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FNArena Reporting Season Monitor February 2015

Feature Stories | Mar 12 2015

This story features LINDSAY AUSTRALIA LIMITED, and other companies. For more info SHARE ANALYSIS: LAU

Download related file: FNArena-Reporting-Season-Monitor-02-15

This story was first published for subscribers on March 4 and has now been opened for general readership.
 

With the February result season now complete in 2015, 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 318 major listed companies. By FNArena’s assessment, 113 companies beat expectations and 82 missed expectations, for a percentage ratio of 36/26 or 1.4 beats to misses. The simple average of all resultant target price changes came in at a net 5.6% gain. In response to results, brokers made 38 ratings upgrades and 118 ratings downgrades, or a ratio of 3 to 1 downgrades to upgrades.

To put that into perspective, the previous August 2014 reporting season featured 1.1 beats to misses for a 2.1% target price gain. The ratio of downgrades to upgrades was 1.6 to 1.

At the time, excess downgrades reflected mostly broker perception of overvaluation. Yet across the August result season, the ASX200 finished at the same level it began. In stark contrast, the month of February saw the ASX200 gain 6%, and a lot of that was to do with the improved beat/miss ratio. Thus what might have been perceived as overvalued in August is now even more overvalued in February, judging by the sharp increase in the downgrade to upgrade ratio.

The vast bulk of downgrades reflect the market's insatiable thirst for yield stocks in a low interest rate world, such that share prices have been pushed too far above analyst valuations. That said, many an analyst conceded during the season that this insatiable thirst will mean share prices will remain supported.

[Note: This final table includes assessments for late reporters Lindsay Australia ((LAU)) and Rhinomed ((RNO))]
 

Disclaimer:

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.

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CHARTS

LAU RNO

For more info SHARE ANALYSIS: LAU - LINDSAY AUSTRALIA LIMITED

For more info SHARE ANALYSIS: RNO - RHINOMED LIMITED