Rudi's View | 4:56 PM
Updates on Conviction Calls, Best Buys and most favoured sector picks for the February results season, including those likely to 'miss' and best to avoid.
By Rudi Filapek-Vandyck, Editor
By Rudi Filapek-Vandyck, Editor
The local February results season starts Friday this week when Credit Corp ((CCP)), Champion Iron ((CIA)) and ResMed ((RMD)) are scheduled for updates on financial performances.
See https://fnarena.com/index.php/reporting_season/ for regular updates (starting next week) and a calendar (scroll down).
At face value, this will be a markedly different proposition from the years past as average earnings forecasts are on the rise, and generally anticipated to continue rising, but that generalisation ignores the bifurcation that has happened underneath the surface.
As also pointed out by market strategists at Wilsons on Thursday morning (earlier today): strip away the mining companies and the rest of the local resources basket, and net trend is net negative, i.e. more downgrades than increases.
That assessment equally features in the latest update by Macquarie where the analysts note the local energy sector has been the stand-out in terms of positive earnings revisions for two consecutive weeks, while property trusts have been detracting from the positive trend on the prospect for RBA rate hikes.
See also FNArena's very own weekly update every Monday morning: https://fnarena.com/index.php/2026/01/27/weekly-ratings-targets-forecast-changes-23-01-26/
On Morgan Stanley's numbers, forecast consensus EPS growth has grown to 9.5% in aggregate, but two-thirds of it is expected to come from the Materials sector.
Wilsons highlights seven out of nine industrials sectors are experiencing net downgrades to forecasts. Heaviest hit have been IT and consumer staples, but for all of healthcare, consumer discretionary, communication services and utilities the net balance from the past three months is negative.
The two exceptions? Materials and Financials.
As the ASX200 is still seen trading around one standard deviation above its five-year average PE multiple, Wilsons wholeheartedly agrees with my personal prediction the trend in above average share price volatility is likely to continue next month.
On Macquarie's numbers, the Australian market's PE ratio for December 2025 has increased to 20.1x, while for June 2026 it decreased to 19.2x.
Investors better buckle up. In August last year circa one third of companies reporting saw their share price move by 10% or more on the day, in either direction; more than half of shares in reporting companies moved by over 5%.
Share market updates to date in January --think Qoria ((QOR)) and Generation Development ((GDG)), but also Life360 ((360)), Paladin Energy ((PDN)) and Hub24 ((HUB))-- certainly are indicating volatility is not likely to subside.
In the words of Wilsons: "We expect upgrades to be rewarded while downgrades are likely to be disproportionately punished by investors".
Core predictions made in this week's preview:
- Mining sector to continue enjoying upgrades to forecasts, also because many models still need to catch up on (much) higher commodity prices
- Retail sector will likely feature cautionary statements in the face of RBA rate hikes. As valuations remain high, any sign of disappointment will likely trigger outsized punishment, Wilsons predicts
- Among Supermarkets, Wilsons' focus is on whether Woolworths ((WOW)) can finally put an end to its two-year long downgrade cycle?
- A similar question rules inside the banking sector: can CommBank ((CBA)) surprise and deliver an upgrade in February?
- Among online classifieds, Wilsons suggests both Car Group ((CAR)) and REA Group ((REA)) appear well-positioned for relief rallies... assuming either can deliver upgrades to consensus forecasts.
- In healthcare, Wilsons' High Conviction remains with ResMed ((RMD)). The strategists wonder whether CSL ((CSL)) can change the negative trend after four successive downgrades and remain cautious towards Cochlear ((COH)) following three successive downgrades.
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