Rudi's View | Jul 01 2026
This story features BABY BUNTING GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: BBN
Corporate earnings are not everything for share market investors, but they do explain a lot.
By Rudi Filapek-Vandyck, Editor
Better-than-expected corporate profitability and growth in the US is the key reason Wall Street strategists are upgrading their year-end targets.
8,000 has become the new December 2026 number for the S&P500 from the likes of Goldman Sachs and Morgan Stanley. BCA Research and Citi have upgraded to 8,100.
RBC Capital just upgraded its target to 8,150 from 7,900.
Between now and then, a general pullback in the order of -5%-10% is still seen as a genuine possibility, also with an eye towards inflation and the midterm elections later in the year, but strong corporate results are underpinning general confidence the underlying trend remains ‘up’.
Following a much better-than-forecast Q1 results season, in which average EPS growth amounted to 30% year-on-year, consensus is now positioned for 23% growth in Q2.
At face value, this seems like analysts have lowered the bar for ongoing success, but history shows such growth numbers this late into a cycle are nothing short of extraordinary.
Some of the more level-headed market commentators are therefore expecting higher volatility, also because share prices are seen as already reflecting this year’s accelerated growth, raising the question: for how long can corporate America continue surprising to the upside?
Australia Is Different But The Same
The dynamics for corporate Australia are different. Here, average forecast EPS growth for FY26 stands at 12%, which is well above the historical average of circa 5% growth, but that number is also heavily dominated by miners and energy producers.
Strong earnings growth momentum for cyclical mining companies is equally a feature in the US, but that sector represents a much smaller index weighting over there.
For artificial intelligence (AI), the commonality applies the other way around.
Besides, with demand for metals and minerals boosted by investments in AI infrastructure, one could make the argument that AI is very much a central theme in both markets.
It’s just that the exact impact and magnitude are different.
While EPS forecasts in Australia remain generally under pressure — see also profit warnings from Baby Bunting ((BBN)), Judo Capital ((JDO)) and Worley ((WOR)), among others — strategists at Macquarie observe local AI Enablers stood out with the best earnings trends during the February results season.
Macquarie believes this group of AI beneficiaries may well again stand out in August.
Think Goodman Group ((GMG)) and NextDC ((NXT)), but also Infratil ((IFT)) and Macquarie Technology ((MAQ)), as well as the likes of APA Group ((APA)), Megaport ((MP1)), Sims ((SGM)), Southern Cross Electrical Engineering ((SXE)), Tasmea ((TEA)), and Ventia Services ((VNT)).
Those are my personal suggestions, not Macquarie’s.
Outside this group and resources companies (not all of them), EPS forecasts for the ASX are trending lower, as also shown through our weekly updates:
https://fnarena.com/index.php/2026/06/29/weekly-ratings-targets-forecast-changes-26-06-26/
Pros & Cons
For what it’s worth, Macquarie’s forecast is for 9.6% EPS growth for FY26, followed by 11.1% growth in FY27.
Next financial year, one of the supporting themes should be energy price relief (assuming peace and the reopening of the Strait of Hormuz).
This then leaves the question: will this be enough to spark more enthusiasm for Australian equities?
Maybe the RBA needs to join in as well?
Alas, we’ve only just started the public debate among economists over whether Michele Bullock & Co are done with tightening for this cycle, or whether one or two more rate hikes will be required.
It might still be a while before confidence in RBA rate cuts is strong enough to carry the local share market’s upward momentum.
Until that time, all the heavy lifting might well remain dependent on corporate earnings and the occasional spike in market sentiment, such as when the Strait of Hormuz effectively opens and stays open.
Year-end portfolio reallocations are currently directing money flows into local share market laggards, but Macquarie strategists suggest this is likely to prove premature in many cases.
A fairly regular stream of profit warnings a la Judo Capital and Worley at the very least signals such share prices may not have bottomed yet.
No doubt, short-term traders and bottom-fishers stand ready to start scooping up downtrodden share prices that have taken an extra hit because of tax-loss selling in June, but the window for pre-August profit warnings remains open, not to mention the results season itself.
The past four August and February seasons have been among the most punishing and volatile ever witnessed in Australia. It seems naive not to expect more of the same in August.
In Bullion We Trust
Not all share market laggards are equal, of course, and on Monday stockbroker Morgans makes the case for lifting exposure to gold stocks that have been de-rated in line with a -26% weakening in the price of bullion since January.
This year’s weakness is in line with history, Morgans argues, in that gold bull markets tend to experience such drawdowns, but each has proved temporary and an opportunity prior to the long-term thesis reasserting itself.
Morgans’ preference lays with (in order) Evolution Mining ((EVN)), Newmont Corp ((NEM)), and Northern Star ((NST)) among large caps, and Ramelius Resources ((RMS)), Catalyst Metals ((CYL)) and Regis Resources ((RRL)) for exposure to smaller caps.
It just so happens that, on the same day, Macquarie updated its views on gold producers in Africa.
Its preference is for Perseus Mining ((PRU)) — for stability — followed by Resolute Mining ((RSG)) — for growth — and Turaco Gold ((TCG)) third, for “attractive de-risking”.
Ahead Of August
With only a little more than four weeks left until August, Macquarie favours stocks that are supported by positive underlying momentum.
Three categories stand out in late June:
- Companies better positioned to deal with higher-for-longer interest rates
- Defensive income
- Those AI Enablers
Regarding categories one and two, think about insurers QBE Insurance ((QBE)) and Suncorp Group ((SUN)), but also Challenger ((CGF)), Medibank Private ((MPL)) and Computershare ((CPU)) for the first group, and Aurizon Holdings ((AZJ)) and APA Group ((APA)) for the second.
I’d also add Dalrymple Bay Infrastructure ((DBI)), HomeCo Daily Needs REIT ((HDN)), and Telstra ((TLS)).
Looking ahead to August results, Macquarie has identified the following for upside risk to FY27 forecasts:
- Propel Funeral Partners ((PFP))
- HealthCo Healthcare and Wellness REIT ((HCW))
- James Hardie ((JHX))
- Web Travel Group ((WEB))
- News Corp ((NWS))
- Dexus ((DXS))
- Universal Store ((UNI))
- GrainCorp ((GNC))
- Cleanaway Waste Management ((CWY))
- Australian Finance Group ((AFG))
- Coles Group ((COL))
The following have been identified for potential downside risk:
- Temple & Webster ((TPW))
- Domino’s Pizza ((DMP))
- AGL Energy ((AGL))
- Helia Group ((HLI))
- IDP Education ((IEL))
- Fletcher Building ((FBU))
- Steadfast Group ((SDF))
- Insurance Australia Group ((IAG))
- Audinate Group ((AD8))
- Endeavour Group ((EDV))
History suggests not all of these will report in line with the broker’s expectations, but investors can use this information to make up their own mind between now and August.
FNArena’s Corporate Results Monitor: https://fnarena.com/index.php/reporting_season/
My curated lists and All-Weather Performers: https://fnarena.com/index.php/analysis-data/all-weather-stocks/
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