The eagerly anticipated Australian corporate earnings season for the first half of the 2014-2015 financial year unfolded during February. Coming into the season, market analysts were expecting earnings forecasts for industrial companies to be realised, with declines in resources sector earnings offset by better growth among industrial companies. Overall, more companies have reported earnings growth in line with estimates and a lower proportion have disappointed the market.
- 55% exceeded earnings expectations (versus a norm of 43%);
- 66% have seen their profits rise from a year ago (in line with recent trends); and
- 62% have increased dividends from a year ago (also in line with recent trends).
The better performers during the season were beneficiaries of the continuing low interest rate environment such as banks, property and infrastructure companies, along with companies that generate significant revenues from offshore businesses. Efficiency gains from cost reductions also continued to be a common theme.
A key feature of this results season was significant increases in dividends, with many companies choosing to reward shareholders with additional returns of cash rather than reinvesting in their businesses. While this is good for shareholders, it does raise the question of management confidence in pursuing future growth opportunities.
Looking ahead to the full year results, companies that benefit from a weaker Australian dollar and exposure to strong growth opportunities outside of Australia should continue to do well, as will companies that can continue to deliver sustainable growth in dividends.
Important note: While every care has been taken in the preparation of this information, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This information has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. Certain information in this website has been obtained from sources that we consider to be reliable and is based on present circumstances, market conditions and beliefs. We have not independently verified this information and cannot assure you that it is accurate or complete.