Insights for Investors by Investors

Earnings season set to determine direction for 2021

•5-National-Australia-Bank

It’s quarterly earnings season for a small handful of ASX-listed companies, but some might say the most important in the index. While most companies listed on the ASX report half-yearly with a June year-end, the second month after the financial period, being July and February tends to the busiest each year.

However, a small group of companies, including more cyclical sectors like retailers, resources and financials will provide quarterly sales updates as well. The quarterly earnings season kicked off last Wednesday with Coles (ASX: COL), GPT Group (ASX: GPT), IOOF (ASX: IFL), Janus Henderson (ASX: JHG), Marley Spoon (ASX: MMM), Unibail-Rodamco-Westfield (ASX :URW), AMP (ASX: AMP), CIMIC (ASX: CIM), Genworth Mortgage (ASX: GMA), Pointsbet Holdings (ASX: PBH) and ResMed (ASX: RMD) all delivering updates. The news was, at best, mixed.

With so many releases every day, it’s an opportune time for investors to identify a few winners from the losers. This week both the National Australia Bank (ASX: NAB) and Bank of Queensland (ASX: BOQ) are set to release quarterly numbers.

  • National Australia Bank – If the Westpac pre-result is anything to go by, NAB should release a positive set of results today. Investors have been buying bank shares following the Westpac announcement on the back of what has been a stellar post-Covid recovery, supported by a housing boom underway on Australia’s east coast. The dividend will be of utmost importance for income-starved investors. On consensus, the brokers have NAB paying a dividend of 104.6 cents in FY21 (range low of 88 cents to high of 130 cents per share. This puts NAB on a prospective yield of 4.7% for FY21. Morgan Stanley has an equal-weight recommendation with a target price of $26.30 up from $25.30.

  • Amcor (ASX: AMC) – Amcor was due to announce its results Wednesday for the nine months ending 31 March 2021. AMC has traditionally delivered steady and predictable earnings even in times of economic uncertainty. Amcor is looking to achieve its sustainability goal of a fully recyclable and reusable portfolio by 2025. With a strong balance sheet, the company is cashed-up, pays a decent dividend and is expected to post a good set of results this Thursday. Ord Minnett has a Buy recommendation with a target price of $16.75 and is expecting earnings per share (EPS) growth of about 8%.

  • Macquarie (ASX: MQG) – Is due to report next Monday. Morgan Stanley expects the investment bank to report an earnings rise of about 8% to $2.94 billion on strong revenue following its one-off boost on the back of the Texas Freeze earlier this year. Post-Covid, Macquarie should benefit from tailwinds arising from renewables and infrastructure. Morgan Stanley has an Outperform recommendation with a target price of $172.00.

A summary of the major events in the first two weeks of May is as follows:

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