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The recent Australian equities earnings season reflected generally soft conditions and a subdued outlook for Australia’s listed companies.
The recent Australian equities earnings season reflected generally soft conditions and a subdued outlook for Australia’s listed companies. Headline earnings revisions were very weak, with the 1.9% decline in the ASX200 earnings per share (EPS) estimate the largest scale-back in a results season since February 2009. Moreover, the proportion of stocks by number seeing downgrades across the ASX300 was nearly 70% – the weakest “breadth” for well over five years.On the final tally, the number of company results beating expectations came in at 25%, behind the misses at 30%. The rate of beats was the second-lowest in the past eight reporting seasons. Remarkably, not one sector managed to deliver a beat rate of more than 50%, with Energy the high-water mark, at 44%.Highlights:Revenue: The aggregate revenue for Australian listed companies in FY19 was A$369.1bn, representing a 6.2% decrease against FY18.CAPEX: The market remains in a capex upgrade cycle, with most sectors seeing increased spend expectations.Cost Pressures: Having abated somewhat over the July-December 2018 period reported in February 2019, cost pressures re-emerged in the second half of the financial year.EPS Revisions: The Mid-Cap Index saw particularly sharp negative revisions, with EPS falling 4.8% (for context: ASX200 -1.9% EPS).The charts prepared below by J.P. Morgan summarise some of the main metrics compared to previous results seasons. JANA considers the September 2019 reporting season outcomes to be in line with our expectations and our view that Australian equities remain unattractive on a relative basis. Furthermore, JANA reaffirms the following recommendations for Australian equities:
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