ASX Earnings Infocus | What you need to pay attention to during the upcoming Australian financial reporting season

In terms of industry sectors, technology stocks and non-essential consumer goods have performed well this year, while mining stocks have faced significant pressure.

A crucial financial reporting season for the Australian market is about to arrive, bringing more opportunities and challenges to Australian stocks. Here are some upcoming financial performance forecasts for five key stocks in the Australian market:

Recent significant events: Following the unsuccessful acquisition attempt of Anglo American, BHP is currently intensifying its internal management efforts. Recently, BHP has decided to suspend operations of its Western Australian nickel business from October 2024 until a review in February 2027. BHP's iron ore production increased by 1% in the 2024 fiscal year, reaching a record high of 260 million tonnes. The iron ore production for the 2025 fiscal year is expected to be between 255 million and 265.5 million tonnes.

Financial forecast:

Revenue for the fiscal year 2024 is AUD $54.252 billion, expected to increase by 0.8% year-on-year; net income is AUD $0.69 billion, expected to decrease by 49.95% year-on-year; Adj. EPS is 2.57, a decrease of 3.1% year-on-year; net profit margin is 29.0%, Adj. P/E is 11.4, according to JP Morgan.

Release date: The financial performance for 2024 will be announced on August 26, 2024.

Recent significant events: According to media reports citing key sources, Rio Tinto is considering a potential takeover proposal for Canadian mining giant Teck Resources Limited. Known for its substantial copper and zinc reserves, and its strategic importance in the context of energy transition, Teck Resources is seen as a significant potential acquisition target for Rio Tinto. It is currently unclear whether Rio Tinto will formally make a takeover offer to Teck Resources, or if the deal will ultimately be unsuccessful.

Financial forecast: Revenue for the fiscal year 2024 is AUD $49.67 billion, expected to decrease by 8.1% year-on-year, and net income is AUD $11.969 billion, expected to increase by 19% year-on-year. Adj. EPS is 7.38, an increase of 1.8% year-on-year, net asset profit rate is 20.6%, Adj. P/E is 10.7, according to JP Morgan.

Release date: The financial performance for 2024 will be announced on July 31, 2024.

Recent significant events: CBA has been performing exceptionally well in the Australian stock market, with its share price reaching a record high of AUD $134, and a market capitalisation of AUD $220 billion. It has surpassed BHP Group to become the company with the highest market value in Australia.

Financial performance: The performance in the fiscal year 2023 was average, with revenue of AUD $27.109 billion, an increase of 14.34% year-on-year, and net profit of AUD $10.09 billion, a decrease of 6.32% year-on-year. Earnings per share of 5.84, a decrease of 2.93% year-on-year, net asset profit rate of 13.93%, a decrease of 2.00% year-on-year.

Although the company's profits have decreased, its stock price has reached a new high in 2024, indicating that the market still recognises the current performance.

Release date: The financial performance for 2024 will be announced on August 14, 2024.

Recent significant events: Since May, PLS has seen its share price drop by more than 27%, reaching a new 52-week low. The weakening of lithium ore prices is primarily due to the continuous expansion of production scale on the supply side, a slowdown in the growth rate of electric vehicles on the demand side, and factors such as the imposition of tariffs on Chinese electric vehicles by countries in Europe and America.

Financial performance: PLS's net profit in the fiscal year 2023 surged by 326%, reaching AUD $2.4 billion, and the company decided to pay a fully tax-exempt final dividend of 14 cents per share. Revenue increased by 242% to AUD $4.1 billion, EBITDA surged by 307% to AUD $3.3 billion, and cash balance was AUD $3.3 billion. The output of spodumene concentrate increased by 64% to 620,100 tons, and sales volume increased by 68% to 607,500 tons.

In terms of target price forecasts, the average target price forecast for Pilbara Minerals Ltd's stock is AUD $3.40, with the highest price of $4.59, and the lowest price of $2.60. For the upcoming financial report, analysts have made predictions for Pilbara Minerals Ltd's revenue, with a forecasted revenue of AUD $757.2 million for the first half of 2024 and AUD $481.1 million for the second half.

Combining this information, it can be expected that Pilbara Minerals Ltd will show strong performance in lithium ore production and sales, as well as good financial growth in the financial report in August. However, the actual performance of the stock price may be affected by market sentiment, macroeconomic factors, and other external factors.

Release date: The financial performance for 2024 will be announced on August 22, 2024.

Recent significant events: The world's fourth-largest iron ore producer, Fortescue Ltd, is set to lay off 700 staff globally and streamline its business structure. Founder and Executive Chairman Andrew Forrest plans to transform the Australian mining and clean energy company by heavily investing in hydrogen and other green technologies.

Financial performance: In the 2023 financial year, the operating income was AUD $16.78 billion, a decrease of 3.07% year-on-year, and net profit was AUD $4.796 billion, a decrease of 22.61% year-on-year. Earnings per share were 1.56, a decrease of 22.54% year-on-year, and the return on net assets was 27.16%, a decrease of 23.15% year-on-year. The performance in the 2023 financial year was average, and it is worth noting whether there will be any improvement in FMG's performance in the financial report in August.

Release date: The financial performance for 2024 will be announced on August 28, 2024.

In addition to the key stocks to watch during the Australian financial reporting season, it is also important to pay attention to the impact of some Australian economic policies and global significant events.

In the first quarter of 2024, Australia's CPI grew by 3.6% year-on-year, higher than the market expectation of 3.4%. The Reserve Bank of Australia (RBA) has set targets for inflation data to be between 2-3%. This higher inflation data may further delay the timing of the RBA's interest rate cuts. The RBA has maintained the benchmark cash rate at 4.35% since the beginning of 2024, mainly to cope with the current high inflation. With the easing of high inflationary pressures in the future of Australia, monetary policy may further relax. Australia is about to release the CPI data for the second quarter at the end of July. The latest inflation level will determine the next monetary policy of the Australian market, whether to raise interest rates in August or maintain the status quo, adding more uncertainty to the market. CBA stated that the overall CPI growth year-on-year for the second quarter is expected to be 3.7%, indicating that the RBA will pause interest rate hikes in August.

Once the Federal Reserve enters the interest rate cut cycle, the monetary policy will be further relaxed, which will have an important impact on boosting the Australian economy. If the RBA follows in suite, eventually cutting rates, each commercial bank will follow, lowering the mortgage interest rates. This will have an important supporting role for the Australian real estate industry. In addition, the Federal Reserve's expected interest rate cut may lead to a more abundant global currency, bringing forward more opportunities for the export of Australian mineral resources. The improved global currency and the strengthening of liquidity will also have a more positive impact on the Australian stock market. The local gold sector in Australia will also in turn have more opportunities. Additionally, the Federal Reserve's interest rate cut, may also cause the dollar to soften, leading to a decline in the yield of other assets such as bonds, thereby enhancing the attractiveness of the gold sector priced in US dollar. Morgan Stanley believes that, against the backdrop of the interest rate cut boosting gold prices, it is expected that the gold price will rise to US $2650 per ounce in the fourth quarter, setting a new historical high.

The US election is also an important factor affecting the global economy and stock market. As one of the world's largest economies, the change of leadership in the United States often has a significant impact on the global economy and market. The US election will also in turn bring more uncertainty to the Australian economy and stock market. If Trump is elected as the President of the United States, he may restart trade frictions and raise tariffs, which are not conducive to the export of mineral resource-rich Australia. The shooting incident and Biden's withdrawal have increased the certainty of Trump's re-election, leading to the possibility that the Federal Reserve's interest rate cut may be postponed, increasing market volitility. In terms of industry sectors, Trump's policy tends to support the development of traditional industries, including the traditional energy industry, non-ferrous metals, oil, and cyclical industries. In addition, banking, cryptocurrency, agricultural products, military sectors may also reap benefits, with new energy and other clean energy, semiconductors and other technology industries potentially being impacted.