Key points

• The theme emerging from the August 2015 reporting season is – don’t disappoint.
• Telstra reports on Thursday and is expected to show a rise of almost 7% in underlying earnings, which would take it to a new record.
• Analysts are looking for a record profit from CSL and strong forward guidance for FY16.

Already the theme emerging from the August 2015 reporting season is: don’t disappoint. The market is not in a very forgiving mood for companies that fall short of expectations – or which foresee a difficult environment in their outlook statements.

The story so far

A case in point was engineering and infrastructure group Downer, which was tipped before the season as a positive surprise candidate. On Thursday, Downer reported a net profit that beat analysts’ expectations – coming in down just 2.7% on last year’s result – and lifted its dividend by 4.3%, to 24 cents. Over the year, the value of Downer’s project pipeline – or ‘work in hand’ – increased by 5%. So far, so good, but Downer stated bluntly that because of weakness and a high degree of uncertainty in a number of its markets, net profit for FY16 was likely to fall by 10%.

That unnerved the market, and Downer shares lost 13.1% in two days.

Conversely, Rio Tinto reported a 40% fall in half-year net profit, but a fall was expected, and Rio’s US$2.9 billion ($3.9 billion) interim result was well above the US$2.4 billion expected by analysts’ consensus. Rio Tinto also beat expectations on its interim dividend, lifting it from 96 US cents to 107.5 US cents. Despite still-weakening commodity prices, the strong performance on cost savings and capital-spending cuts surprised the market. Analysts jumped to upgrade full-year 2015 estimates, and that was enough to see Rio shares lift more than $1 (2%) on the news.

The banks

This week all eyes will be on Commonwealth Bank, which reports full-year results on Wednesday. The market is looking for a 3.3% lift in earnings per share for CBA and a 4.8% lift in the dividend: the cash profit is expected to come in at about $8.68 billion to $9.1 billion, at the higher end of estimates. That would be a record, and would represent a profit of more than $1 million an hour.

However, the banking sector is all of a sudden looking more challenging than it has for a long while, if ANZ’s third-quarter trading update last week is anything to go by. ANZ’s third-quarter performance featured a weaker-than-expected cash profit of $1.73 billion, dragged down by a surge in bad debts – which signalled to the market that the banks’ period of record low losses from bad and doubtful debts has come to an end. Cash profit for the nine months to June 2015 was $5.4 billion, up 4.3% on June 2014, but below expectations, and potentially signalling that more earnings headwinds are brewing.

ANZ also surprised the market with a capital raising to pull in up to $3 billion, in the lead-up to the higher capital requirements being placed on the banks by the Australian Prudential Regulation Authority (APRA). The fact that ANZ had previously stated that it did not need to raise capital combined with the weaker-than-expected profit to send ANZ shares tumbling 7% after the quarterly update.

CBA shares fell more than 3%, and investors are bracing for an even larger capital raising when it reports on Wednesday.

Possible stars

Telstra reports on Thursday and is expected to show a rise of almost 7% in underlying earnings, which would take it to a new record. But more than the profit, investors will be focusing on what Telstra has to say about the war for market share in mobile phones and how its profit margins are holding up; and the dividend. Last year Telstra lifted its dividend for the first time in seven years and the market is expecting a further rise, of about 1 cent.

Some of the market’s small-cap star stocks step into the reporting spotlight this week, with some big expectations on them. Watch out for agribusiness producer Capilano Honey, food retail star Domino’s Pizza, vet chain Greencross and financial services group Magellan Financial tomorrow, and medical diagnostic imaging aggregator Capitol Health on Wednesday

Two of our global leaders, CSL and Computershare, report their US$ results on Thursday, as did Ansell earlier today. Ansell posted a strong lift in underlying full-year profits – up 20% – despite pressure from currency headwinds, which it expects will weigh on it over the coming financial year. The market will be concerned at the foreign exchange impacts on CSL and Computershare, as well as the strength of the underlying businesses.

This month CSL got final approval for its US$275 million ($378 million) acquisition of Novartis’ influenza business, announced last October. The business will be merged with CSL’s Melbourne-based vaccine subsidiary, bioCSL, and will become the second-largest player in the $US4 billion influenza vaccine market, after Sanofi. Analysts are looking for a record profit from CSL and strong forward guidance for FY16, with expected profit growth above 10%, while a strong balance sheet could mean another buyback for shareholders.

Here is the schedule for major companies reporting full-year June 30 results this week, as the season starts to get into full swing. Consensus analysts’ earnings per share (EPS) and dividend per share (DPS) estimates come from FN Arena, unless otherwise stated.

Tuesday 11 August

Bradken (BKN)
Full-year

Consensus earnings per share (EPS): 15.3 cents, –52.1%
Consensus dividend per share (DPS): 5.7 cents, –78%

Boom Logistics (BOL)
Full-year

Consensus earnings per share (EPS): –1.1 cents, up from –16.8 cents
Consensus dividend per share (DPS): n/a

Capilano Honey (CZZ)
Full-year

Consensus earnings per share (EPS): 84 cents, +55%
Consensus dividend per share (DPS): 38 cents, +90%

Cochlear (COH)
Full-year

Consensus earnings per share (EPS): 275.2 cents, +67.2%
Consensus dividend per share (DPS): 192.4 cents, –24.2%

Domino’s Pizza (DMP)
Full-year

Consensus earnings per share (EPS): 70.8 cents. +40.2%
Consensus dividend per share (DPS): 50.1 cents, +36.5%

GPT Metro Office Fund (GMF)
Full-year

Consensus earnings per share (EPS): 10.8 cents, –63.2%
Consensus dividend per share (DPS): 9.8 cents, –3.4%

Greencross (GXL)
Full-year

Consensus earnings per share (EPS): 34 cents, +41.7%
Consensus dividend per share (DPS): 17 cents, +36%

Magellan Financial Group (MFG)
Full-year

Consensus earnings per share (EPS): 86 cents, +50.9%
Consensus dividend per share (DPS): 69.4 cents, +110.3%

SkyCity Entertainment (SKC)
Full-year

Consensus earnings per share (EPS): 19.9 cents, +0.6%
Consensus dividend per share (DPS): 17.7 cents, +5.1%
(Thomson Reuters estimates)

Transurban (TCL)
Full-year

Consensus earnings per share (EPS): 16.3 cents, –10.9%
Consensus dividend per share (DPS): 39.9 cents, +13.9%

Wednesday 12 August

AGL Energy (AGL)
Full-year

Consensus earnings per share (EPS): 94.9 cents, –7.2%
Consensus dividend per share (DPS): 63 cents, unchanged

Capitol Health (CAJ)
Full-year

Consensus earnings per share (EPS): 2.2 cents, +30.9%
Consensus dividend per share (DPS): 1.2 cents, +33.3%

Carsales.com (CAR)
Full-year

Consensus earnings per share (EPS): 43.1 cents, +4.4%
Consensus dividend per share (DPS): 35.1 cents, –29.6%

Centuria Metropolitan REIT (CMA)
Full-year (listed December 2014)

Consensus earnings per share (EPS): 11.1 cents
Consensus dividend per share (DPS): 9.2 cents

Commonwealth Bank (CBA)
Full-year

Consensus earnings per share (EPS): 551.3 cents, +3.3%
Consensus dividend per share (DPS): 420.4 cents, +4.8%

Computershare (CPU)
Full-year

Consensus earnings per share (EPS): 55.8 US cents, +24%
Consensus dividend per share (DPS): 27.3 US cents, –5.7%

CSL (CSL)
Full-year

Consensus earnings per share (EPS): 296 US cents, +10%
Consensus dividend per share (DPS): 121.6 US cents, +7.6%

Dexus Property Group (DXS)
Full-year

Consensus earnings per share (EPS): 54.9 cents, –15.3%
Consensus dividend per share (DPS): 41 cents, +9.2%

Echo Entertainment (EGP)
Full-year

Consensus earnings per share (EPS): 25.2 cents, +95.4%
Consensus dividend per share (DPS): 11.2 cents, +40.2%

Estia Health Group (EHE)
Full-year (listed December 2014)

Consensus earnings per share (EPS): 24.6 cents
Consensus dividend per share (DPS): 17 cents

Primary Health Care (PRY)
Full-year

Consensus earnings per share (EPS): 23.5 cents, –26.9%
Consensus dividend per share (DPS): 19 cents, –5.2%

REA Group (REA)
Full-year

Consensus earnings per share (EPS): 144.4 cents, +27%
Consensus dividend per share (DPS): 70.8 cents, +24.3%

Thursday 13 August

Crown Resorts (CWN)
Full-year

Consensus earnings per share (EPS): 73.1 cents, –18.8%
Consensus dividend per share (DPS): 37.4 cents, +1%

Fairfax Media (FXJ)
Full-year

Consensus earnings per share (EPS): 5.9 cents, –10.6%
Consensus dividend per share (DPS): 3.9 cents, –2.5%

Goodman Group (GMG)
Full-year

Consensus earnings per share (EPS): 38.8 cents, +11.5%
Consensus dividend per share (DPS): 22.3 cents, +7.7%

Mirvac Group (MGR)
Full-year

Consensus earnings per share (EPS): 12.2 cents, unchanged
Consensus dividend per share (DPS): 9.2 cents, +100%

News Corp (NWS)
Full-year

Consensus earnings per share (EPS): 46.3 US cents, +12.9%
Consensus dividend per share (DPS): 2 US cents, versus nil FY14

Sirtex Medical (SRX)
Full-year

Consensus earnings per share (EPS): 60.9 cents, +43.3%
Consensus dividend per share (DPS): 19 cents, +58.3%

STW Communications (SGN)
Half-yearly

Consensus earnings per share (EPS): 11 cents, –9.1%
Consensus dividend per share (DPS): 6.4 cents, –5.9%

Tabcorp (TAH)
Full-year

Consensus earnings per share (EPS): 21.6 cents, +25.8%
Consensus dividend per share (DPS): 13.3 cents, –16.9% (excluding special dividend of 30 cents, paid March 2015)

Telstra (TLS)
Full-year

Consensus earnings per share (EPS): 33.7 cents, +6.9%
Consensus dividend per share (DPS): 30.6 cents, +3.7%

Whitehaven Coal
Full-year

Consensus earnings per share (EPS): –1.6 cents, up from –3.9 cents FY14
Consensus dividend per share (DPS): 0.6 cents, up from nil FY14

Friday 14 August

Automotive Holdings (AHG)
Full-year

Consensus earnings per share (EPS): 29.9 cents, +16.3%
Consensus dividend per share (DPS): 22.1 cents, +7.7%

Colorpak (CKL)
Full-year 

Consensus earnings per share (EPS): 6.2 cents, +33.6%
Consensus dividend per share (DPS): 2.5 cents, –28.6%
(Thomson Reuters estimates)

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