14ausM

The week ahead in Australian earnings

Strats-Eleanor-88x88
Eleanor Creagh

Australian Market Strategist

The week ahead is a blockbuster one for earnings in Australia and with current valuations on the ASX looking stretched, upside surprises are likely to come from companies that benefit from the weaker AUD, supportive commodity prices, and US-driven growth. 

The key themes for investors to watch will be the USD earners and companies exposed to strong US growth; growth stocks with high PE ratios priced to perfection must deliver both on forward outlooks and meeting expectations, as well as capital management given Australians' love affair with dividends.

Below are some potential market movers for the week ahead.

This week Dominos reports, and despite the market expecting the firm to miss FY'18 growth targets, a miss would still be disappointing. A downgrade to FY'19 growth momentum guidance is also likely which could disappoint investors. However, Dominos does have a high level of short interest, so in the event of a positive surprise there is risk of a rally as short sellers cover their positions. 

The US has been a clear outperformer on the global macro stage in terms of growth and record low unemployment. The fiscal stimulus has the US economy running on a sugar high and this, along with the currency exposure, is likely to present positive tailwinds for Bluescope Steel next week. 

CSL is a great Australian success story, both domestically and internationally, and it reports on Wednesday, a bumper day for companies reporting. For the past two years, CSL has missed earnings expectations. CSL is trading at a price to earnings ratio of 34x forward earnings, well above comparable companies and its own historical average. With market expectations so high the onus is on CSL to deliver, and there is a risk that increased capital spending dampens FY'19 earnings guidance. While we don’t doubt that CSL is a quality Australian company with the capability to grow earnings, the high valuation does not leave any margin for safety when it comes to reporting.

Cochlear, another stock reporting this week, has also been flagged by the market as a high growth stock, with a heightened valuation. As we have seen with Facebook and Twitter suffering sharp revaluations on missed expectations, we could see sharp falls in the share price on the day if expectations are missed.  

Wesfarmers also report on super Wednesday; the Bloomberg consensus forecast for FY'18 EBIT is A$4,218, we expect the figure to come up slightly below this estimate due to falling earnings from Coles and the Industrials division of the business. 

IAG repors Wednesday as well, which is the biggest day of reporting season by market capitalisation. IAG are likely to report an upgraded FY'19 outlook due to advantageous weather conditions. This may provide an upside surprise over analyst estimates. IAG could also announce a buyback given its favourable capital position.

QBE reports on Thursday and like IAG, the reasonably stable weather conditions could reduce natural hazard losses. Given guidance is skewed to the downside, the market could take a positive report favourably

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900 Hellerup
Denmark

Contact Saxo

Select region

International
International

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.