• Overview

    February’s half year reporting season was the strongest in several years, as illustrated by the high level of earnings upgrades to consensus forecasts through the month and confirming a V-shaped recovery in profits across the market. Historically, it has been unusual to see large earnings upgrades through reporting seasons (as illustrated by the brown bars in the chart), though estimates were upgraded by 4% through the month.

    Chart 5: Strongest earnings season in several years – ASX 200 earnings revisions

    Source: Bloomberg


    As a consequence, the Australian market is now anticipated to fully recover the earnings decline of FY20 by FY22. Resources earnings are expected to show a large bounce back this year, aided by high commodity prices, while industrials and financials will be the key driver next year.

    Chart 6: Sharp recovery – Cumulative EPS growth by sector

    Source: UBS


    Higher than forecast dividends were a feature of reporting season and this trend is expected to continue over the following 12 months. Dividends had previously suffered large cuts following the onset of the COVID crisis, with many companies electing to conserve capital amid an uncertain outlook. On the back of economies reopening and the vaccine rollout, however, dividends are returning, as illustrated by a rise in the forward payout ratio.

    Chart 7: Dividends returning – ASX 200 forward dividend payout ratio

    Source: Bloomberg

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