Rudi’s View: Consumer Stocks, Insurers, Telcos & More

This story features BLUESCOPE STEEL LIMITED, and other companies.
For more info SHARE ANALYSIS: BSL
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

Update on expert views and predictions ahead of the August results season in Australia.

-FNArena Talks
-The Importance Of The USD
-Australia's Golden Goose
-August: It's About More Than Earnings

By Rudi Filapek-Vandyck, Editor

FNArena Talks

A replay of this week’s online Q&A is available: https://youtu.be/d30WGsiGWs0

Or simply visit the dedicated section on the website:

https://fnarena.com/index.php/analysis-data/fnarena-talks/

The Importance Of The USD

An underlying trend of US dollar weakening might make American businesses more competitive vis a vis foreign competitors, but for foreign investors a dilemma is being created.

FNArena has written about this already, but ClearBridge Investments highlighted the issue yet again this week and it’s worth repeating the gap that is forming between domestic and foreign investors in US assets.

“Investors looking at their June statements must feel good unless they live outside the United States.

“Continued US underperformance also risks becoming self-reinforcing. With US markets at all-time highs, foreign markets relatively cheaper than they have ever been and global investors over-indexed to US markets, it is easy to envision cascading outflows.”

Australia’s Golden Goose

A recent UBS report on Australia’s mandated superannuation system, considered the country’s golden goose, contained the following comment:

“The size and growth in Super funds potentially creates systemic risks in Australia.

“What does strike us as uncomfortable, is the layered exposure Australian householders now have to the domestic residential property market. More than half of Australians’ wealth already sits in residential property.

“If we also include the Superannuation fund holdings of Australian Banks, then we estimate the proportion of Australians’ wealth directly (or very closely) linked to the Australian housing market is 55%.”

August: It’s About More Than Earnings

There’s lots of noise in and around financial markets, strategists at Macquarie concluded this week, but investors should not be complacent about risks which remain elevated.

Macquarie’s suggestion is to adopt a more defensive portfolio stance through quality growth stocks that are still trading on reasonable multiples.

All of BlueScope Steel ((BSL)), Amcor ((AMC)), Brambles ((BXB)), James Hardie ((JHX)) and SGH Ltd ((SGH)) are Buy-equivalent rated by Macquarie analysts, and they fit the more defensive mould.

Investors might also consider Reliance Worldwide ((RWC)), suggest the strategists, but it’s probably too early still for Fletcher Building ((FBU)) and Reece ((REH)).

Within this context it’s interesting to note analysts at Morgan Stanley have identified Amcor and Orica ((ORI)) for likely delivering a positive surprise in August, but with Brambles and Dyno Nobel ((DNL)) likely to surprise negatively.

Aurizon Holdings ((AZJ)) is also still considered a negative surprise risk.

****

August was supposed to be the earnings season when RBA rate cuts facilitate an uptick in domestic consumer spending but the RBA has mostly held off thus far and most Australians prefer to have more savings just in case it would appear.

Analysts at Morgan Stanley lined up the following five key themes to watch for investors in consumer companies during the upcoming results season:

1) FY26 sales/margin trajectory;
2) Earnings benefits of cost out programs;
3) Capital management;
4) Escrow unwind; and
5) Strategic reviews

Morgan Stanley remains wedded to a defensive/cautious approach, preferring staples over discretionary retailers and Sigma Healthcare ((SIG)) over alcohol and fast-food as health & wellness have become a solid trend among Australians too.

Potential cost out benefits apply to all of Domino’s Pizza ((DMP)), Woolworths Group ((WOW)), Sigma Healthcare, and Treasury Wine Estates ((TWE)).

For the chance of a special dividend, the analysts have penciled in both JB Hi-Fi ((JBH)) and Super Retail ((SUL)).

Multiple management teams are currently reviewing strategies, including at Woolworths, Endeavour Group ((EDV)), Treasury Wine Estates, Domino’s Pizza, and Sigma Healthcare.

To date, the pace of recovery in discretionary retail has been slower than expected across Australia. How many greenshoots will be announced in August is anybody’s guess at this stage, but Flight Centre ((FLT)) just issued its second profit warning since April, even though some analysts are prepared to declare this will prove to be the last piece of negative news coming out of the travel agent (for this cycle).

Post disappointing indications from Metcash ((MTS)) and Viva Energy ((VEA)) investors will be curious to find out how much the popularity of illegal tobacco in Australia is hurting the supermarket businesses at Woolworths and Coles Group ((COL)).

Outside of your typical consumer spending related dilemmas, Morgan Stanley strategists believe the following themes are likely on investors’ mind ahead of August results:

-the domestic economic cycle (expectation is for better times ahead)
-momentum rotation and its durability
-costs and margins
-capital allocation and M&A
-AI investments and results

****

Sector analysts at Citi have re-iterated their preference for Buy-rated AMP ((AMP)) and Challenger ((CGF)) among non-bank financials with the added observation that expectations for Neutral-rated Computershare ((CPU)) are higher than market consensus.

Least preferred is ASX Ltd ((ASX)), while overall enthusiasm is only a smidgen higher for Perpetual ((PPT)).

Among insurers, the preference lays with QBE Insurance ((QBE)) and Insurance Australia Group ((IAG)).

All health insurers are rated Neutral, though for different reasons. Medibank Private is seen as fully valued while ongoing challenges and a new CEO at nib Holdings has the analysts wary of a potential rebasing of expectations (i.e. a good old fashioned profit warning to make future achievements look better).

Peers at Morgan Stanley are expecting solid results from the insurers this season. Analysts at Jarden see upside risk for insurers versus downside risks for the banks.

Morgans’ favourites among financial services providers are Generation Development ((GDG)), MA Financial ((MAF)) and Tyro Payments ((TYR)).

****

Over at Ord Minnett, Research analyst Athena Kospetas sees too many question marks in addition to elevated valuation multiples to get excited ahead of August:

“Downgrades have been concentrated in real estate and consumer-related sectors. Earnings expectations for energy and materials stocks remain depressed, held back by softness in commodity markets.

“Technology is one area of the market that has seen strong positive earnings momentum, and with valuations particularly stretched in this part of the market, so we expect sizeable reactions if companies disappoint.”

****

One of the sectors that currently stand out is the domestic telecommunication industry. Forecasts remain buoyant and momentum, both operationally and in share prices, has remained to the upside.

No surprise, a recent sector update by Jarden shows Buy-equivalent ratings for all of Aussie Broadband ((ABB)), Superloop ((SLC)), Telstra ((TLS)), and TPG Telecom ((TPG)).

****

One sector expected to climb out of its recent rut is the automotive sector with sales momentum expected to improve this second half of 2025.

Macquarie’s sector favourites are Eagers Automotive ((APE)), ARB Corp ((ARB)) and Amotiv ((AOV)).

****

FNArena’s Corporate Results Monitor (to switch soon into August mode): https://fnarena.com/index.php/reporting_season/

(This Monitor includes a calendar for August results).

In preparation of August:

https://fnarena.com/index.php/2025/07/30/rudis-view-taking-stock-ahead-of-august/

https://fnarena.com/index.php/2025/07/24/rudis-view-bega-cheese-cettire-harvey-norman-sigma-siteminder-more/

https://fnarena.com/index.php/2025/07/23/rudis-view-extreme-bifurcation-ahead-of-august/

https://fnarena.com/index.php/2025/07/17/rudis-view-aussie-broadband-oohmedia-paladin-energy-seek-xero-more/

https://fnarena.com/index.php/2025/07/16/rudis-view-navigating-covid-legacies/

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

P.S. I – All paying members at FNArena are being reminded they can set an email alert for my Rudi’s View stories. Go to My Alerts (top bar of the website) and tick the box in front of ‘Rudi’s View’. You will receive an email alert every time a new Rudi’s View story has been published on the website. 

P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

FNArena Subscription

A subscription to FNArena (6 or 12 months) comes with an archive of Special Reports (20 since 2006); examples below.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms