investors peer into tea leaves after bumper earnings season

On the numbers, it’s been a strong season – even allowing for the traditional risk that companies that report late are most likely to disappoint.

Lining up to report earnings next week are retailer Harvey Norman, casino group Crown Resorts, iron ore giant Fortescue, pathology provider Healius and investigative analytics company Nuix.

JPMorgan’s head of equity research Jason Steed says that on the investment bank’s numbers, 34 per cent of the companies that have reported so far have beaten their forecasts, and by an average 2.5 per cent on earnings per share estimates.

And on the other side, only 26 per cent of companies have missed JPMorgan estimates, compared to 35 per cent of the past 12 reporting seasons.

Put simply, across the board, companies results are strong. By sector, discretionary retail is the stand-out performer, though healthcare and financial stocks have done well too.

But Steed points out there is a little disquiet out there in the market about whether this can all last.

“The market is using this results season to pull back expectations for the remainder of the year,” he says, noting that the same trend occurred last year, forcing a big wave of upgrades after Victoria came out of lockdown and vaccine rollouts began to accelerate globally.

Of the 11 sectors, just two – healthcare and financials – have had positive revisions to earnings per share after the results have been released. The same holds true for dividend outlooks: the analysts are revising dividends down by 2.7 per cent across the board.

“It’s this unusual juxtaposition between beats [beating earnings estimates] and the outlook for earnings. We’re all trying to figure out if this is going to drag out into a period of weaker earnings, or whether we see a 2020 style snap-back,” Steed says.

Finally, it’s worth pulling out one other trend.

Results packs this reporting season have often included sustainability targets, a discussion that is usually reserved – if it’s been had at all – for strategy days and annual meetings.

Perhaps it’s a hint of what’s expected to be asked in those upcoming investor meetings.