This month we take a look at the domestic economy, and Dan Moradi, Portfolio Manager – Listed Products, joins us to discuss the most recent reporting season.
Key Messages for Investors
- Aggregate FY26 earnings growth for the ASX came in at approximately 11%, ahead of both pre-season expectations and the low single-digit growth recorded over the prior three years.
- Resources contributed disproportionately to profit growth, aided by higher commodity prices; earnings growth across the rest of the market was considerably more modest.
- The earnings beat was driven by margins and cost-out rather than sales growth.
- Consumers are still spending but increasingly selective; June and July trading updates point to a slowdown in discretionary sales growth heading into FY27.
- Balance sheets remain a source of strength: capital management was well received by the market, and M&A activity picked up materially across the market.
- Consensus FY27 earnings growth has been downgraded around 3.6% since the start of the financial year to approximately 6.7%, and with the market trading on an 18x forward multiple against a 16x long run average, earnings delivery needs to do the work from here.
- Headwinds remain domestically and we retain our cautious stance on Australian equities. That is a view based primarily on the outlook for the macro economy.