Reporting Season Wrap

The easy discussion today would probably be War or the price of Oil (or Petrol..eek). But the answer to the question is, “I don’t know”. How long does it go far. Does it spread? Or perhaps, end quickly. All outcomes give different results for potential action.  

Instead, lets talk the February reporting season. 

UBS released a report that gave us a quaint little summary. 

Positive earnings surprises outnumbered the misses (i.e. profit below expectation) at a ratio of 2 to 1. And if you missed, the market punished the share price. In fact, 12% of companies in the ASX100 moved by more than 10% after their results announcement. Individual stock volatility is at an all-time high (higher than during the GFC or Covid) 

Upgrades to earnings guidance outnumbered downgrades 3:1. 

Forecasts for full year earnings growth now sits at 13%. It is worth noting that at the start of the financial year it was a miserly 3%. How wrong the analysts were. 

Where analysts were really wrong was in the mining sector. Take BHP, this excerpt of “fair value” was from our research provider Lonsec in January 2026 

And today? 

An $11, or 25%, upgrade.  

It’s a natural phenomenon, especially in the resources sector where analysts prefer to be conservative on their commodity price forecasts and then upgrade as the prevailing price flows through. 

It is also a timely reminder that Analysts tend to follow price rather than lead it (i.e. they upgrade after prices move up and downgrade valuations after they move down). 

I do think the easy gains for mining are in and the problem they may now face is cost issues (rising oil hurts miners given heavy diesel usage) 

Perhaps though it is worth noting that despite this great leap in earnings the market is still expensive. The ASX200 is currently trading on Price/Earnings multiple of 18.6x. Historically the ASX200 trades around 14x. A large part of this can be attributed to the big banks with Westpac, for example, trading at 19x (vs 16x) or CBA at 27x earnings, versus its historical average of 19x. 

In my opinion the banks remain a risk to the ASX200 indexes performance given their heavy weighting and above average valuations. That hasn’t stopped our friends at UBS remaining bullish, they’ve put a target of 9400 for the ASX200 at years end. 

That said, households are still very active. It was reported today that savings rates are at the highest they’ve been since 2022 (our savings rate now sits at 6.9%) and our spending remains resilient. Vicinity Centres, in its report, noted foot traffic has increased across its shopping centres and Harvey Norman reported sales growth of 6.9% (although that was lower than expected).  

GDP data released today showed private consumption continues to grow. The “cost of living crisis” and statistics seems to be at odds with each other.  

While we’re on Harvey Norman, it’s paying a grossed-up dividend yield of 7.3%. That is dwarfed by fund manager GQG Partners’ 10.8% annualized yield. But be warned, both are tipped for falling profit this year.  

To summarise, the headline numbers are good if not very encouraging. Who wouldn’t be happy if every company grew at 13%?  

The volatility, however, suggests that avoiding the underperformers (I’m looking at you CSL) has never been more important.