Feature Stories | Mar 16 2017
Download related file: FNArena_Reporting_Season_Monitor-03-03
This feature was first published for subscribers on March 3 and is now open for general readership.
With the February result season now complete in 2017, the FNArena Result Season Monitor, which has been building throughout the month, is now complete and published here in its final form (see attached Excel file).
The table contains ratings and consensus target price changes along with brief summaries of the collective responses from FNArena database brokers for each individual corporate result, and an assessment of “beats” and “misses”. Australian corporate results tend to focus on the profit line, with all its inherent potential for accounting vagaries, tax changes, asset write-downs and other “one-off” impacts. FNArena has focused mostly on underlying earnings results (more in line with Wall Street practice) as a more valuable indicator of whether or not a company has outperformed or underperformed broker expectations. There is also a level of “quality” assessment here rather than simple blind “quantity”.
The Monitor summarises results from 320 major listed companies. By FNArena’s assessment, 112 companies beat expectations and 87 missed expectations, for a percentage ratio of 35/27 or 1.3 beats to misses. The simple average of all resultant target price changes came in at a net 1.36% gain. In response to results, brokers made 55 ratings upgrades and 66 ratings downgrades, or a ratio of 1.3 to 1 downgrades to upgrades.
A glance at the table below suggests that as far as recent results seasons have gone, this one was pretty benign in net terms. This season’s beat/miss ratio is about average. Perhaps the standout result is a total of only 111 broker ratings changes, up or down. It is the lowest number since FNArena began the Monitor back in August 2013, on (almost) the highest number of stocks under coverage over that period.
This may suggest that despite some pretty spectacular individual stocks moves during the season, up or down, the market is as balanced as it has been for some time. And that’s despite the Trump rally. Supporting the Trump rally, and with help from China, has been the rebound in commodity prices from the depths of the prior results season.
The other interesting, or perhaps disturbing, point to note is the ASX200 level at the end of each of the season since August 2013. We’ve seen ups and downs, but we have gone absolutely nowhere.
Imagine what an S&P500 equivalent table would look like.
Each day of the Australian six-monthly reporting season, FNArena provides a summary of broker responses to the previous day's profit result releases from companies under coverage. Readers are reminded that it matters not what actual profit/loss result is posted by each company but by how much that result exceeded/fell short of stock analysts' consensus forecasts. Stock price movements on the day of release, and in many cases for the months following the release, will often be determined by the extent of "beats" and "misses" of underlying earnings as well as company guidance and analyst/management outlook.
A rolling summary table (Excel) is attached to each day's report and will build as the season progresses. Additions are made each day, consistent with release dates, and stocks will then be listed in alphabetical order for ease of use until the full picture of the reporting season emerges.
Note that companies assessed include only those covered by the eight major stockbrokers in the FNArena database and that ratings changes and targets are those provided only by the database brokers.
Note also that "beat" and "miss" assessments are open to an element of subjectivity and not simply a result-versus-consensus-forecast comparison. Mitigating factors include one-off items, top line versus bottom line relevance, forward guidance as an important consideration and so forth. In many cases "profit" per se is not the most relevant performance indicator.
Australian corporate results tend to focus on the profit line, with all its inherent potential for accounting vagaries, tax changes, asset write-downs and other "one-off" impacts. FNArena has focused mostly on underlying earnings results (more in line with Wall Street practice) as a more valuable indicator of whether or not a company has outperformed or underperformed broker expectations. There is also a level of "quality" assessment here rather than simple blind "quantity".
While FNArena's Reporting Season Monitor is being compiled with great care and our best endeavours, investors should note that we cannot guarantee that all data and information gathered and on display is 100% accurate at all times. FNArena does not accept any responsibility for errors and omissions that can occur. Investors should always do their own research and consult with a financial expert before making investment decisions. FNArena's Reporting Season Monitor is an informative tool, it does not not contain investment advice and should not be treated as such.