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Wrapping up Aussie earnings season and what it means for the ASX200

August 25, 2020 1:45 AM

One of the notable features of reporting season has again been the lack of future guidance due to the distortions created by the COVID-19 pandemic.

An example of this is Coles and Woolworths who have benefitted from significant spending shifts as a result of lockdowns and government stimulus. As a result, they have enjoyed unprecedented sales growth that is unlikely to be repeated soon.

In terms of the split between lemons and oranges, according to AMP’s Chief Economist, Shane Oliver, 28% of company's earnings results have exceeded expectations, while about the same amount have disappointed. Only 33% of companies have reported earnings higher than the previous year compared to 66% in a normal year.

Looking through the charts of the companies covered in our earnings previews there has been little discernible change in price trend following the delivery of earnings reports. The big miners, in particular, FMG and RIO continue to look solid technically as do the consumer staples stocks Coles and A2 Milk.

There are signs of life starting to emerge in some travel-related stocks such as Qantas, Flight Centre, and Webjet. This may continue as the vaccine drum begins to beat a little louder and the market starts to price in a better outlook for travel in the second half of 2021.

Tripping up the ASX200 is the hard hit financial sector which remains out of favour after reporting a -29% slump in earnings. It’s difficult to see what changes the attitude towards banks given the outcome of the pandemic remains uncertain and the potential for APRA to place further restrictions on dividend payments in 2021.

Technically, the AS200 continues to trade comfortably within a range between 6200 and 5800. Should the ASX200 make a sustained break out of the top of its 12-week range 6200, it would be considered as a buy signal, looking for a move towards 6600 as momentum/technical buyers step in.

Source Tradingview. The figures stated areas of the 25th of August 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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