Lonsec   ⟩   News & Insights   ⟩   Media releases   ⟩   How earnings season impacts share prices

AuthorShaun Hedrick

TitleGM - IT

DateFebruary 26, 2018

CategoryMedia releases

Share

Australia’s top companies are more than halfway through reporting season, and so far those exceeding analyst expectations outnumber those that don’t.

Of the 170 ASX 200 companies due to report in February, around 130 have already announced their results, and exceeding or missing expected performance is having a direct impact on share prices. As the chart below shows, around 35% of results have exceeded expectations (meaning they were at least 5% higher than analysts estimated), while 29% have missed. Around 35% have been in line with the market’s expectations.

Earnings season – midway point report card

Resource giant BHP (BHP) reported earnings slightly below expectations, missing estimates by -6% despite a 25% rise in net profit, while Rio Tinto’s (RIO) 90% jump in earnings delivered more or less in line with expectations. Major upside surprises came from biotech giant CSL (CSL), which delivered +30% on expectations, A2 Milk Co (A2M), which beat estimates by +24%, and Insurance Australia Group (IAG), which beat estimates by +18%.

As the chart below shows, it is the upside or downside surprise that has the real impact on share prices. Over the reporting period so far, companies that have reported above-consensus earnings have seen their share price rise by 2.9% on average, while those that have missed have fallen by 3.4%.

Earnings season – impact on share price

Release ends

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