by winston » Tue Feb 23, 2016 12:49 pm
Australia: Worst Earnings Since 2009, But Less Than Feared
By Shuli Ren
Australia is two thirds of the way through its reporting season.
A lot of negative headlines are encircling Australian companies. BHP Billiton (BHP) cut its dividend for the first time in 15 years. This morning, Oil Search (OSH.Australia) swung to 2015 full-year loss after writing down its Papua New Guinea liquefied natural gas assets.
As a result, sell-side analysts have been adjusting down their earnings estimates, now seeing Australian companies’ earnings to fall 8.9% this year, versus a 5.2% decline just a month ago. The resources sector, in particular, is expected to see a 53% fall in earnings.
But not all is bad. First of all, stripping out resources, Australian companies are still expected to register 4.1% growth this year.
More encouragingly, areas that benefit from Australia’s transition from mining to consumer spending, such as housing and infrastructure spending, are expected to report 13.3% growth this year.
Mainland Chinese, for instance, have been visiting Australia, buying up properties and settling Down Under for better air and food quality.
To be sure, apart from the few bright consumer spots, overall, sales growth is not driving Australian companies. Citi Research estimates Australian companies are reporting only 1.9% sales growth in 2015.
But cost discipline is supporting earnings. The bank sees companies there report 8.1% operating profit growth (EBITDA). Operating margin was estimated to be at 13.7% last year, near par with 2007 high of 14.2%.
The ASX All Ordinaries Index fell into the red, down 0.3% today. Year-to-date, the iShares MSCI Australia ETF (EWA) fell 16.9%.
Source: Barron's Asia
It's all about "how much you made when you were right" & "how little you lost when you were wrong"