Ahead of the end of the financial year, Ausbil Investment Management has outlined a more optimistic case for Australian equities in FY26/27 than consensus.
While it trimmed its Australian growth forecast to 2.3 per cent from 2.8 per cent, citing oil price headwinds, it said it still sees the backdrop as conducive to equities and earnings growth.
In a recent note, chief economist Jim Chronis and chief investment officer Paul Xiradis laid out their case, reflecting on the past six months during which Ausbil was already more bullish than the broader market.
“At the start of calendar 2026, on the back of a significant rerating in commodity prices in Q4 2025, and an even more promising outlook for growth, consensus has in-creased their FY26 EPSg to +13.7 per cent, with Ausbil more positive again with an EPSg expectation of +15.2 per cent for FY26 and +13.4 per cent for FY27 (both for the S&P/ASX 200), largely on a better outlook for resources than the market,” they wrote.
For FY27, the pair said they are again forecasting earnings to be ahead of the market, largely driven by resources, a recovery in financials and strong growth in the industrials sector. For the broader S&P/ASX 200, the pair forecast EPS growth of 13.4 per cent, some 2.2 per cent above consensus.
In resources, Ausbil forecast EPS growth of 19.7 per cent against the market’s 16 per cent consensus. With BHP recently overtaking Commonwealth Bank as the ASX’s most valuable company, commodity prices surging and Budget changes weighing on the banks, resources are carrying significant weight for the Australian sharemarket at present.
But Ausbil was still more upbeat on the banks than consensus, forecasting EPS growth of 5.1 per cent against the market’s 4.2 per cent.
The one exception to the firm’s optimism was REITs, where Ausbil’s 8.2 per cent EPS growth forecast trailed the 9 per cent consensus.
They attributed their overall earnings outlook to several major secular themes. These included the continued strength of metals and critical minerals, leading Australian technology companies monetising AI, and domestic productivity and inflation pressures that favour globally exposed earnings over local ones.
Ausbil’s comments on technology companies come after the brutal software sell-off on AI disruption fears earlier this year showed signs of reversal in May, with the sector posting its strongest monthly returns in years.
According to Global X investment strategist Justin Lin, Australian software names that partner well with AI firms could stand to deliver strong returns.
“Companies such as Xero and WiseTech are already progressing through their own AI transformations yet continue to trade at valuations that remain well below historical highs. For investors seeking exposure to the next phase of the AI theme, these high moat, established and AI forwarded businesses could present a really compelling opportunity,” Lin said.
“Investors should not forget that the end goal of AI is not simply to build it, but to use it.”
For investors navigating the current landscape, Chronis and Xiradis concluded that active management was the most compelling approach.
“With the volatility and uncertainty in markets, an active approach to equities makes sense, particularly in seeking earnings and earnings growth, and avoiding surprises.”
