Australian listed company profits may be down 8.5 per cent in the current reporting season, but there is reason to believe the worst may be behind us, says AMP Capital.
With 95 per cent of results released in the past week, the total number of companies exceeding expectations has fallen back to 41 per cent.
According to AMP Capital chief economist Shane Oliver, that is below the norm of "around 45 per cent".
The main drag on results has been the resources sector, which had a "horrible" year with a 48 per cent drop in profits, Mr Oliver said.
However, conditions are improving in the sector, thanks largely to improving commodity prices, he added.
While overall profits are down, it is worth noting that 62 per cent of companies have actually seen their profits rise on a year ago, Mr Oliver said.
"The median company has seen profit growth of around 4 per cent, and 54 per cent have seen their share price outperform the market the day results were released which adds to the view that results haven’t been worse than expected," he said.
"Overall profits are on track to return to growth in 2016-17 as the slump in resources profits reverses and non-resource stocks see growth.
"2016-17 earnings growth is expected to be around 8 per cent, with mining companies now seeing the fastest rate of upgrades," Mr Oliver said.
Stimulate new ideas. Stimulate new thinking. Top up your CPD and hear from industry experts with InvestorDaily’s Knowledge Centre. Keep up to date with the latest trends and reforms, all while adding to your CPD. Explore the knowledge centre Knowledge Centre now.
Despite the Australian economy’s ongoing rapid recovery, an Australian equity head believes GDP growth will “fade” in 2022. ...
The next financial year could see a “new record year” for dividends as the Australian economy continues its recovery from the COVID-19 p...