Rudi's View | May 06 2026
This story features ACCENT GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: AX1
The company is included in ALL-ORDS
Momentum in corporate profits locally is sharply different from the US, and today's Fourth Industrial revolution goes a long way explaining it.
By Rudi Filapek-Vandyck, Editor
The point of difference has been highlighted many times over, by myself and others, but it is still worth repeating because of the many valuable signals for investors in Australia.
US equities are not solely outperforming because the US is a net exporter of crude oil and gas or because the Federal Reserve is in no mood to follow in the RBA’s footsteps and start hiking rates.
US equities are outperforming because corporate results are healthy, robust, overwhelmingly better-than-forecast and the current quarterly result season is yet again forcing analysts to raise their projections for the year ahead.
Down Under Is Struggling
It’s a rather bleak comparison, but Australian investors instead see retailer Accent Group ((AX1)) issue a profit warning much worse than already is reflected in reduced forecasts (analysts saw it coming, but are still negatively surprised by the magnitude of today’s downgrade), with an unwelcome probe by ASIC on top.
On Thursday last week, it was Woolworths Group’s ((WOW)) turn to disappoint, while quarterly trading updates reveal corporate Australia continues to struggle with rising costs (not only due to the energy crisis) and sagging demand locally, including from many a mining company.
When we finally do see a quarterly performance above expectations from ResMed ((RMD)), the market decides healthcare remains in a bear market, and those shares too need to be sold.
Neither ANZ Bank ((ANZ)) or National Australia Bank ((NAB)) results have been able to prevent share prices from weakening.
Reports Of AI’s Demise Greatly Exaggerated
The one factor that makes America so special, even after all those years and despite plenty of forecasts and speculation to the contrary, is still AI.
As one commentator put it on Monday:
“Every week or so we seem to hear another speculative reason for the whole AI project to come to a grinding halt”.
But then corporate results are released and the most appropriate response is probably: Oh, wow!
The cold hard data and insights are pointing towards acceleration in demand for Agentic AI. So much for “AI doesn’t work” or “too much hype”.
For good measure: not all share prices are positively rewarded and those of Meta and Microsoft, for example, are well underwater year-to-date thus far.
Accelerating strong momentum is equally supporting business confidence. Indications are capex at the top of the world’s ranking for AI spending will most likely still increase from what are already mindbogglingly large numbers.
This is not the time and place to debate valuations and opportunities among US technology companies, but the one message that is increasingly being understood by investors overseas is that all speculation and reports about the demise of AI are greatly inaccurate.
Sooner or later, this message will equally resonate in Australia where, admittedly, there are no local Hyperscalers such as Amazon or Apple, no Samsung, and no Anthropic waiting to list, but there are plenty of companies exposed and levered to the theme, and their share prices are still well below price levels from last year.
In fact, share prices might already have started to respond to this ‘new’ understanding.
While the ASX200 recoved a net 2.17% in April (ex-dividends), the local All-Tech Index jumped up by 9.75% over the month and the local IT sector is up 13.25%.
Yet, as said, share prices –virtually without exception– are still well below last year’s prices.
This by no means suggests they should return to where they came from, but at the very least it raises the question of was such an outsized de-rating, across the board, actually justified?
Can Upcoming Results Convince?
The coming weeks might assist with answering investors’ questions, and it will most likely occur on a case-by-case basis, as companies including Aristocrat Leisure ((ALL)), Block ((XYZ)), TechnologyOne ((TNE)), and Xero ((XRO)) release financial results.
As evidenced in the case of ResMed; it cannot be assumed a great result will trigger the next major rally in the share price, but ultimately, as also proven by TechOne since its AGM market update in February, once management can silence the doubters and convince others, those share prices can reclaim a whole lot back.
For those who do not have TechOne on their radar as much as I do: the shares touched $20 before recovering somewhat to $22.40 when board and management assured shareholders everything was fine inside the business in contrast to the sinking share price, and that triggered a rally beyond $30 over the following two months.
This time last year those shares were trading above $40. Current consensus target is $30.82, as $29 targets by Macquarie and Ord Minnett weigh on the average.
On the weekend I received a tip off about an expert rebuttal of the AI threat thesis that prior had pushed down the shares to $20. It’s worth viewing and listening to:
https://www.youtube.com/watch?v=5X4IpdqtFSg
Scroll to 1:04:00 to go straight to TechOne as a high-quality stock impervious to AI. (Special thanks to subscriber David).
I am assuming most of you are well aware of FNArena’s Corporate Results Monitor by now:
https://fnarena.com/index.php/reporting_season/
(Scroll to the bottom of the page for the results calendar).
What Are Investors Looking For?
The current in-between season in Australia (outside of February and August, when most companies report) also includes banks, retailers, travel companies, agricultural services providers and a slew of NZ-headquartered companies, such as Fisher & Paykel Healthcare ((FPH)) and Infratil ((IFT)).
A recent preview saw stockbroker Morgans communicating its positive bias towards ALS Ltd ((ALQ)), Collins Foods ((CKF)), Nufarm ((NUF)), Orica ((ORI)) and Xero ((XRO)).
Morgans predicts companies that can demonstrate cost control and earnings visibility will be the ones that stand out. For those mentioned, the broker sees upside potential through volume recovery, cost discipline and structural growth drivers.
Equally worth mentioning post Accent Group punishment on Monday, Morgans has started downgrading forecasts for the local retailing sector.
Two sector favourites have been nominated: Lovisa Holdings ((LOV)) and Universal Store ((UNI)).
Similarly as with TechOne et al: current de-rated share prices are only great value if a larger-than-anticipated profit warning is not the next thing to occur.
Market strategists at UBS suggest what investors are curious about are any second order impacts from war in the Middle East.
Think about consumers holding back in their spending or businesses becoming more hesitant with their financial commitments.
As such, upcoming results releases from Amcor ((AMC)) –food & drinks packaging–, James Hardie ((JHX)) –building materials–, and ALS Ltd –mineral exploration– might be treated as benchmarks for peers who report later.
UBS is anticipating US consumer and housing stocks to set a cautious tone, given the decline in US consumer confidence and mortgage rate increases.
I think it’s probably a fair assumption those segments are not operating under different circumstances in Australia.
At face value, Orica’s ((ORI)) recent trading updates should have reduced the risk around potential H1 disappointment, but UBS still points out management needs to manage the risk of ammonium nitrate (AN) sourcing costs in an increasingly tight global market.
Analysts didn’t have high expectations for the banks and thus far that appears to have been correct (also: no disasters have announced itself since those banks have been pre-warning investors about tougher conditions and higher reserves).
P.S. Accent Group shares entered the calendar year trading above $2. Don’t look them up today, it’ll only hurt your eyes. They rose as high as $3 back in 2021.
For stats aficionados: With more than 60% of the S&P500 through Q1 results, blended S&P earnings growth is running at 15.1% year-over-year, on pace for the sixth straight quarter of double-digit gains (with some of the large cap giants still outgrowing the rest of the market).
84% of reporting companies have beaten EPS estimates, well above the five-year average of 78%. Net profit margins just hit a 15-year high at 13.4%.
Corporate Australia can only dream of emulating such a scorecard, as also showcased in FNArena’s Corporate Results Monitor: https://fnarena.com/index.php/reporting_season/
My curated lists: https://fnarena.com/index.php/analysis-data/all-weather-stocks/
Best Buys & Conviction Calls
Ord Minnett‘s Analysts’ Conviction List has seen no amendments in April (12 nominations in total):
- Alkane Resources ((ALK))
- Brazilian Rare Earths ((BRE))
- Breville Group ((BRG))
- Cuscal ((CCL))
- Energy One ((EOL))
- Lindsay Australia ((LAU))
- Qoria ((QOR))
- Regis Healthcare ((REG))
- Service Stream ((SSM))
- Shape Australia ((SHA))
- SiteMinder ((SDR))
- Zip Co ((ZIP))
*****
Woodside Energy ((WDS)) continues to be included in RBC Capital’s Global Energy Best Ideas List.
FNArena Subscription
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