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Equities

FY24 Reporting Season Wrap

The reporting season gets a pass mark. FY24 results have, on average, met low earnings expectations, with the ASX 200 industrials navigating a challenging macro environment.

Margins the swing factor

FY24 reporting season highlighted the importance of margin management. Revenue beats were less prominent than earnings beats, indicating that margins have been the key story of beats this reporting season through cost control/efficiencies/pricing. The contrast between fewer revenue misses to earnings misses indicates that a lack of margin control was also a key reason for EPS misses this reporting season.

For the ASX 200 Industrials, the % of beats and misses were broadly even (28% vs 27% of total results, respectively), with a significant proportion of results in line (+/-2%) with consensus (45%).

Misses punished

Companies that missed expectations experienced sharp price declines (on average). While exceeding expectations was rewarded, the magnitude of these gains was smaller in comparison to the penalties for misses.

Elevated P/E ratios indicated lofty market expectations going into reporting season. Therefore, it is unsurprising that when results did not meet expectations, share prices were punished.

FY25 earnings downgraded

FY25/FY26 consensus earnings continued to be downgraded in reporting season as guidance/outlook/trading statements have, on aggregate, underwhelmed the market. ASX 200 FY25 EPS was downgraded by 1.3% in August, and FY25 earnings growth is now expected to be ~3.7% vs ~5.4% pre-reporting season.

Downgrades have outweighed upgrades this reporting season. 63% of the ASX 200 industrials (that reported) were downgraded and 68% of the ASX 200 resources were downgraded in August.

Earnings downgrades at a sector level have been broad, with only financials coming out of reporting season with more upgrades than downgrades. Tech has seen upgrades on an aggregate basis with a great result from large cap WiseTech (WTC).

Authored by Rob Crookston – Equity Strategist – at Bell Potter Securities, 4 September 2024
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