SEARCH
Company earnings in the 2015-16 reporting season were roughly in line with expectations, but large caps were very "disappointing", says USB Asset Management.
Expectations for the 2016-17 financial year have been downgraded by 1.7 per cent over the course of the recent reporting season, despite 2015-16 results meeting expectations, said UBS.
The downgrade was driven by a lack of earnings growth in the larger stocks, said UBS in a new report.
“The 'very large cap' universe, the top 20 or so stocks by size, is still struggling for earnings growth and on average produced somewhat disappointing results this reporting season,” the report said.
Small caps were also discouraging, though not as bad as their large counterparts, UBS found, while the best results were delivered by mid-cap companies, between 25 and 100 by size.
UBS also noted the Australian market has eased recently, following a solid rally throughout July, bringing the ASX200 price to 5469 basis points.
“Multiples still look demanding in an absolute sense, particularly in industrials ex financials, but the relative appeal of equities against very low interest rates can't be ignored," UBS said.
“Aggregate earnings trends look set to improve in 2016-17 after a weak aggregate 2015-16 due to a revival in commodity prices, though typical stock-specific earnings trends are steadier."
The Australian dollar could be a headwind to foreign currency users if its current “revival” continues, the firm added.
UBS cautioned that single digit total returns are to be expected in 2016-17, as indicated by the high absolute multiples currently seen in the market, though low rates and moderate earnings growth make estimating market performance difficult, UBS said.
Read more:
Satisfaction with banks about to turn a corner
CEO pay falls to decade-long lows
Be wary when seeking yield, investors warned
NAB sounds warning on housing oversupply
Deloitte Australia makes new acquisition
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.
A new report from the Australian Competition and Consumer Commission (ACCC) has revealed the extent to which consumers are falling for scams...
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...
Get notifications in real-time for staying up to date with content that matters to you.
Read More
