The corporate earnings season has started strongly, with net upgrades to full-year earnings on the back of the numbers presented and supporting a continued rally in stock prices.
AMP’s Shane Oliver said of the 33 companies to report so far 46 per cent have come in ahead of estimates and 27 worse.
This compares with the August reporting season, where just 32 per cent were better than expected.
Profits overall are up in 62 per cent of cases compared to 64 per cent down in the last earnings season, while 52 per cent of companies have reported an increase in dividends against last season where 55 per cent reported payout falls.
MST’s Hasan Tevfik reports upgrades averaging 1.3 per cent against the long term average of 0.7 per cent downgrades.
In all it’s been a strong start, reflecting better profit margins due to a better economy and continued focus on costs.
Some traditional companies are talking up change, as AGL flagged last week, confirming potential company breakups to boost shareholder returns.
Telstra’s Andy Penn is also flagging increased earnings from the company next financial year, which would be the first increase since 2016.
Back then the company reported earnings before interest tax, depreciation and amortisation of $10.7 billion, compared to the $6.6 billion hoped for this year
The peak in earnings for the company was 2014 when it reported EBITDA of $11.1 billion, which means it has fallen some 41 per cent since then.
AMP, another icon, will potentially also split, with Ares Management looking at buying its AMP Capital unit, leaving Francesco De Ferrari the task of trying to stem the red ink flowing from his wealth management assets, and turning around perceptions of the brand.
Profit commentary from chief executives is largely positive with COVID hardly featuring and mention of the March fiscal cliff almost a distant memory.
This compares sharply with the uncertainty reflected in August when COVID fears were at their peak but now, with vaccines being rolled out in the US and Europe, concern has eased.
Unemployment is not as bad as expected and with the exception of international tourism-based sectors and education, the economy is travelling well.
This also explains why Prime Minister Scott Morrison is tipped to go to the polls in the third quarter before questions are asked about reform ambitions.
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