Results so far are a shot in the arm for investors

The August reporting hits a critial point which has the potential to crystallise perceptions about the health of corporate Australia.

CSL’s share price surged after it confirmed it was in talks with AstraZeneca. Picture: Bloomberg

Of all the days in the August reporting period, Wednesday and Thursday this week have the most potential to crystallise perceptions about the health of corporate Australia.

Barring a sudden change on Thursday — the biggest day of the earnings season — it will look reasonably good in the context of the coronavirus pandemic and ­associated lockdowns that have caused what may be the biggest peacetime economic downturn in at least 100 years.

As of Wednesday, when the earnings season passed the halfway mark in terms of the market capitalisation of reporting S&P/ASX 200 companies, it was 64 per cent complete by value. By Thursday it will be 79 per cent complete after a deluge of earnings reports from 33 companies.

Based on the share price reactions, the combination of earnings, dividends and guidance from corporate Australia appears to be exceeding overly pessimistic market expectations. The ASX 200 finished up 44.2 points, or 0.7 per cent, at 6167.6 points on Wednesday — a six-month high on a daily close basis — after rising as much as 1.2 per cent to 6196.6 points intraday.

Helped along by a 5 per cent rise in the S&P 500 amid the fastest recovery from a bear market in US sharemarket history, as well as commodity price gains including a 17 per cent rise in spot iron ore to a 6½-year high of $US127.60 per tonne, Australia’s benchmark index has risen 2 per cent since reporting began late last month. It has also soaked up a sizeable transition portfolio in value stocks.

The ASX 200 also closed above its downward sloping 200-day moving average — currently near 6160 points — for the first time since the recent bear market began in late February.

Most of Wednesday’s 44.2 point rise in the index — 33 points in fact — was due to an unusually large 6.4 per cent rise in CSL after it confirmed Tuesday’s report in The Australian that it was in talks with AstraZeneca and the federal government to assess whether it can provide manufacturing support for the coronavirus vaccine being developed in conjunction with the University of Oxford.

But the fact that CSL was able to provide 2020-21 earnings guidance, albeit about 5 per cent below consensus, was also cited as a positive by analysts at Goldman Sachs and Citi, in the context of recent speculation that the biotech might be unable to do so due to uncertainty related to its plasma collection.

ANZ Bank was another solid performer with a 3.4 per cent rise, contributing almost 7 points to the index on Wednesday, saying it will pay a dividend, albeit at a sharply reduced rate amid regulatory constraints, and its third quarter cash profit beat estimates thanks to strong market revenue, although other revenue fell 4 per cent with net interest margins down 10 basis points.

And there was a spectacular 34 per cent surge in WiseTech Global shares after cost-cutting saw its 2019-20 result beat the consensus by about 8 per cent, and its 2020-21 guidance including costs beat estimates by 7 per cent, according to Ord Minnett’s Jules Cooper.

There were also plenty of positive share price reactions from companies covering a broad cross section of the market, with Corporate Travel up 11 per cent, Domino’s Pizza up 8.9 per cent, Bapcor up 7.8 per cent, Megaport up 6.4 per cent, NRW Holdings up 5.7 per cent, Vocus Group up 4.8 per cent, carsales.com up 4.3 per cent, OZ Minerals up 3.9 per cent and Crown Resorts up 3.3 per cent.

Many of the outperforming companies that reported were those paying dividends.

Among them were CSL, ANZ, WiseTech, Domino’s Pizza, Bapcor, carsales.com, OZ Minerals, NRW Holdings and Dexus, while a lack of dividend payments was one factor weighing on A2 Milk, McMillan Shakespeare, Silver Lake Resources, Saracen Mineral, Nearmap and Vicinity Centres.

Thursday sees such heavyweights as Wesfarmers, ASX Limited, Origin Energy, Santos, Suncorp and South32 report alongside companies hit by coronavirus lockdowns, including Qantas, Domain, Mirvac, Charter Hall and Growthpoint Properties.