As we have discussed, investors will be watching the current earnings season as closely as ever, as the market looks for stronger profit results to support share price gains. We outline our key takeaways from earnings season so far.
At the half way mark of results, across Australia and NZ both markets are little changed since the start of the month (with the ASX 200 market index down approx. -1%, and the NZX 50 market index up approx. +1%). Given the market rally heading into earnings season, corporate profits were going to be especially important to support share prices. Looking at the AU/NZ markets as a whole there seems to be no more bad news than normal, but fewer positive surprises, which has resulted in relatively muted share price moves for the AU/NZ markets overall. It is worth noting that in Australia consensus earnings expectations were at their lowest level since the GFC, so large earnings misses weren’t expected, despite the softer economic environment.
Across ’s portfolio, results so far have generally been positive across our key investment themes, and our Australasian Tourism and Agriculture holdings have performed particularly well. Our Resource/Energy picks have also responded well to earnings season, as given their underperformance in recent times the bar was set very low. One area of our portfolio that has disappointed so far has been our Healthcare exposures, which had rallied hard into earnings season, as Healthcare has been one of the top performing sectors over the last year. Given the structural tailwinds of an ageing baby boomer population behind the Healthcare sector and the fact that Healthcare stocks are trading at relative highs, we remain comfortable with our holdings in the sector. Overall the recent earnings season divergence illustrates how being selective and holding quality stocks with solid economic drivers can result in performance outcomes significantly different from the broader market.
