Reporting season continues apace this week: here’s what the market expects for some of the heavyweight stocks, plus several market darlings will have to try to justify their soaring share prices.

Tuesday 21 August

1. Altium (ALU)

Market consensus profit estimate: $38.6 million

Electronic printed circuit board (PCB) software provider Altium has been a tech darling on the ASX, rising from $3.96 three years ago to $21.54, as it has been picked up as a good exposure to the “Internet of Things” and the “fourth industrial revolution” it will drive. But such a rise usually brings risk to a stock’s valuation, and Altium is trading at 40 times estimated FY19 earnings – an expensive rating. The FY18 result has to show investors that profit growth is rising, to justify such a level. The collation of analysts’ forecasts by FN Arena is looking for earnings per share (EPS) of 35 cents, up 61%, with an unfranked dividend of 34 cents, lifted by 48%. Thomson Arena’s collation expects EPS of 40.9 cents, with a dividend of 33 cents.

2. Amcor (AMC)

Market consensus profit estimate: US$725.4 million

Earlier this month, packaging giant Amcor announced a multibillion-dollar takeover bid for a large competitor in the US. The US$5.3 billion ($7 billion) proposed buyout of Wisconsin-based plastics business Bemis would give Amcor a much larger footprint in the US. Bemis is expected to post US$4 billion ($5.5 billion) in annual sales, with most of this coming from the US market. Given that analysts expect Amcor to post revenue of US$9.4 billion ($12.9 billion) for FY18, it would be a big boost to the Australian company.

For FY18, FN Arena expects EPS of 62.6 US cents, up from US 51.6 US cents in FY17, with an unfranked dividend of 45.3 US cents, compared to 43 US cents a year earlier. In A$ terms, Thomson Reuter puts analysts’ consensus at 85.5 cents for FY18 EPS, and a dividend of 62 cents.

3.  BHP Billiton (BHP)

Market consensus profit estimate: US$9,627 million

Diversified mining heavyweight BHP has already told the market that it met or beat its full-year production guidance for petroleum, copper, iron ore and energy coal, and met its production guidance for metallurgical (steelmaking) coal, which it lowered in January. That means that BHP beat analyst estimates for production in all of its major product groups.

BHP’s overall production, measured in “copper equivalent” terms, rose by 8% in FY2018, ending a run of two consecutive years in which its overall output fell in the company’s five most important product groups; namely, petroleum, iron ore, coking coal, copper and thermal coal.

FY18 production numbers were:

• Copper – 1,753,000 tonnes in FY18, up 32%
• Iron ore – 238 million tonnes in FY18, up 3%
• Petroleum – 192 million BOE (barrels of oil equivalent) in FY18, down 8%
• Steelmaking coal – 43 million tonnes in FY18, up 7%
• Thermal coal – 29 million tonnes in FY17, unchanged.

BHP’s underlying profit in FY18 is expected to be its biggest profit since FY14, and the consensus could under-shoot, given the stronger-than-expected production in the June quarter, particularly at the Western Australian iron ore, Queensland coking coal and Chilean copper assets, which has had analysts sharpening their pens. BHP will show the benefit of stronger commodity prices. Of BHP’s suite of commodities, only iron ore and US natural gas (both down 3%) slipped backwards over FY18. In contrast, oil surged 26%, nickel rose 24%, copper appreciated by 23%, LNG was up 18%, thermal coal rose 16% and steelmaking coal gained 9%.

BHP will report a $US440 million charge related to the Samarco dam disaster, adding to the $US210 million exceptional item recorded at February’s half year results.

FN Arena puts the analysts’ consensus estimate of BHP’s EPS at 154.2 US cents, up 39%, with a fully franked dividend of 116 US cents, up 40%. In A$ terms, Thomson Reuters expects EPS of 237.6 cents, with a dividend of 161.6 cents. Some Australian analysts, including UBS, predict BHP will pay its highest ever dividend, beating the $US1.24 paid in FY15. BHP paid a 55 US cents interim dividend in February, and UBS believes that the final dividend could come in above US 70 cents. BHP’s FY18 dividend will be before any proceeds from the US$10.8 billion ($14.8 billion) sale of the US shale-oil assets, announced last month – although the company has pledged to return the proceeds to shareholders.

Wednesday 22 August

 4.  A2 Milk Company (A2M)

Market consensus profit estimate: $189 million

Specialist dairy products company a2 is another market darling from which investors expect a big profit result. Even on the most pessimistic of market expectations, a2 Milk is looking like it will at least double its net profit in FY18. That is not bad considering that the FY17 net profit of $90.6 million was triple that of FY16. One thing that has concerned investors has been that global food giant Nestlé is muscling in on a2 Milk’s Chinese market. Nestlé starting to sell a2-protein only baby formula in China is considered to be the main reason for a2M’s price slide from $12.74 in March to $9.78 at present. Amid this increased competition, investors expect a2’s operating margin to narrow as it lifts spending for marketing and to support its own expansion into the US.

FN Arena’s collation suggests analysts are looking for EPS of 26.1 cents, more than double the 12.7 cents earned in FY17, but still no dividend. Thomson Reuters has the EPS consensus at 23.6 cents.

5. Carsales.com (CAR)

Market consensus profit estimate: $131.3 million

The interim result saw first-half profit surge by 27%, to $60.2 million, and investors expect more of the same – but the online car seller is one of the Australian stocks that has high expectations baked into the share price, and can’t afford to disappoint.  

Both FN Arena and Thomson Reuters say analysts expect consensus EPS of 54 cents, up from 45.4 cents in FY17, with a fully franked dividend of 44 cents, up from 40.2 cents in FY17.

6. Newcrest Mining (NCM)

Market consensus profit estimate: US$368.4 million

The ASX’s biggest gold miner has already flagged a hit to full-year earnings of up to US$270 million ($370 million) because of asset writedowns. Also, Newcrest has already told the market that gold production slipped by 1.4% in FY18, to 2,346,354 ounces, while copper production was down 7.1%, to 77,975 tonnes. The company’s all-in-sustaining cost of production increased by 6.1%, to US$835 an ounce, but better prices enabled the all-in-sustaining cost margin to end FY18 at US$473 an ounce, down only slightly from last year’s US$476.

FN Arena has analysts expecting a 7.5 US cent (18.4%) lift in EPS, to 47.6 US cents, with a dividend more than doubled, to 15.9 US cents. In A$ terms, Thomson Reuters expects EPS of 63.5 cents, with a dividend of 21.7 cents, 85.2% franked for Australian holders.

7.  WiseTech Global (WTC)

Market consensus profit estimate: $42.7 million

Global logistics software leader WiseTech has been another market darling since listing in April 2016. Issued at $3.35, the shares have surged to $15.96, with a 2018 peak of almost $18. Like several of the ASX’s technology stars, the share price return has been well in advance of the earnings growth that the company has delivered – now profits have to show that they’re capable of catching up. Given that WiseTech earned net profit of $14.2 million in FY16, the $42.7 million expected this year is big growth, but is probably not going to be enough to match WiseTech’s sky-high price/earnings (P/E) ratio, which is running at 84 times expected FY19 earnings.

FN Arena puts analysts’ consensus for FY18 EPS at 13.9 cents, up 3 cents (28%) on FY17, with a fully franked dividend lifted by 0.6 cents (25.6%) to 2.8 cents. Thomson Reuters expects EPS of 14.3 cents, with a dividend of 2.8 cents.

Thursday 23 August

8.  Qantas Airways (QAN)

Market consensus profit estimate: $1,136.9 million

After reporting $1.4 billion in underlying net profit in FY17 – the second largest in its history – and a net profit of $1.1 billion, Qantas is again expected to top the $1 billion mark in FY18.

At the half-year, Qantas boosted interim profit by 18%, to $607 million, and the airline has told the market that it expects to achieve underlying pre-tax profit of between $1,560 million– $1,600 million in FY18. Analysts expect Qantas to come in closer to the higher end of that range than the lower, mainly on the back of rising international inbound tourism, but also, improving operating numbers. The breakdown of the business will be interesting, however: the better interim result was mostly driven by the domestic and budget flights businesses — with earnings from Qantas Domestic up 20% to $447 million, and Jetstar’s earnings rising 16% to $318 million – while the international flights business saw earnings fall by 6%, to $222 million.

FN Arena projects analysts’ consensus expectation for Qantas’ FY18 EPS at 62.4 cents, up 36% on the 46 cents reported in FY17, with an unfranked dividend held steady, at 14 cents. Thomson Reuters is looking for 64.8 cents in EPS, also expecting a 14-cent payout.

9. South32 (S32)

 Market consensus profit estimate: US$1,268 million

Diversified base metal miner South32 brought out a relatively unimpressive production report for FY18: the highlight was a 20% lift in nickel production, and 10%–11% rises in manganese ore and alloy production respectively, but steelmaking coal went backwards by 44%, zinc by 41%, lead by 21% and silver by 20%.

FN Arena’s collation has analysts expecting South32’s EPS to push 12% higher, to 24.2 US cents, but with a fully franked dividend more than doubling, to 14.1 US cents. In A$ terms, Thomson Reuters is looking for EPS of 34.4 cents, with a dividend of 19.3 cents.

Friday August 24

10. Afterpay Touch (APT)

 Market consensus profit estimate: $12.4 million

The “buy now, pay later” sensation has been a wonder-stock on the ASX, roaring from a May 2016 issue price of $1.00 to $17.25 at present. This reporting season, the market expects the first profit for the company. At this stage, APT is prepared to state that it expects group revenue (and other income) for the year to be in the order of $142 million – versus $29 million in FY17 – and earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the order of $33 million–$34 million, compared to $5.8 million in FY17. From this, the market is well and truly extrapolating a net profit, compared to a $9.6 million reported net loss in FY17.

In the first full month of operating in the US — June 2018 — the company processed more than $11 million in underlying sales. By comparison, it took about 16 months for the Australian Afterpay business to hit $11 million of cumulative underlying sales, underlining the platform’s potential in the US – and elsewhere. Management could mention possible expansion in other countries.

FN Arena’s estimates collation has analysts looking for FY18 EPS of 4.5 cents, while Thomson Reuters expects 5.5 cents. The worry for Afterpay Touch shareholders is that even the 14.9-cent EPS that FN Arena expects in FY19 prices the stock at almost 116 times earnings.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.