Earnings reports offer ‘reassuring’ signs for profit margins

The CBA, which published last week, eased investor concerns about shrinking margins – the reason for the bank’s sharp drop in November’s share price – while pointing to productivity efforts given the pressure on the economy from rising costs.

Australia’s largest bank realized $92 million in savings from its organizational simplification efforts, which “helped offset other inflationary cost increases”, Mr Schellbach said.

“Clear beats from diversified finance heavyweights Macquarie Group, Computershare and Suncorp were bolstered by beats from CBA and a positive update from NAB,” said Chris Nicol, Head of Strategy and Economics. Australian companies for Morgan Stanley.

“The rising tide has helped ANZ and Westpac ignore substandard updates,” he said.

Part of the outperformance relates to the confessions season, which was dominated by warnings about COVID-19-related business disruptions and higher costs, according to Nicol.

“The start of the season was marked by generally better than expected draws,” he said, which could be “perhaps a function of the bias in industry results to date,” given that many worrying results should come from industrial companies. much to report.

Supply chain pressures weighing on business globally may also begin to ease, according to UBS, which pointed to “tentative signs that supply chain pressures may ease over the coming months”.

Imdex, a mining services company, and manufacturer GUD Holdings both said supply chain pressures had passed their highs, reflecting a similar sentiment beginning to emerge in the United States, according to the broker.

“These comments echo recent readings from our U.S. equity strategy team, which found that supply chain issues remained very negative on U.S. fourth quarter results, but improved slightly from third quarter levels. “said Mr. Schellbach.

Macquarie analysts were less optimistic about the results so far, describing the reports as a “mixed start” and pointing to the fact that more companies have exceeded dividend expectations than exceeded.

The brokerage cut its earnings-per-share growth estimate for fiscal 2022 to 12.4% from a forecast of 13.6% a month ago.

Macquarie also pointed to a shortfall for Mineral Resources which warned of rising export costs and weighed in on the benefits of a surge in lithium prices.

Beyond the slight decline in expected earnings growth, Macquarie analysts pointed to a handful of companies that benefited from rising stock prices, such as CBA and Suncorp.

“Despite the impact of omicron in early 2022, more stocks were upperformed than downgraded,” the analysts said, “primarily due to assumed higher margins.”

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