More strong earnings on the cards

Financial journalist
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With a very solid first week of interim reporting season behind it, the market moves with improved confidence into week two.

Shane Oliver, head of investment strategy at AMP Capital, keeps as close an eye on reporting season as anyone, and although we are only about one-fifth of the way through the December 2013 earnings-reporting season, he reckons the results have been “impressive.”

The report card

So far, 57% of companies have exceeded expectations (compared to a ‘norm’ in recent years of 43%); 72% of companies have seen their profits rise from a year ago (compared to a norm of 66%); a whopping 84% of companies have increased their dividends from a year ago (compared to an average of about 62% in the last two years); and 55% of companies have seen their share price outperform the day they released results.

Oliver says the key themes to emerge have been a massive turnaround for the resources stocks (notably Rio Tinto), banks doing very well (with great results from CBA and ANZ), help coming through from the lower $A, ongoing cost control, improved outlook comments from cyclical stocks (for example, Boral) and soaring dividends.

“The surge in dividends is a good signal that companies are confident about the outlook. The bottom line is that Australian earnings look to be on track for strong growth this financial year,” says Oliver.

The early tone of the season has been set by crowd-pleasing results from heavyweights Commonwealth Bank, Rio Tinto and Telstra. CBA generated a record cash profit for the December 2013 half-year of $4.3 billion, up 14%, and lifted its interim dividend by 12%, to $1.83 a share. The result puts CBA well on track to beat last year’s annual profit of $7.8 billion, the largest by an Australian bank.

If possible, Rio Tinto was even more impressive, delivering a full-year underlying earnings for 2013 of $US10.22 billion ($11.3 billion), up 10% on 2012 and US$500 million better than consensus expectation. The full-year dividend, fully-franked for Australian shareholders, was also better than expected, up 15% to US$1.92 a share. The great bulk of the profit came from the Western Australia-based iron ore division, which earned US$9.86 billion, up from US$9.25 billion in 2012.

For its part, Telstra lifted profit for the half-year to December 31 by 9.7% to $1.7 billion, enabling it to lift its interim dividend by half a cent to 14.5 cents – the first rise in the interim dividend for eight years. The result leaves Telstra poised to exceed comfortably its FY13 profit of $3.59 billion.

The week ahead

Of the heavyweights booked to appear on the ASX’s Oprah couch to admit all this week, BHP Billiton (BHP) is up on Tuesday, reporting its half-year numbers. After reporting last month a strong operational performance for the half-year – which saw total production up 10%, record production achieved in iron ore, metallurgical (steel-making) coal and alumina, and full-year production guidance retained for the iron ore, petroleum, coal and copper divisions – BHP will be under pressure to deliver on the financial front, too. In particular, the consensus expects a 9% lift on the interim dividend, to 62 cents a share.

On Wednesday, Fortescue Metals (FMG) reports its half-year results. UBS estimates a half-year net profit of $1.67 billion and a six-cent interim dividend. To put that in context, Fortescue posted a net profit of $478 million in the same period last year, and did not pay an interim dividend.

Also on Wednesday, Woodside Petroleum (WPL) delivers full-year (calendar 2013) numbers. The consensus expects net profit of just over $2 billion, up from the $1.992 billion earned in 2012, but with a significant lift in the dividend, from 130 cents in 2012 to at least 246.3 cents in 2013 – and some estimates are as high as 286 cents – on the back of a large Petroleum Resource Rent Tax credit and bonus payments from its liquefied natural gas (LNG) customers. For FY13, Woodside has already paid an interim dividend of 83 US cents (92.77 Australian cents) and a special dividend in May 2013 of 63 US cents (61.22 Australian cents)

On Friday, the market will closely scrutinise NAB’s first-quarter trading update, to see if it’s on the same optimistic page as ANZ’s first-quarter trading update last week, and CBA’s stellar result.

Other results for the week, with UBS expectations:

Tuesday

  • Asciano Group (AIO): HY. Net profit $220.4 million, dividend 6.4 cents.
  • Amcor (AMC): HY. Net profit $401.1 million, dividend 24.5 cents.
  • Arrium (ARI): HY. Net profit $157.3 million, dividend 3.7 cents.
  • Coca-Cola Amatil (CCL): FY. Net profit $515.4 million, dividend 33.4 cents.
  • Cardno (CDD): HY. Net profit $37.5 million, dividend 15.5 cents.
  • CFS Retail Property Trust (CFX): HY. Net profit $197.2 million, dividend 6.8 cents.
  • Challenger (CGF): HY. Net profit $166.2 million, dividend 11.5 cents.
  • Commonwealth Property Office Fund (CPA): HY. Net profit $103.6 million, dividend 3.3 cents.
  • Monadelphous (MND): HY. Net profit $69.1 million, dividend 58.4 cents.
  • Mermaid Marine (MRM): HY. Net profit $22.6 million, dividend 4 cents.
  • Pacific Brands (PBG): HY. Net profit $34.0 million, dividend 2.5 cents.
  • SAI Global (SAI): HY. Net profit $24.8 million, dividend 6.5 cents.
  • Sonic Healthcare (SHL): HY. Net profit $181.0 million, dividend 27.3 cents.
  • Sirtex Medical (SRX): HY. Net profit $13.0 million, no dividend.

Wednesday

  • APA Group (APA): HY. Net profit $106.6 million, dividend 18.5 cents.
  • APN News & Media (APN): FY. Net profit $48.6 million, no dividend.
  • Brambles (BXB): HY. Net profit $351.8 million, dividend 13.5 cents.
  • Fortescue Metals (FMG): HY. Net profit $1.377 billion, dividend 6.0 cents.
  • Suncorp Group (SUN): HY. Net profit $656.8 million, dividend 30 cents.
  • Toll Holdings (TOL): HY. Net profit $147.8 million, dividend 13 cents.
  • Wesfarmers (WES): HY. Net profit $1.283 billion, dividend 80 cents.

Thursday

  • Adelaide Brighton (ABC): FY. Net profit $147 million, dividend 9.5 cents.
  • AMP (AMP): FY. Net profit $777.5 million, dividend 11.5 cents.
  • Alumina (AWC): FY. Net profit $14.7 million, dividend 1 cent.
  • Drillsearch Energy (DLS): HY. Net profit $64.8 million, no dividend.
  • Emeco (EHL): HY. Net loss $6.3 million, no dividend.
  • Envestra (ENV): HY. Net profit $85 million, dividend 3.3 cents.
  • Fletcher Building (FBU): HY. Net profit $171.4 million, dividend 17 cents.
  • Federation Centres (FDC): HY. Net profit $119.2 million, dividend 7.5 cents.
  • Fairfax Media (FXJ): HY. Dividend 1.4 cents.
  • Investa Office Fund (IOF): HY. Net profit $81.9 million, dividend 9.3 cents.
  • InvoCare (IVC): FY. Net profit $41.7 million, dividend 19.5 cents.
  • Leighton (LEI): FY. Net profit $527.0 million, dividend 48 cents.
  • Mirvac Group (MGR): HY. Net profit $214.7 million, dividend 4.4 cents.
  • Origin Energy (ORG): HY. Net profit $339.1 million, dividend 25 cents.
  • PanAust (PNA): FY. Net profit $80.9 million, dividend 2 cents.
  • SMS Management & Technology (SMX): HY. Net profit $6.6 million, dividend 9.5 cents.
  • Super Retail Group (SUL): HY. Net profit $61.2 million, dividend 17.8 cents.
  • Treasury Wine Estates (TWE): HY. Net profit $41.9 million, dividend 6.4 cents.

Friday

  • Calibre Group (CGH): HY. Net profit $10.1 million, dividend 1.1 cents.
  • Crown (CWN): HY. Net profit $336.7 million, dividend 18 cents.
  • DUET Group (DUE): HY. Net profit $67.2 million, dividend 8.5 cents.
  • Insurance Australia (IAG): HY. Net profit $564.3 million, dividend 12.5 cents.
  • Iluka (ILU): FY. Net profit $70.2 million, dividend 5 cents.
  • Qube Logistics (QUB): HY. Net profit $46.1 million, dividend 2.3 cents.
  • Santos (STO): FY. Net profit $595.5 million, dividend 30 cents.
  • Tatts Group (TTS): HY. Net profit $117.3 million, dividend 8 cents.

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 regards to your circumstances.

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