The Australian earnings season has started strongly, with brokers becoming increasingly optimistic about the nation’s largest stocks. Outperformance by mining giants and major banks has overshadowed disappointing results from blue-chips such as CSL and Cochlear. A rally in commodity prices has fuelled profit upgrades across the resources sector, including companies like uranium producer Paladin Energy, diversified miner South32, aluminium giant Alcoa, and gold company Northern Star. BHP also contributed, with copper earnings surpassing iron ore for the first time in the company’s history.
Commonwealth Bank and ANZ have boosted the outlook for financial services, alleviating concerns about margin squeeze. Low loan losses and strong consumer and business borrowing, particularly at CBA, have restored faith in the industry. National Australia Bank is scheduled to report its results on Wednesday. CSL, a biotech giant, develops and delivers innovative biotherapies and influenza vaccines. Temple & Webster is an online retailer of furniture and homewares in Australia.
With mining companies and banks comprising nearly 60 per cent of the S&P/ASX 200 Index, analysts have already upgraded full-year earnings forecasts by 1.3 per cent, according to MST Marquee. This contrasts with the typical 0.7 per cent downgrade during the earnings season. MST senior analyst Hasan Tevfik noted the unusually strong start, reminiscent of the post-pandemic recovery in February 2021. Profits are now projected to be 10 per cent higher in the 12 months ending June 30, a significant increase from the 3 per cent forecast at the end of the August reporting season.
The bullish outlook for corporate profits is expected to positively impact the share market this year. Analysts have also upgraded earnings forecasts for the next financial year to 10 per cent, aligning the Australian market with the global profits recovery led by companies in Europe and the United States. Dividend forecasts for the financial year are up by approximately 1 per cent to $92.3 billion, with notable upgrades from Northern Star, South32, and Computershare. Several companies, including REA Group, IAG, CSL, and Challenger, have announced buyback programs.