Rudi's View | 10:00 AM
Expect downgrades, and upside dividend surprises, and day-to-day volatility, plus lots and lots more.
In today's edition:
- Buckle Up, Says Macquarie
- UBS Sees A Different Rate Hike Cycle
- Diversified Financials & Infrastructure
- Transport & Waste Management
- Small Caps
- Technology & Online Classifieds
- Ord Minnett Adds Conviction
By Rudi Filapek-Vandyck, Editor
It's very early days, but given how tough the past six months have been for many an investment portfolio in Australia, I reckon local investors are happy to embrace every little bit of optimism and positive news.
On Monday, share prices in copper producer Capstone Copper ((CSC)) and data analysis and marketing company Vista Group International ((VGL)) are continuing the underlying positive undercurrent that has dominated the early local result releases that also featured Ampol ((ALD)), James Hardie ((JHX)), Newmont Corp ((NEM)), and Rio Tinto ((RIO)).
Canadian iron ore miner Champion Iron ((CIA)) is thus far the only negative outlier. But, as said, it's early days.
Give it a week or so and we'll be in the thick of it. Add another week and we'll find ourselves in the eye of the storm.
Soon the FNArena Corporate Results Monitor will start providing daily updates. Its calendar for the season is looking chock-a-block already, in particular the final nine days of the month.
https://fnarena.com/index.php/reporting_season/
Buckle Up, Says Macquarie
Macquarie strategists are preparing for a difficult results season over the four weeks ahead. In-house analysts have been extra-busy with culling earnings forecasts over the weeks past.
The expectation is that companies will issue conservative and cautious forward-looking guidance, adding more pressure on analysts' forecasts.
The quote that sums up the general anticipation:
"Results will be challenging as a slowing cycle and conservative guidance likely drives EPS downgrades".
Macquarie's EPS growth forecast has (for now) settled around 8.9% growth, which will be the first advance since 2022, with the added observation it's all about resources.
Outside of the resources sector, Macquarie sees little growth elsewhere. FY27 EPS growth forecasts for resources and banks have been downgraded, reducing the market's growth forecast to 7.2% for the twelve months ahead.
If Macquarie's projections prove correct, banks will have a strong year ahead, while momentum slows markedly for resources, and REITs will become the strongest growers next year, with domestic industrials second.
Among the few companies reporting this week, Macquarie strategists prefer Block ((XYZ)) and News Corp ((NWS)) with both likely to benefit if/when the AI trade loses momentum globally and money is seeking to rotate elsewhere.
Further out in the following week, Computershare is favoured with this company currently enjoying upgrades to forecasts plus the stock seen as a beneficiary of potential Fed rate hikes.
Amcor ((AMC)) is equally enjoying upgrades to forecasts and adds specific defensive characteristics.
Treasury Wine Estates ((TWE)) is mentioned as one of the most unloved stocks in the ASX100, but with emerging new momentum in the share price also carried by recent upgrades to forecasts.
Macquarie is not so keen on Beach Energy ((BPT)), with its shares suffering from poor momentum while in-house forecasts sit below market consensus.
The same arguments are put forward for Pinnacle Investment Management ((PNI)). Both AGL Energy ((AGL)) and Origin Energy ((ORG)) are equally disliked, with forecasts falling in light of a structurally oversupplied electricity market.
Elsewhere, the broker's healthcare desk has identified ResMed ((RMD)) and Ramsay Health Care ((RHC)) as sector preferences while CSL ((CSL)) and Cochlear ((COH)) are least preferred.
Key picks inside the consumer-oriented sector are Sigma Healthcare ((SIG)), Coles Group ((COL)), Guzman Y Gomez ((GYG)), and JB Hi-Fi ((JBH)).
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