Mining tipped to again push top-tier profits lower | Australian Markets
Australia’s company sector is dealing with a “decisive test” from an imminent reporting season that can doubtless verify a second consecutive yr of weaker revenue growth and unsure dividends.
Analysts are tipping ASX200 annual company profits to be launched over the subsequent 5 weeks will show an average discount of up to practically 2 per cent off the back of one other weak yr for giant miners and a sluggish national financial system.
They’re warning that traders will need to see higher if the share market is to push deeper into report territory.
UBS stated whereas stocks had rallied onerous since April, “the local equity market story hasn’t necessarily improved”.
“The economy is slowing, rate cuts have thus far been relatively un-impactful, and earnings are declining,” it stated.
“The downbeat tones we expect to come from August results may not be enough to halt the markets ‘melt-up’ . . . but they should cause it to pause.”
Reporting season for the majors kicks off subsequent week, with Rio Tinto and lithium miner PLS on Wednesday earlier than hitting prime gear within the final two weeks of August and a penultimate day on August 28, full of Mineral Resources, Wesfarmers, IGO, Qantas, South32 and Sandfire Resources.
Analysts stated investor focus was now switching from US President Donald Trump’s tariffs to corporations’ skill to defy home financial circumstances that haven’t obtained the anticipated increase from rate of interest cuts.
The reporting season “arrives as the decisive test for corporate Australia’s earnings resilience, with company-specific fundamentals now taking precedence over macro considerations”, stated Morgans, which has forecast a 1.2 per cent fall in ASX200 profits.
“While earnings and share prices have shown remarkable resilience despite global trade uncertainty since the February reporting period, the focus shifts to companies’ ability to maintain margins and drive growth amid subdued trading conditions.”
UBS, which is tipping a 1.7 per cent drop in revenue for the 2025 financial yr after the earlier yr’s 5.4 per cent decline, expressed concern that fee cuts have misplaced their energy to stimulate financial growth, making it more troublesome for corporations.
Mining and power corporations are seen as the most important drag on earnings, with their profits anticipated to be off one other 17 per cent for the yr on weaker commodity costs and chronic issues about China’s financial system.
Outside of sources, “things (are) look less bad, but still relatively lacklustre”, with the exception of tech (forecast 26.1 per cent rise), communication providers (27.6 per cent), banks (7.8 per cent), healthcare and chosen industrial corporations, UBS stated.
Morgans warned that ultimate dividends could also be smaller than some traders anticipate, after surprisingly good returns for the 2024 financial yr as payout ratios recovered in the direction of their 10-year average of about 72 per cent or 73 per cent.
“Payout expectations have eased through 2025, and we moderate dividend expectations slightly as boards note sluggish earnings growth and a nod toward conservative capital management,” it stated.
UBS forecasts profits to return to growth this financial yr, tipping a 5.3 per cent rise throughout the ASX200. Energy is the one sector seen lacking out.
Morgans expects growth of 5.4 per cent for 2025-26, however cautions expectations are already slipping after forecast growth of 8 per cent in simply April.
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