Ask the analyst: What to expect in earnings season?

Morning Star AU

Jul 27

Welcome to ask the analyst, where members of Morningstar Australia’s equity research team answer questions from the Morningstar community. If you have a question about an ASX company or industry in ...

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If you have a question about an ASX company or industry in ...</p>\n\n<a href=\"https://www.morningstar.com.au/stocks/ask-analyst-what-expect-earnings-season\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BLUC","symbol_name":"Bluemonte Large Cap Core ETF","start_time":0,"source_url":"https://www.morningstar.com.au/stocks/ask-analyst-what-expect-earnings-season","article_id":"2654076550","we_media_id":null,"thumbnails":[],"rights":{"source":"morningstar_stock","url":"https://www.morningstar.com.au/stocks/ask-analyst-what-expect-earnings-season","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2654076550","pubTimestamp":1785081600,"columns":[],"sourceInfo":{"source_id":"morningstar_stock","name":"Morning Star"},"weMediaInfo":null,"summary":"Welcome to ask the analyst, where members of Morningstar Australia’s equity research team answer questions from the Morningstar community. If you have a question about an ASX company or industry in ou","collect":0,"end_time":0,"defaultTopTitle":"morningstar.com.au","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"BLUC":"Bluemonte Large Cap Core ETF","BDYN":"iShares Dynamic Equity Active ETF","XFEB":"FT VEST U.S. EQUITY ENHANCE & MODERATE BUFFER ETF - FEBRUARY","FEBM":"FT Vest U.S. Equity Max Buffer ETF - February","PQXX":"PGIM S&P 500 Quarterly Buffer 20 ETF","JULW":"AllianzIM U.S. Equity Buffer20 Jul ETF","PMAP":"PGIM S&P 500 Max Buffer ETF - April","LRGC":"AB US Large Cap Strategic Equities ETF","SFLR":"INNOVATOR EQUITY MANAGED FLOOR ETF","LGDX":"INTECH S&P LARGE CAP DIVERSIFIED ALPHA ETF","JOYT":"JPMorgan Equity and Options Total Return ETF","PMJA":"PGIM S&P 500 Max Buffer ETF - January","VOTE":"TCW Transform 500 ETF","JULC":"Corgi U.S. Equities 10% Structured Buffer ETF - July Series","IYY":"iShares Trust Dow Jones U.S. Ind","SPYT":"Defiance S&P 500 Target Income ETF","FHEQ":"Fidelity Hedged Equity ETF","PBFB":"PGIM S&P 500 Buffer 20 ETF - February","AVLC":"Avantis U.S. Large Cap Equity ETF","SNAV":"MOHR SECTOR NAV ETF","OCTP":"PGIM S&P 500 Buffer 12 ETF - October","MAYP":"PGIM S&P 500 Buffer 12 ETF - May","QBSF":"AllianzIM U.S. Equity Buffer15 ETF","MSLC":"MORGAN STANLEY PATHWAY LARGE CAP EQUITY ETF","BAMV":"Brookstone Value Stock ETF","DECU":"AllianzIM U.S. Equity Buffer15 Uncapped Dec ETF","RKSG":"Ruk Strategic Growth ETF","PKW":"Invesco BuyBack Achievers ETF","SIXZ":"AllianzIM U.S. Equity 6 Month Buffer10 May/Nov ETF","QRFT":"QRAFT AI-Enhanced U.S. Large Cap ETF","ITOT":"安硕核心标普全美股市ETF-iShares","BEEZ":"Honeytree U.S. Equity ETF","PMDE":"PGIM S&P 500 Max Buffer ETF - December","SHDG":"Soundwatch Hedged Equity ETF","EDGE":"MRBL Enhanced Equity ETF","SNTH":"MRP SYNTHEQUITY ETF","LCF":"Touchstone US Large Cap Focused ETF","GXDW":"Global X Dorsey Wright Thematic ETF","RGLO":"Global Equity Active ETF","SIXA":"ETC 6 Meridian Mega Cap Equity ETF","TMFC":"Motley Fool 100 Index ETF","FLAO":"AllianzIM U.S. Equity 6 Month Floor5 Apr/Oct ETF","RJMG":"FT RAYMOND JAMES MULTICAP GROWTH EQUITY ETF","MODL":"VictoryShares WestEnd US Sector ETF","SEUS":"SEI QiM U.S. Equity Factor Allocation Active ETF","FEBU":"AllianzIM U.S. Equity Buffer15 Uncapped Feb ETF","EEH":"ELEMENTSLinked to SPECTRUM Large Cap U.S. Sector Momentum Index","VGFPF":"Vanguard Funds PLC","SEPM":"FT Vest U.S. Equity Max Buffer ETF - September","SPXL":"三倍做多标普500ETF-Direxion"},"translate_title":"询问分析师：财报季有何期待？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"LGDX":1.5,"PMDE":1.5,"SHDG":1.5,"PMAP":1.5,"XFEB":1.5,"TMFC":1.5,"GXDW":1.5,"FEBM":1.5,"FEBU":1.5,"MAYP":1.5,"EDGE":1.5,"SIXZ":1.5,"QRFT":1.5,"PQXX":1.5,"VOTE":1.5,"EEH":1.5,"SFLR":1.5,"FLAO":1.5,"PBFB":1.5,"SIXA":1.5,"SPXL":1.5,"ITOT":1.5,"RJMG":1.5,"JULC":1.5,"MODL":1.5,"QBSF":1.5,"VGFPF":1.5,"JULW":1.5,"IYY":1.5,"PMJA":1.5,"SNTH":1.5,"AVLC":1.5,"SNAV":1.5,"SPYT":1.5,"LRGC":1.5,"BAMV":1.5,"FHEQ":1.5,"BLUC":1.5,"LCF":1.5,"MSLC":1.5,"OCTP":1.5,"SEUS":1.5,"DECU":1.5,"RGLO":1.5,"RKSG":1.5,"SEPM":1.5,"JOYT":1.5,"PKW":1.5,"BDYN":1.5,"BEEZ":1.5},"content_text":"Welcome to ask the analyst, where members of Morningstar Australia’s equity research team answer questions from the Morningstar community. If you have a question about an ASX company or industry in our coverage, please send it to [email protected].Where rubber meets the roadEarnings season is where the rubber meets the road. Investors get fresh insight into how companies are performing and whether management is delivering on their promises. With the August earnings season fast approaching, investors are preparing for a new round of earnings updates that could reshape views on some of the ASX’s most popular stocks.In this edition of the Ask the analyst, I have asked three of our equity research analysts to assess the pre-earnings environment for Telstra, BHP and a2 Milk. Earnings results are highly nuanced and include financial metrics which can be difficult to translate. The purpose of this article is to cut through the noise and highlight exactly what investors should look for in these results. This includes indicating which metrics matter and where these companies could potentially fall short. Telstra: Resilience expected as investors watch mobile and dividendsTelstra (ASX.TLS) is set to report their full year results on 13 August. As the dominant telecom provider on the ASX, there are a handful of unique earnings metrics which paint a picture of their full year performance. Our analyst Brian Han highlighted three key metrics investors should focus on in the upcoming result. The first area of focus is mobile earnings growth (EBITDA) and margins. The mobile business accounts for 60% of group earnings and its profit/margin sustainability is key indicator of competitive rationality. The second is signs of cost-outs or cost reductions. The importance of cost reductions specifically for Telstra relates to the need to offset the decline in earnings from legacy products such as landline. The last metric in focus is the full year dividend. Telstra’s distribution to shareholders underpins its defensiveness and steady growth, which is the core appeal for most investors in TLS shares.Brian expects steadiness and resilience to be the key features of the result. This will be primarily reflected in mobile earnings, cost cuts and dividends. However, Brian notes the result is likely to be overshadowed by media hysteria and management-bashing relating to the recent mobile network outage. None of which Brian notes, will lead to any permanent diminution of Telstra’s sustainable earnings power.The last question focused on where Telstra could fall short in the result. Fixed-line performances could fall short of expectations, especially on broadband subscriber and margin front, across both retail and enterprise. Mobile could also potentially fall short of the bullish expectations of some investors who extrapolate the recent strong performance as the baseline looking forward. Overall, Brian sees ASX telecom companies continuing to reduce capital expenditure and fixed costs through to 2030. This is expected to raise free cash flows and improve income visibility/distributions for investors. BHP: Dividend and costs in focus ahead of FY resultsBHP (ASX.BHP) is scheduled to release its full-year results on 18 August, following the release of its quarterly production report in July. Unlike most sectors, mining companies typically publish production results before earnings, meaning investors already have visibility on key metrics such as sales and realised commodity prices. As a result, earnings tend to contain fewer surprises for major mining stocks. According to our analyst Jon Mills, the biggest potential surprise for investors will be the final dividend. While BHP generally maintains its distribution within its payout ratio band, a higher or lower than expected dividend can be enough to swing market sentiment. Another area for investors to watch is costs.For mining companies such as BHP, earnings provide investors insight into how new projects are tracking and if costs are outgrowing management guidance. A good example is the Jansen potash development in Canada, which is expected to go online in 2027. While growing costs can be cause for investor concern, Jon reiterated that BHP’s potash development is an asset with a low cost and a long-life span. A marginal increase in capital expenditure now is less material when assessing the long-term value of the project. Furthermore, the iron ore and copper production are the core value drivers of BHP’s share price, not so much coal and potash. Jon will also be closely monitoring cost trends in the Pilbara, BHP’s primary iron ore hub. Disruptions to global supply chains spurred from conflict in the Middle East, have increased freight and diesel costs. At the same time, wage pressures have contributed to rising operating costs across the Pilbara region. Despite these headwinds, BHP remains the lowest-cost iron ore producers followed by Rio Tinto (ASX.RIO). A2 Milk: China market share is key A2 Milk (ASX: A2M) is expected to report its full-year results on 17 August. Our analyst Angus Hewitt highlighted that the most important metric to watch will be the company’s market share in the Chinese labelled infant formula market. China boasts the world’s largest infant formula market and this is the key growth opportunity for A2 Milk. The company has established itself as a premium brand, one of the few foreign brands to hold a leading position in the Chinese market. Despite this, A2M’s current Chinese market share remains in the single digits, underpinning the significant growth opportunity ahead. As a result, any evidence that A2 Milk is continuing to gain momentum in this market is a positive sign. Angus indicated that he will also be focusing on whether A2M can sustain its premium pricing, a core ingredient in overall market share growth. A2 Milk is particularly well positioned in the premium end of the market, where stringent Chinese regulations have helped create barriers to entry and supported consumer trust in established brands. The company has carved a narrow economic moat from its intangible brand assets in infant formula in China as well as its fresh milk in Australia.In relation to earnings surprises or downside risk, Angus notes he doesn’t expect overall earnings to be far off the mark. However, any significant changes to market share or pricing could suggest changes to the current growth narrative for A2M. Lastly, the company’s guidance may also provide some insight into how the business is tracking logistically. Wrap UpEarnings season is when expectations meet reality. The three major ASX shares covered today span across widely differing sectors. Each company is unique in its reporting which underpins the importance of understanding the metrics that count. Understanding the drivers behind company results allows investors to contextualise market reactions and test their own investment views. Get Morningstar’s insights in your inbox","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"}}}