Bluescope Steel Ltd., Oz Minerals Ltd. and Woodside Petroleum Ltd. declared stronger-than-expected dividends, Citigroup Inc. analysts led by Liz Dinh wrote in a note. The broker maintains its above-consensus growth forecasts for the current fiscal year. Shares in Bluescope, Oz Minerals and Woodside added 3.8%, 4.2% and 0.8% respectively on Monday.
Still, while mining giants BHP Group and Rio Tinto Ltd. both posted solid results, the outlook for commodities and global growth is at risk as the delta variant drags on China and U.S. consumers, according to UBS’s Tharenou. The two producers each shed more than 10% last week as materials slumped. BHP rose 0.7% while Rio Tinto climbed 0.5% during the Monday trading session.
In other industries, construction materials, insurance and diversified financials are seeing strong forecast upgrades, according to Citi’s Dinh. But for the banking sector, “softness of core earnings prospects” was the key takeaway, she said.
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