Stocks, sectors to watch as Australia underwhelms in reporting season | Jessica Amir on The Australian
In a recent issue of The Australian, Moomoo analyst Jessica Amir discusses which stocks and sectors are worth watching.
As the second-quarter earnings season draws to a close, it's clear that global economic uncertainty has led to a decline in profitability across many industries. "However, not all news is bleak and we anticipate market growth next year," Jessica Amir says.
Australia underperforms, but US strength creates positive outlook
The recent US earnings season set a high bar, with many S&P 500 companies far exceeding expectations. This is a hopeful sign globally, even as the Australian market faces its own challenges.
“The US reporting season set the benchmark as high as a gold medallist in the Olympic high jump,” says Jessica.
“Ninety-three per cent of S&P 500 companies have reported results so far, and most of them have delivered better-than-expected sales and profit growth, with an impressive 8.5% profit growth."
In contrast, Jessica remarks on the Australian market, “so far, about 45% of S&P/ASX 200 companies have reported, and unfortunately, most are delivering slightly weaker-than-expected earnings results or profits. The decline in profitability reflects broader economic challenges, including sluggish consumer demand, higher interest rates, and persistent inflationary pressures."
Nevertheless, Jessica stresses that the outlook isn’t entirely negative. “The good news is that the market is forward-looking – it anticipates falling inflation and Federal Reserve rate cuts supporting future global economic growth and company profits. The market expects a forward earnings growth of 6% next year for the S&P/ASX 200. So, while the outlook might look stormy, there are blue skies ahead.”
What to watch: Winners and losers in a shifting market
“If we examine the results so far, six of the 11 sectors have delivered weaker-than-expected results,” Jessica explains. “The biggest drags have been energy, communications, and industrials, with average profits declining by 24%, 18%, and 14%, respectively."
Nimble investors are paying attention to macro trends and focusing on future opportunities. China, the world’s largest consumer of oil and steel, is now transitioning to clean energy production – wind, solar, and leading the global market in electric vehicle sales. Therefore, keeping an eye on China’s economic focus is also a useful reference for investment strategies.
On the other hand, the staples sector has been a standout performer.
"In times of slowing economic growth, we usually see the ‘bread and butter’ sectors holding up, and that’s what we’re seeing,” notes Jessica. For example, Treasury Wine Estates (ASX: TWE) has delivered an impressive 82% better earnings than expected.
"While wine may not be a basic necessity for everyone, it is essential to some. Treasury Wine has raised prices on top-tier Penfolds products and is experiencing increased sales from a new premium label in the US. Additionally, shipping to China resumed after a four-year hiatus due to sanctions."
Read the full article：Stocks, sectors to watch as Australia underwhelms in reporting season | The Australian
