Goldman has a little update on earnings season that builds on my point this morning when addressing the ASX98 guff from Craig James:
Revenues disappoint, but cost-out delivers 70% of the ASX 200 has reported with consensus EPS growth for FY14 revised up by 80bps to 13.2%. If this holds through next week it will mark the first interim reporting season post the GFC
that has seen a net earnings upgrade, following 5 years where results seasons have triggered 1-2% downgrades to full year earnings.While earnings have risen, it remains a story of cost-out driving beats against low expectations. Revenues have disappointed across all sectors of the market. Consensus expectations for resource revenue growth have been cut 2% for FY14, but cost controls and better productivity have driven a 2% upgrade to EPS. Similarly, Bank earnings have seen 1-2% consensus upgrades on further improvements in asset quality despite still-weak credit growth. Industrial EPS growth (+6.3%) remains largely unchanged with lower costs again offsetting weak revenues.
Early themes continued to play out this week:
– Delivering top-line growth continues to be rare and well rewarded (DMP, REA, GEM, SEK, CRZ).
– Housing remains the main bright spot on the domestic economy, but is becoming fully priced
(BLD, SGP, MGR, ABC, ALZ).
– 43% of stocks have seen a >2% cut in consensus operating costs for FY15.
– Productivity driving higher mining volumes.
– Historically low interest rates producing higher net profit margins, but firms prefer to pay-down debt or return cash rather than re-invest.
– Dividends continue to grow, but there are far fewer surprises than in recent years.
– Retail trading conditions appear to have based, but no evidence of a broad-based recovery.
– More focus on rising input costs from lower A$.
New normal means jobless recovery.
