Strong investment set to drive ASX earnings: Ausbil

And that’s a wrap.

Another positive earnings season, with 47 per cent of the S&P/ASX 200 Index beating on revenue estimates and 44 per cent beating on EPS (earnings per share) estimates. Ausbil Investment Management has released its reporting season wrap and outlook for earnings going forward. Here are the highlights:

• HY22 was another positive earnings season, with 47% of the S&P/ASX 200 beating on revenue forecasts, and 44% on EPS.
• Consensus earnings outlook strengthened with FY22 EPS growth of +14.2% (S&P/ASX 200), up from its pre-reporting season outlook of +13.6%.
• Australian resources continued to deliver earnings beats against expectations. Battery materials were a highlight on EV and renewable energy fundamentals, on strong demand and supply dynamics.
• Strong results from banks following record capital management in FY21, with strengthening net interest margins (NIMs) on firming rates.
• Energy showed improving earnings from previous underinvestment, strong demand and commodity tailwinds.
• Dividends were lower compared to the record dividends in FY21, however strong dividends were achieved in resources and energy exposures.

Ausbil says, “HY22 marks a significant milestone in the path of earnings because, as with the last two halves (FY21 and HY21), profits have grown despite major uncertainty around the path of COVID-19 and its variants. Of course, it was the onslaught of monetary and fiscal stimulus unleashed from March 2020, and the triumph of science with the design and release of effective vaccines in late 2021 that has created an unfolding path towards greater normality, ensured access to liquidity, and driven the economy to resurgence from the brief two-quarter technical recession experienced in 2020.

“The invasion of Ukraine by Russia in the last week of reporting bought a new level of uncertainty to the market. To put it bluntly, we are living through extraordinary times, and this reporting season as with the last two, is testament to the power of optimism and effort in business and life in the face of great resistance,” says Ausbil.

Overall, Ausbil says reporting season was positive, with companies delivering another round of solid earnings. This was expected against low interest rates, strong economic activity and workforce/supply chain that is returning to normality after two years of intermittent lockdowns, here and globally. Ausbil concludes by listing expectations for earnings outlook:

Outlook for earnings:

• Company guidance returned in HY22, with most companies optimistic on the outlook.
• We expect FY22 is the first of a trilogy of positive earnings years for equities.
• With COVID moving from pandemic to endemic, we expect that travel, entertainment and leisure will lead recovery.
• domestic cyclical sectors.
• Companies have strong investment plans for ’22 and ’23 – to drive potential future earnings growth.
• We expect significant upward earnings adjustments for the energy, and metals and mining sectors.

Ishan Dan

Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.