March 2022 – Please be aware of scammers falsely representing AMP Capital. AMP Capital is aware of an ongoing scam operation targeting customers and the broader community, offering inflated interest returns, available through fictitious investment vehicles, titled AMP Capital High Yield Fixed Return Global Market Fund. Through the use of phishing emails and phone calls, malicious operators are attempting to entice them to invest in a false product that features AMP Capital’s branding. Please be aware this is a not a legitimate product from AMP Capital.

AMP Capital does not approach potential customers via electronic direct mail (EDM) nor does the company solicit personal or financial information via email. If you are concerned that you may have been targeted by scammers, please contact us on 1800 658 404 from 8.30am to 5.30pm Monday to Friday (Sydney time). More information on scams can also be found on the ACCC’s website Scamwatch.

Economics & Markets

An investor’s guide to the reporting season

By Dermot Ryan
Sydney, Australia

Earnings season is well and truly under way and investors will be hoping for optimism from Australian chief executives after a tough end to 2018.

Over the next three weeks, Australian Securities Exchange (ASX) listed companies will outline how they went for the final six months of last year and what they think will happen to profitability over the next few years.

Despite markets roaring higher, it has been an inauspicious start with lots of profit warnings. In the lead up to the reporting season, for every company that investors had estimated profits would be higher than forecast, five companies had lowered profit expectations. That’s much worse than normal reporting seasons.

Look both ways at a turning point

The economic environment underpins most companies’ earnings. Investors have grappled with a global growth slowdown, led by China, and rising US interest rates. Chinese authorities started stimulating their economy in December and markets have been getting excited and hoping for a repeat of previous huge stimulus episodes. Now profits and future expectations need to follow through as investors are looking for signs of improvements in earnings.

Investors need to look both ways. They need to look back to see how revenues and profits were for the final six months of 2018, but equally important, they need to look forward to hear where those numbers are heading. That’s why the outlook statements this profit season are so important as they can trigger share price volatility, but they can also throw up opportunities.

Windfalls for some

Some companies are in a very strong position from a balance sheet and cashflow point of view. If they have franking credits there’s a good opportunity to provide either off-market buybacks, special dividends, or return those valuable franking credits to shareholders who pay tax in Australia. This is particularly the case for retirees, who get $1.43 worth of value out of every dollar of franked income they receive.

With Labor’s move to potentially make changes to the franking credit rebate system should they win the upcoming federal election, this is a perfect pre-election window for companies to do these returns.

Seek out value

Some growth stocks are very expensive at the moment. Sectors like technology and parts of healthcare are trading on very high price-to-earnings multiples. A growth stock is expected to provide investors with share price growth, but when they are already expensive, they become less attractive.

If growth stocks don’t deliver high profit growth or management aren’t optimistic in their outlook, their share prices will underperform other, cheaper, value stocks.

It’s going to be a volatile reporting season. Investors need to keep a close watch on guidance statements and be ready to pounce on opportunities that come their way.

Share this article

Important notes

While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs.
This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

Cookies & Tracking on our website.  We use basic cookies to help remember selections you make on the website and to make the site work. We also use non-essential cookies, website tracking as well as analytics - so we can amongst other things, show which of our products and services may be relevant for you, and tailor marketing (if you have agreed to this). More details about our use of cookies and website analytics can be found here
You can turn off cookie collection and/or website tracking by updating your cookies & tracking preferences in your browser settings.