Rudi’s View: More Surprises, Led By CBA & BHP

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

Interim assessment and observations from the February results season which is mostly surprising to the upside.

By Rudi Filapek-Vandyck, Editor

At face value, the February results season is generating plenty of signals indicating the Australian economy is doing just fine, thanks for asking.

One might even conclude results from the first 107 companies reporting vindicate the RBA’s decision to crank up the official cash rate earlier in the month, with possibly more to follow.

Look no further than analysts continuing to upgrade their forecasts for the year(s) ahead. As reported by UBS earlier this week, ASX200 earnings growth has now reached 12.1% for FY26.

This is up from 11.7% projected a week earlier and just 3.0% six months ago.

A reminder to everyone: that number had been negative for each of the preceding three financial years in Australia.

So corporate Australia is staging a Big Bang comeback in terms of a sizeable earnings upswing, which likely has further to run too.

The past 20 trading sessions (early results were released in late January) have offered plenty of examples of companies that previously, as a matter of speech, couldn’t put a dent in a soggy pack of butter but whose financial performance this time around proved of much improved magnitude and quality.

AGL Energy ((AGL)), Aurizon Holdings ((AZJ)), the ASX ((ASX)), Baby Bunting ((BBN)), Magellan Financial ((MFG)), Orora ((ORA)) and Viva Leisure ((VVA)) are just a few of the names for which investor interest might well have re-awoken.

But things are not necessarily as rosy as those face value observations suggest. Look more closely underneath the share market’s bonnet and we’re left with the conclusion that outside of banks and resources, that newfound momentum in profitability is not widespread.

As a matter of fact, take out those two sectors and corporate earnings growth in Australia looks a whole lot less ebulliant. As strategists at Wilsons observed this week:

“The market’s earnings upgrade cycle remains narrowly concentrated within the Materials sector, with Mining companies continuing to account for the vast majority of positive EPS revisions. Outside of Resources, revision momentum remains subdued.”

The good news remains many of the major representatives for both key sectors for the Australian bourse continue to support this month’s positive vibes, with both sector leaders CommBank ((CBA)) and BHP Group ((BHP)) releasing results that surprised to the upside.

Gold miners are equally no longer testing investor nerves with disappointing financial updates. Retail landlords seem back in a strong negotiating position (REITs are equally among the stand outs this season), while the report thus far for the healthcare sector and consumer companies is more mixed.

If there’s one obvious warning signal to point out it is that retailers are seeing their pace of growth slowing down in 2026. This might be an initial response to the RBA’s rate hike, which had been well flagged in advance.

Increasingly the prospect of more USD weakness, and thus a stronger AUD, is creeping into investors’ awareness, which might keep a lid on overall enthusiasm for foreign earners outside of resources this season.

For what it’s worth, the abovementioned strategists at Wilsons are keeping the faith in:

• ResMed ((RMD))
• Aristocrat Leisure ((ALL))
• Car Group ((CAR))
• Brambles ((BXB))
• Goodman Group ((GMG))

The latter failed to upgrade FY26 guidance from 9% EPS growth with its project pipeline now 73% made up by data centres. Within the current macro context, that combination was not well-received and Goodman shares encountered more selling pressure today.

Goodman Group is part of what many market commentator would describe as the large cap Quality basket on the ASX. Think also REA Group ((REA)), for example, and TechnologyOne (yes, it’s in the ASX50) ((TNE)).

It would not have escaped anyone these stocks have been heavily under the pump this year, having already encountered more selling pressure in the second half of last year.

Investor fears about what AI development could possibly inflict on such business models is but one factor behind their relative underperformance.

Strategists at UBS believe it remains yet too early to comfortable assume the Quality end of the ASX has by now seen the worst of its fall from grace.

UBS’ historical data analysis has revealed previous periods of such an extreme leadership reversal saw quality stocks continuing to fall, and underperforming the ASX200 by -12% on average over the following six months.

With the number of companies reporting accelerating, starting today (Thursday), UBS has quickly lined up those companies for which its analysts see potential for upside surprise (all are Buy rated too):

• Coles Group ((COL))
• Cleanaway Waste Management ((CWY))
• Domino’s Pizza ((DMP))
• Flight Centre ((FLT))
• IDP Education ((IEL))
• Navigator Global ((NGI))
• Qantas Airtways ((QAN))
• Sigma Healthcare ((SIG))
• WiseTech Global ((WTC))

UBS had also selected some of the companies that have already reported with Universal Store Holdings ((UNI)), GPT Group ((GPT)) and HomeCo Daily Needs REIT ((HMC)) indeed delivering on their promise, while Goodman Group is punished for the reason explained.

Stocks where UBS analysts see downside risk include:

• Accent Group ((AX1))
• Guzman y Gomez ((GYG))
• Monadelphous ((MND))
• Scentre Group ((SCG))
• Super Retail ((SUL))
• TPG Telecom ((TPG))
• Woolworths ((WOW))

Here we must conclude it’s much easier to predict upside surprises (UBS had also picked BHP Group ((BHP)) as the likes of Aurizon Holdings, Bendigo & Adelaide Bank ((BEN)), JB Hi-Fi ((JBH)), Mirvac Group ((MGR)) and Stockland ((SGP)) had been selected too and they all stood up to the challenge.

Reliance Worldwide ((RWC)), Iluka Resources ((ILU)) and Treasury Wine Estates ((TWE)) had been identified correctly, while UBS wasn’t happy about Deterra Royalties’ ((DRR)) result either.

On Thursday, February 19th, the FNArena Corporate Results Monitor comprises of 107 results, of which more than 40% have been assessed as better-than-forecast (result plus guidance).

Historically, if that percentage holds (still a big if at this stage) this would be the third best February season since 2013, only marginally bettered by February seasons of 2021 and 2022, when similarly strong earnings recoveries followed the covid outbreak of 2020.

25 results, 23.40% to date, have been marked down as disappointing (a ‘miss’). Were this percentage to remain by month’s end, it would rank among the lowest in this series.

FNArena’s corporate results monitor, with a day-to-day calendar, is updated daily until early March:

https://fnarena.com/index.php/analysis-data/consensus-forecasts/stock-analysis/?code=SGP

Big Result From The Big Australian

The February reporting season is still relatively young, in terms of absolute numbers of companies reporting, with many more results still forthcoming but there’s little doubt when the final balance follows in March, BHP Group’s ((BHP)) interim performance will be included with the season’s highlights.

It does not happen every year the second largest corporate giant on the ASX pulverises analysts’ forecasts by some 16% with its first dividend announcement for the fiscal year.

The big surprise was not solely built on higher commodity prices, though a much better price for copper –now BHP’s main bread and butter selling point– does help, of course. But analysts knew this beforehand as base materials trade on public markets, which is also why they, correctly, had anticipated BHP’s result was poised for a positive surprise.

At face value numbers, the Big Australian duly performed on that promise. I won’t repeat the numbers. They were generally accepted as first class, and better-than-forecast.

The bonus stand out positive surprise was an extra US$6bn raised through two separate asset deals. The board intends to use the extra cash to fund higher-returning growth projects as well as capital returns for shareholders.

FNArena joined other media in a conference call with Chief Financial Officer Vandita Pant after the result release on Tuesday when she was quite adament the two deals generating US$6bn should not be seen as “asset divestments”, but more as “unlocking value” from the company’s wide and diversified portfolio.

“We have a big capital base and lots of assets. So the way we think about this is that if there is any asset or capital that we have which some other party will give us more value for, we should do that because it maximizes value for our shareholders.”

The deal with Wheaton Precious Metals is the world’s largest streaming transaction ever done for a precious metal, and as the CFO explained, silver is mined along with copper in Antamina, in which BHP owns a 33.75% stake.

The benefit seems pretty straightforward: silver doesn’t get valued in BHP’s portfolio, it’s a non-core asset and analysts don’t ascribe any value to it when then they model the group’s assets, future cash flows and valuation.

In addition to the upfront payment, Wheaton will also pay BHP an ongoing 20% of the spot silver price per ounce delivered.

Hence, the deal combined with the WAIO inland power network transaction announced in December, paints BHP as a savvy manager of assets, being able to unlock extra value when opportunity presents itself.

The silver streaming deal pulls in US$4.3bn in cash upfront, on top of the US$2bn from the December infrastructure deal.

A second noteworthy milestone is that copper now contributes more than 50% of EBITDA. BHP management remains adament in its forecast for a structural copper deficit outlook to 2035, even after accounting for projects already in the pipeline; they estimate the world still needs circa 10 million tonnes of additional copper.

No hedging is taking place on the view that shareholders are buying the stock for direct commodity exposure.

While it is easy to relegate BHP’s copper achievement as simply a result of the general resurgence in commodity prices over the past six months or so, the miner did manage to increase production by some 30% over the past two years while many peers experienced difficulties in maintaining existing volumes.

Codelco, Anglo American, Glencore; they all have seen total output slide, but not Rio Tinto ((RIO)), it has to be said. Maybe Australian investors don’t know by half how lucky they are?

BHP, in case this still needs to be pointed out, is the world’s largest producer of copper and this week’s interim result equally touts the future potential of its Vicuna asset in Argentia, at an estimated cost of -US$17bn.

Bottom line: gone are the days of BHP effectively operating as a leverage on iron ore. Now it’s up to investors to amend their perception.

CEO Mike Henry used this week’s opportunity to highlight BHP is also a Top 20 gold producer (in particular in South Australia) and Olympic Dam supplies some 5% of the world’s uranium.

BHP is equally proud it is the only producer in the Pilbara whose inflation-adjusted iron ore costs have come down since 2022.

A Touch Of AI

As one of early adopters of “machine learning”, now universally referred to as AI, BHP remains as enthusiastic as ever about the technology’s usefullness and operational advantages.

The CFO thinks investors should think of AI in terms of reducing costs and improving safety:

• AI is used for hazard identification, supporting safer operations.
• AI helps optimise concentrator settings so that given ore characteristics, the plant can achieve maximum recovery/output.
• AI is used to schedule equipment, drivers, and movements in a tightly coupled supply chain, leading to better-quality decisions than manual scheduling.
• Geophysical data is digitised and fed to machine-learning models to detect patterns and targets for more focused exploration drilling.

See also FNArena’s post result update, published earlier on Thursday morning:

https://fnarena.com/index.php/2026/02/19/bhp-crowns-itself-the-asset-savvy-copper-king/

(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.

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