Five Things to Watch This Earnings Season in Australia

(Bloomberg) -- Australia’s biggest companies are facing a challenging reporting period, marred by a looming federal election and signs the worst housing slump in a decade is hitting consumer spending.

The nation’s stocks have tumbled 4.6 percent since the last major reporting season ended in August after almost half of companies fell short of expectations. Analysts are expecting more of the same, cutting earnings estimates by 1.1 percent over the past three months, according to data compiled by Bloomberg.

Five Things to Watch This Earnings Season in Australia

Here’s five things to keep an eye on this month:

Retail Rebirth

Retail sales fell the most in a year last month as the slumping property market hit consumer confidence.

Analysts are favoring consumer staples including supermarkets Woolworths Group Ltd. and Metcash Ltd. over discretionary retailers such as Harvey Norman Holdings Ltd., JB Hi-Fi Ltd. and Super Retail Group, which are among the 10 most-shorted stocks on the S&P/ASX 200 Index. UBS Group AG has flagged Wesfarmers Ltd. as at risk from a consumer slowdown, primarily through its Bunnings hardware unit.

Stocks to watch: JB Hi-Fi, Harvey Norman, Myer Holdings Ltd., Ltd., Super Retail

A Royal Commission

The final report from the inquiry into financial services misconduct was better-than-expected for Australia’s banks. Not so for their intermediaries.

  • Mortgage Choice Ltd. and Australian Finance Group Ltd. may have to address how they’ll fare after the commission recommended removing trailing commissions for home loans
  • Look out for updates the costs associated with the inquiry. Commonwealth Bank of Australia on Wednesday reported that risk, compliance and remediation expenses were up A$121 million

Stocks to Watch: National Australia Bank Ltd., AMP Ltd., IOOF Holdings Ltd., HUB24 Ltd., Netwealth Group Ltd.

M&A Influence

Companies, particularly in Australia’s healthcare sector, may provide commentary on how a slew of takeovers are tracking. The following firms are either targets, or on the hunt for acquisitions:

  • Healius Ltd. may update the market on any further overtures from China’s Jangho Group Co., after rejecting its approach last month as opportunistic
  • Beach Energy Ltd., which has said will be debt free at the end of March, may look at more acquisitions after buying Lattice Energy Ltd. last year
  • Australia’s gold producers may be on the hunt as Barrick Gold Corp. and Newmont Mining Corp. divest assets following a spate of mega deals last year

Stocks to Watch: Healthscope Ltd., MYOB Group Ltd, Nine Entertainment Co., Northern Star Resources Ltd., Newcrest Mining Ltd., Evolution Mining Ltd.

Go Global

Exporters and companies with offshore operations have a better outlook than domestic peers, according to Jun Bei Liu, a portfolio manager at Tribeca Investment Partners, who favors resources stocks.

  • BHP Group, Rio Tinto Group and Fortescue Metals Group Ltd. may provide insight into the iron ore market after Vale SA declared force majeure in a series of contracts after the deadly tailings dam collapse in Brazil
  • Treasury Wine Estates Ltd. and a2 Milk Co. may provide insights on how they’re coping with a slowdown in China’s consumer spending
  • WorleyParsons Ltd. will provide a window into how the oil sector is performing after prices slumped last quarter

Stocks to watch: BHP Group, Rio Tinto, Fortescue Metals, Sims Metal Management Ltd., Newcrest, Seven Group Holdings Ltd., Bellamy’s Australia Ltd, Blackmores Ltd, CSL Ltd., Cochlear Ltd, Mayne Pharma Group Ltd.


Woolworths, JB Hi-Fi and Flight Centre Travel Group Ltd. are among companies expected to bring forward capital management plans to use up excess dividend tax credits ahead of a potential change of government.

Stocks to watch: BHP Group, Rio Tinto, Fortescue, Woodside Petroleum Ltd, Caltex Australia Ltd, Ramsay Health Care Ltd., Origin Energy Ltd., Santos Ltd.

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