Reporting Season Wrap and Outlook – half-yearly update

Headline earnings growth for Australian corporates reflects a continuation of favourable operating conditions, with aggregate results broadly in line with expectations and fewer negative surprises than usual.  Forward earnings growth expectations are largely unchanged at around 6% and are well underpinned by the resources sector.

Key themes emanating from the results season include:

1. Stable earnings outlook which supports reasonable return expectations
2. A distinct lack of negative surprises
3. Earnings momentum is emerging in the cheaper sectors
4. Commodity prices provide a buffer for earnings growth

While the market’s valuation is above its long term average, it is not egregiously so and is entirely consistent with the low interest rate environment. However, conditions are differentiated at an industry level and we are cognisant of the ongoing wave of disruption to traditional business models and industry structures. Equally, we aware of earnings momentum gathering among previously unloved industrial cyclicals and these are presenting a range of compelling investment opportunities.


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This article has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and the information contained within is current as at April 9, 2018. It is not to be published, or otherwise made available to any person other than the party to whom it is provided.

This article is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation.

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