Rudi’s View: Many February Uncertainties

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This story features CAR GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: CAR
The company is included in ASX50, ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH

2026's February results season offers more for investors to consider than simply earnings and outlook statements.

By Rudi Filapek-Vandyck, Editor

By Rudi Filapek-Vandyck, Editor

It is my favourite observation prior to each corporate results season in Australia: every season tends to have its own specific context, which also defines differences in share price responses and ultimate outcomes.

Ahead of February results (mostly in the second half of this month) general positioning and sentiment are in alignment with the major shifts that flavoured the local market in 2025.

In simple terms: stocks that before mid-year last year could do no wrong have fallen out of favour and those seen languishing for most of the three years prior have sprung to life in a manner seldom witnessed unless after a big economic recession or amidst a major reset in bond yields.

In plain layman’s lingo: Quality, Growth, Technology and AI beneficiaries and infrastructure are now suffering a prolonged bear market while a new bull market has opened up for cyclicals, miners, mining contractors, and the likes.

This is your Growth versus Value switch professional fund managers like to talk about in full display.

The Return Of Corporate Earnings Growth

Carried by strong rallies in industrial metals and minerals, parabolic moves in precious metals and a resurgence in oil prices, earnings forecasts in Australia are now in a firm uptrend and, as analysts are usually slow to catch up to such strong pricing momentum, this trend looks far from finished just yet.

After three years of net negative earnings erosion for corporate Australia, aggregate consensus EPS growth projections are now signalling 11.3% growth is on the menu for FY26, to be followed up by 8.6% growth in FY27.

It wasn’t that long ago market strategists at UBS reported the long-term average pace of growth in Australian earnings lays around 4.5%-5% per annum, so these numbers suggest a new boom time has arrived.

Certainly, when the team here at FNArena is updating earnings estimates these days it is not uncommon to see future numbers increase by 50%, 70%, or even 100% for smaller cap mining companies, which easily explains investor enthusiasm and strong share price gains over the past six months or so.

Narratives supporting the world’s newfound focus on ‘hard assets’ includes geographic disruption and risks (including US tariffs), the prospect of prolonged US dollar weakening (see also: erosion of its status as the global reserve currency), higher bond yields (lots happening), persistent inflation (also: angst about it rising), renewed stimulus and ‘money printing’ in China and the US, ongoing strong demand through data centres, renewables and AI infrastructure, and looming under-supply in the face of rising demand.

Not unimportant for Australian-based investors: commodities tend to offer a natural hedge against an appreciating Aussie dollar unlike most exporters and international success stories whose financial numbers –one way or another– feel the impact from a negative translation back into the local currency.

In January, things suddenly shifted in a parabolic manner, not only in prices of gold and silver, but equally so for AUD. Might this be yet another signal today’s markets are increasingly led by narratives and continuation of momentum?

Time will tell, but the current set-up does not bode particularly well for those prior momentum leaders now in a nasty and enduring bear market; at least for now.

A Nasty Bear Market

Many an investor thinks about bear markets in terms of the GFC in 2008 or the Nasdaq meltdown in 2000, but bear markets that only affect specific segments of the market are much more common.

Open up a price chart for your average lithium stock showing price action between mid-2023 and mid last year and you’ll immediately understand what I am referring to.

It’s gut-wrenching when your portfolio has exposure during the draw-down. And while we all know (should know) bear markets by default offer opportunity when the turnaround arrives (see also those lithium stocks), there’s no certainty about how long they might stick around, or how low share prices might fall in the meantime.

This one I did not see coming.

So to anyone out there who’s suffering from owning shares in companies like Car Group ((CAR)), Life360 ((360)), Telix Pharmaceuticals ((TLX)), Pro Medicus ((PME)), SiteMinder ((SDR)), Xero ((XRO)), and the like; the FNArena-Vested Equities All-Weather Model Portfolio knows exactly what your thoughts and feelings are about the past seven months.

My main concern is February results will not necessarily trigger the next sustainable turnaround for this segment of the local market. This concern is partially based on price action in January which saw companies like Life360, Hub24 ((HUB)) and ResMed ((RMD)) decisively beat analysts’ forecasts, but that initial positive reaction is way too quickly forgotten about.

Analysts might raise their forecasts and valuation, and often express their amazement as to why share prices are trading so far below their price target, but there’s currently not enough appetite around to move these share prices sustainably higher.

This will change at some point, of course, but thus far indications are Growth, Quality, Technology and AI continue sailing into strong headwinds.

Frustration? That’s a grave understatement. I can fully understand why many choose to pull up stumps and relocate their attention to where the grass looks much greener, and momentum is more favourable, but for all others ‘patience’ and ‘persistence’ remain key necessary ingredients.

Nothing of the above prevents us from making adjustments to the portfolio ahead of February results which, I strongly suspect, will elicit above-average volatility in price action, as also already signalled throughout January. One possible strategy is to have plenty of cash available so that opportunities can be jumped upon.

Macro And Sentiment Rule

This year’s February results will be heavily overshadowed by macro considerations and related narratives. Is an underperforming mining company still a Sell if the market pricing of its main commodity continues to move higher, for example?

In similar vein, shares in Qoria ((QOR)) sold off heavily because management’s guidance was based upon a cheaper AUD. Ironically, this share price weakness has opened up the option of a “merger” with a US company, which just goes to show local Growth stocks have turned into value propositions –that’s exactly what bear markets do– and M&A might start featuring more prominently.

Meanwhile, there’s no escaping the fact a much stronger AUD will become a major focal point throughout the season, and that’s not even taking into account that US70c is not necessarily the end point in this uptrend.

A lot depends on whether the RBA is truly about to embark on a new tightening cycle and whether the USD can stabilise, or not.

The AUD In Focus

FNArena last zoomed in on the impact of a stronger AUD for corporate Australia in 2013. This report is still available via the Special Reports section on the website.

Ord Minnett offered its clientele a brief update on the currency’s impact on Friday.

Companies negatively impacted include:

• Those with offshore operations, including the likes of Amcor ((AMC)), Aristocrat Leisure ((ALL)), Brambles ((BXB)), CSL ((CSL)), Incitec Pivot ((IPL)), etc, as sales and profits are translated back into AUD for local shareholders
• Companies that compete domestically with imports, or those that export products from Australia, including BlueScope Steel ((BSL)), Cochlear ((COH)), ResMed ((RMD)) and Treasury Wine Estates ((TWE))
• Resources companies, in theory, are also negatively impacted but commodity prices often match the rise in the AUD, if not exceed it, reducing any negative impact

Companies positively impacted include:

Importers typically benefit including retailers (think Harvey Norman ((HVN)), JB Hi-Fi ((JBH)) and Wesfarmers ((WES)) and airlines such as Qantas Airways ((QAN)) and Virgin Australia ((VGN)).

Focus On Interest Rates, Bond Yields

One obvious stimulant underneath the stronger AUD is the prospect for RBA rate hikes while most other central banks, such as the Federal Reserve in the US, are still expected to cut rates, or leave them as they are.

Traditionally, rate hikes push up bond yields and this weighs on equity valuations, with higher PE multiples more heavily impacted.

History thus shows Growth and Technology stocks underperform during times of central bank tightening (all else remaining equal). This time around two questions remain unanswered:

• Is the RBA truly embarking on a renewed cycle of rate hikes?
• How much of the bond-yield de-rating has already been priced in?

I note, for example, a number of property sector analysts believe much of sector de-rating has already occurred for local REITs and any one-on-one comparisons with past precedents might prove too harsh.

A much more important observation is that economists’ predictions about RBA policy this year remain as wide and varied as ever and contrary to what one might be inclined to assume, there’s not even general consensus on whether the RBA should hike in February or whether it will.

Macquarie has joined the local ‘hawks’, expecting multiple hikes this year, with other central banks to join in.

Taking a leaf from history, Macquarie analysts report as follows:

• Rate hikes usually mean lower returns ahead from equities generally, but returns will likely still be positive
• Gold, Utilities, Infrastructure and Energy often outperform after the first hike, while Technology is hit hardest
• Other sectors likely to underperform, based on history, are Capital Goods, Commercial Services, REITs, and Telecoms

A portfolio made up of Energy, Materials, Banks and Consumer stocks outperformed in three of five historical examples.

In sharp contrast, Morgan Stanley’s preview to the February board meeting starts with the following statement: “We think the RBA will hold rates in February, against market and consensus expectations”.

If the RBA decides to hike, Morgan Stanley’s view is the Australian economy will slow down markedly, in particular in the second half of calendar 2026.

Key Themes To Watch

Ahead of February, Morgan Stanley strategists believe the following should be on investors’ radar:

• Any signs of consumer fatigue? Watch out for signals of excessive discounting. Retailers were among those issuing disappointing trading updates late last year
• Is there any impact from the switch in RBA policy expectations? Negative signals from domestic Industrials could further support a shift to materials and also certain defensive growth names
• Long-term Compounders in focus. Morgan Stanley believes investor scrutiny is focused on three de-rated long-term compounders; CSL ((CSL)), Goodman Group ((GMG)), and Macquarie Group ((MQG))
• Australian Technology? The Australia All Tech index has underperformed the local market by some -28% over the past six months. What comes out of corporate results and what will the response be?
• Turnaround stories. AI might play a role, but plenty of management teams have the opportunity to unlock productivity, resilience and growth in companies that have been lagging.

Potential candidates for such turnaround stories include:

• ANZ Bank ((ANZ))
• AGL Energy ((AGL))
• CSL ((CSL))
• Insurance Australia Group ((IAG))
• Macquarie Group ((MQG))
• REA Group ((REA))
• Telstra ((TLS))
• The Lottery Corp ((TLC))
• Transurban ((TCL))
• Woolworths Group ((WOW))

All shall be revealed over the four weeks ahead.

Ord Minnett has added Alkane Resources ((ALK)) to its Analysts’ Conviction List and removed Ramelius Resources ((RMS)).

If you are interested in conviction calls and stock picks ahead of the February season, I strongly recommend you read my updates from the weeks past:

https://fnarena.com/index.php/2026/01/29/rudis-view-february-favourites-avoids/
https://fnarena.com/index.php/2026/01/22/rudis-view-key-picks-sector-favourites/
https://fnarena.com/index.php/2026/01/15/rudis-view-pre-february-top-picks-favourites/
https://fnarena.com/index.php/2025/12/24/rudis-view-best-buys-favourites-for-2026/

Focus On Gold

Finally, in ultimate proof not everything will be determined by corporate earnings this month, analyst Lachlan Woods at Canaccord Genuity offered the following insight about gold and gold stocks over the weekend:

“While the recent share price weakness in gold stocks may ultimately prove short term, many of the current ASX100 and ASX300 addition candidates are gold names. As such, we believe Monday is likely to see notable share price moves in these candidates as index-related buying by quant funds, which had been positioning ahead of potential inclusion, now reverses.

“While any relative underperformance may be temporary over a longer-term horizon, it is an important dynamic to be mindful of over the coming weeks. Over the medium term, larger-cap gold stocks that ultimately miss ASX100 inclusion could become attractive following a potential period of underperformance.”

On Woods’ assessment, candidates likely to be elevated into the ASX100 in March are:

• Westgold Resources ((WGX))
• Greatland Resources ((GGP))
• Regis Resources ((RRL))
• Vault Minerals ((VAU))

Candidates likely to be elevated into the ASX200 in March are:

• Predictive Discovery ((PDI))
• Kingsgate Consolidated ((KCN))
• Alkane Resources ((ALK))

Candidates likely to be elevated into the ASX300 in March are:

• DPM Metals Inc ((DPM))
• Dateline Resources ((DTR))
• Turaco Gold ((TCG))
• Meeka Metals ((MEK))
• St Barbara ((SBM))
• Santana Minerals ((SMI))

Looking at the above, it appears the gold sector is about to become a whole lot more prominent on the ASX.

FNArena’s Corporate Results Monitor (including calendar): https://fnarena.com/index.php/reporting_season/

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