The 2015/16 fiscal year will count as one of the worst for profit growth by Australian companies, so investors can't be blamed for hoping things will get a little better from here.
With the August reporting season nearly wrapped, the overall trend is becoming evident: earnings for listed companies have declined by an average eight to 10 per cent on the previous year.
Resources companies, weighed down by the collapse in commodities prices, accounted for much of the damage, but subdued growth in other sectors is raising warning flags for future prospects.
"The key themes have been pretty much as expected: a horrible year for resources stocks; constrained revenue growth for industrials; continuing headwinds for the banks; and an ongoing focus on dividends," AMP Capital's head of investment strategy Shane Oliver said.
Only about 41 per cent of the companies have beaten earnings expectations this season - a drop from the average of 45 per cent.
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Major results that have weighed included miner BHP Billiton's record full year loss of $8.29 billion, a big decline in earnings by supermarket giant Woolworths, which reported a $1.23 billion loss, and an 83 per cent plunge in full year profit for Wesfarmers, the parent company of Coles.
A quieter-than-usual 'confession season' seemed to have given a mistaken impression that earnings would largely meet expectations, Citi's head of equity market strategy Tony Brennan said.
"In aggregate, however, the results have been somewhat disappointing," he said.
While the decline in earnings of resources companies was expected, there was surprising weakness in other large sectors such as insurance, telecoms, healthcare, and, to an extent, banks.
Other companies still exposed to the resources sector - in engineering, rail, and chemicals - also continue to face headwinds.
Still, the median company performance has been profit growth of four to five per cent, helped mainly by improving commodity prices and cost controls.
AMP's Dr Oliver estimated that 62 per cent of listed companies have actually seen their profits rise but 86 per cent of companies either raised or maintained their dividends, reflecting the investor appetite for yield.
Results are broadly expected to be better in 2016/17, but analysts are worried on the extent of recovery.
"Some bounce back in earnings growth seems likely in FY17, but business conditions may not be robust enough for this to match current forecasts," Citi's Tony Brennan said.
While resource earnings look to have bottomed, and recent headwinds like volatile financial markets have abated, a lower growth environment and rising competition for market share could likely undermine the rebound in margins and overall earnings, he said.
As a result, market growth may be restricted to mid-single digits this fiscal year.
The benchmark S&P/ASX200 index, which traded around the 5,550 level at the start of the reporting season, has stayed largely flat through this month.
"The message from reporting season so far, is that investors will need to continue to have lower expectations of returns for the rest of 2016, as low interest rates and limited earnings growth prevail," Australian Unity Investments chief executive David Bryant said.
OTHER BIG KNOCKS OF THE FY16 RESULTS SEASON
* Energy giant Woodside Petroleum posts 50 per cent slide in first half profit to $US340 million.
* Blood products giant CSL suffers 10 per cent slide in annual profits to $US1.24 billion.
* Rail freight operator Aurizon posts 88 per cent fall in annual net profit to $72 million
* Energy producer and retailer AGL Energy unveils worse-than-expected $408 million annual loss.
