Reporting season will be ‘grim’: UBS

Reporting season will be ‘grim’: UBS

With falling commodity prices putting extreme pressure on the resources sector, UBS is expecting a "decidedly grim" reporting season.

 

The UBS 2016 Reporting Season Preview, released yesterday, said that ex-resources earnings trends are "far from buoyant" but nevertheless continue to grow at a subdued pace (approximately five per cent).

The Australian equity market is confronting a number of earnings headwinds beyond weak commodity prices, particularly at the "very large-cap end of the market", said UBS.

"Outside the 'top 20', the earnings picture is somewhat better, albeit the backdrop is one of moderate overall growth with a fairly [diverse] range of growth outcomes by stock," said the report.

The tailwind from a lower Australian dollar is still helping 2015-16 earnings per share growth for the US dollar earners segment of the market, said UBS.

Advertisement
Advertisement

"Domestically, consumer discretionary should be a relative bright spot with housing still buoying consumer spending and the NSW economy particularly strong," the report stated.

"Resource-related industrials should report weak results although the market will be looking for any signs of a bottom in profitability given the extended poor performance (and level of short interest) in the sector."

Within the financial services sector, UBS tipped IOOF Limited as a "potential large-cap negative surprise".
For IOOF, "weak flows present downside risk" and there is "potential for cost disappointment", UBS said.

from the web

Website Notifications

Get notifications in real time and stay up to date with content that matters to you.