Rudi’s View: Early August Signals & Observations

Rudi's View | 10:00 AM

In this week's Weekly Insights:

-Early August Signals & Observations
-Next Week
-In preparation of August
-Review All-Weather Model Portfolio

By Rudi Filapek-Vandyck, Editor

Early August Signals & Observations

The first two weeks of the August reporting season have only shown a limited sample of how corporate Australia is performing --the bulk starts flooding in from Wednesday this week onwards-- but already there are plenty of signals for investors to take on board.

The first impression is plenty of share prices respond positively to results, but those who disappoint will get punished. See AGL Energy ((AGL)), Audinate Group ((AD8)), Bravura Solutions ((BVS)), oOh!media ((OML)), and SGH Ltd ((SGH)).

Those examples are thus far matched by strong gains for the likes of Coronado Global Resources ((CRN)), Baby Bunting ((BBN)), Orora ((ORA)), Temple & Webster ((TPW)), and Westpac ((WBC)).

The first two weeks of August have seen more gains than the occasional shellacking, which has underpinned the market's positive momentum resulting in a fresh all-time record high at the month's half-way point of 8,938.60.

But maybe not all is what it necessarily looks like as the first 52 results of the season suggest corporate Australia is not strong and healthy enough to handsomely beat rather mediocre forecasts, at least that would be one of the conclusions from the first two weeks.

On Friday August the 15th, 52 earnings releases had only seen 23% (12 results) outperforming analysts' forecasts, while 27% (14 results) underwhelmed and the big bulk (50% or 26 results) proved simply in-line with forecasts.

It might still be early days with another 330 results or so to be assessed by early September, but those numbers do not make for a great opening gambit.

For context, I have gone back in time and compared with where we were at this point in the past three seasons.

In February, 47 results had seen 42.5% outperforming forecasts against 25.5% 'misses' and 32% in line.

In August last year, 64 results had seen 36% in 'beats' versus 31% in disappointments and 33% in line.

In February last year, 68 reports generated 41% in 'beats' against 22% in 'misses' and 37% in line.

Now consider that August last year ultimately ended with the worst score in the 14 year history of FNArena's Corporate Results Monitor (by a wide margin), and that the two February seasons were not that great either.

The argument that the local economy needs more RBA rate cutting, and maybe less uncertainty from tariffs and China-Russia-Israel-US tensions, would find solid support from those numbers.

Note also: the number of companies reporting in the first half of each season continues to decline from the year prior. Is this too a signal companies are merely struggling and muddling instead of reaping home runs and tries?

By Monday, the numbers on FNArena's Corporate Results Monitor have worsened, not improved, with 59 results disappointing by 30.5% (18 results) against 23.7% better-than-forecasts and the remaining 27 (45.8%) simply meeting forecasts.

Early indications are similar for the 17 or so companies reporting on the day; most manage to broadly meet analysts' estimates, with a bias towards slight 'misses'. Results released by Audinate Group and oOh!media have been identified for instant capital punishment.

As things stand, August 2025 will mark the third year in succession of net negative earnings growth for the ASX200, currently estimated at -1.6%. The local average EPS will have declined by circa -19% since peaking in 2022.

Expectations are FY26 and FY27 should see net positive outcomes of (currently estimated) 4.5% and 7.5% respectively, though the underlying trend is still to the downside.

July and August are witnessing large investment portfolios rotating into smaller caps, resources, cyclicals and other laggards, suggesting market positioning is changing towards (anticipation of) a better environment in 2026.

Corporate results are never the sole determining factor, not even during reporting season, but large beats and misses can leave major imprints on share prices that last for months after the market update.