ASX Reporting Season ASX Reporting Season ASX Reporting Season

ASX Reporting Season

Equities 10 minutes to read

Summary:  We discuss some of the key themes and drivers set to unfold in reporting season, including the capacity for upside surprises with the expectations bar remaining low, and the ongoing cyclical allocation.

Away from the drama of Reddit armies and short squeezes, earnings and more pointedly the inflection in the positive rate of change earnings, from deeply negative to positive, has been lost in the noise.

4Q reports in the US show the cycle has turned and earnings are now accelerating to the upside. Across the broad S&P 500 earnings growth has increased sequentially 4.87% (-7.44% 3Q), the bottom in the earnings cycle is behind us, with the global cycle now in an early expansion. The earnings surprise vs. expectations for the 216 companies that have reported to date sitting at 20.04%.

The profit cycle has turned, and earnings are accelerating to the upside far quicker than expected. Many companies have beat expectations and will continue to do so as coming out the other side of the pandemic many resilient companies have nimbly adapted in response to the crisis and are now positioned to leverage the inbound economic recovery. Balance sheets have been bolstered, cost structures are leaner or have been optimised, and demand is rebounding and will continue to do so, particularly with vaccines now being rolled out on a large scale.

Here in Australia, February reporting season is kicking off and we expect these themes to be followed through locally where the recovery of the domestic economy is underway. Where we expect upside surprises for companies and sectors most leveraged to the economic recovery, alongside the “COVID-19 losers” benefiting most from the ongoing reopening and dialling back of restrictions in a relatively virus free Australia.

Analysts seem to have been marking their estimates to market throughout the crisis period and we may find again the bar to beat remains low as analysts are underestimating the rebound. This was certainly one of the big takeaways in August last year that could be repeated, although to a lesser degree. Expectations and analysts’ forecasts have begun to creep up as the market looks ahead, we believe the upcoming reporting season should enforce that trend. The inflection in the earnings cycle becoming a catalyst for a continued upgrade cycle in combination with the setup of growth rebounding against the backdrop of more fiscal stimulus and free flowing central bank liquidity.

Business conditions are recovering, focus is shifting to the prospects of widespread vaccine rollouts and what lies the other side of the pandemic and we expect earnings to continue to corroborate ongoing cyclical rotations as the earnings recovery broadens in tandem with economic growth rebounding. With growth re-accelerating, vaccine rollouts boosting the bounce back in demand and inflation accelerating, these exposures will continue to perform and the reflation rotation remains intact.

Finishing last year with a laggard tag, the more cyclically orientated nature of the ASX 200 should support index performance throughout 2021. This could see the index shifting from underperformer to outperformer in the year ahead. Particularly as various commodities rev-up into 2021 with a vaccine rollout, demand bounce back weighed against supply deficits and fiscal spending boost, alongside tailwinds of a weaker USD and higher inflation. Exposure to other investing thematics like ESG/green transformation/automation via battery metals, rare earths, copper, silver, tin and the like, also providing opportunity for investors.

Financials – Low hurdles paired with declining loan-loss provisions could deliver positive surprises and signal the beginning of the end to the crisis' toll on the group. Low rates pressure net interest margins and erode bank profits, a clear negative. However, this is weighed against better than expected outcomes on credit losses, less deferred home loans and the prospects of an ongoing recovery in the housing market buoying earnings. This alongside the potential for better guidance, higher dividend payout ratios, and the potential for share buybacks provide support for the sector to continue to rebound alongside the tailwinds of rebounding growth picture and higher yields supporting the asset allocation from a macro standpoint.

Energy - The energy sector was a big COVID-19 loser, the worst performing sector on the ASX 200 last year, still has some catching up to do. Although the period reported will not incorporate the bulk of recovery in the underlying commodity prices, investors should look through this weakness. The earnings recovery will accelerate in the year ahead as the global economy continues to reopen supporting the sector. In addition, the sector should continue to outperform as investors thinking about gains from a vaccine, look ahead to ongoing reopening’s and increased mobility providing more sustained recovery in oil demand into 2021. The energy sector has long underperformed providing opportunity to play the early cycle recovery, with valuations having a more attractive starting point and lower expectations having the capacity to surprise to the upside.

Travel – Many losses have been pre-warned and although the sector has been hampered with border closures there remains a catch up trade in play alongside the cyclical rotation, particularly with vaccines now being rolled out investors can look ahead more clearly to what lies on the other side of the pandemic.

Retailers – Throughout 2021 sector will continue to benefit from reopening led recovery in demand and an ongoing recovery in housing the market. Recovering economic conditions and fewer restrictions continues to boost consumer confidence having a positive flow through to demand. For the period reported those impacted store closures will result in a weak earnings period. However, some retailers were COVID-19 beneficiaries (KGN, JBH, NCK, HVN, ADH etc.) and found themselves positioned to leverage COVID-19 consumption tailwinds, capitalising off online sales growth and claiming market share, for these companies the updates will be solid and focus has shifted toward outlook commentary.

For COVID-19 beneficiaries, many of them technology stocks and online retailers, gains have been frontloaded and expectations of high growth are embedded, meaning the onus is on those companies to meet and beat expectations. Reactions can be violent if investors are disappointed, particularly amongst multiple highflyers. For these stocks, comparisons against a strong year of growth will get tough in the year ahead as conditions normalise, another driver of our preferred cyclical/commodity overweights.

Offshore earnings – Caution as currency strength (AUD +13% LTM) holds back returns for primarily offshore earners (CSL, RMD, JHX, RWC, CPU, SHL, BLD). Although to a certain extent for some offshore earners leveraged to economic recovery that upside should offset some sensitivity to exchange rates.

Dividends – Coinciding with the inflection in profit cycle, dividends will improve in the year ahead, although are likely to remain below long run averages as there is still a significant degree of uncertainty and companies will still be focussed on preserving capital, and conserving cash on their own balance sheets. An exception here is the miners (BHP, RIO, FMG) benefitting from stronger balance sheets and elevated iron ore prices are in a strong position to return cash to shareholders.

Guidance – More companies will deliver guidance relative to August, but there will still be many that opt out as a significant level of uncertainty remains despite the domestic economy stabilising into the final quarter of 2020 as restrictions eased.

AU/China - Although there are individual stocks and sectors that have been impacted by the AU/China tensions, the reopening and recovery in earnings and economic growth should take precedent at an index level. (Caveat – providing high value exports like iron ore do not come into the mix).


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

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