The analyst team at investment bank Citi says the August 2018 reporting season will likely contain more nice surprises than nasty ones as companies post their profit results.
In their latest report previewing earnings season, the Citi team is expecting earnings growth of around eight per cent for the ASX 200, though some sectors are tipped to fare much worse than others.
THE LIKELY WINNERS:
- The health care sector's earnings per share growth is forecast to be 14.1 per cent, compared to 5.9 per cent growth last year.
Earnings coming into the reporting season have been mixed as companies with major international operations generally upgrade their forecast, while some local healthcare players have downgraded.
Hearing device maker Cochlear is expected to perform well.
- The heavyweight resource sector is tipped to show earnings growth of 23.4 per cent, after a sharp slowdown from 93.6 per cent growth last year.
AND THE POSSIBLE LOSERS
- The banking sector's average EPS is expected to drop 0.8 per cent, compared to growth of 2.2 per cent last year.
The banks are predicted to be lending less, facing higher borrowing costs and regulatory costs as a result of the Royal Commission, which Citi says will reduce the sector's forecast growth.
- Telecommunications is estimated to be one of the biggest losers during the reporting season, with average EPS expected to be down 13.7 per cent compared to growth of 4.9 per cent last year.
Citi says Telstra is expected to face further struggles to grow revenue with increasing pressure from competitors.
- The retail sector is predicted to book a 4.2 per cent drop in EPS, compared to 19.7 per cent growth last year.
Citi says housing-related retailers are likely to struggle with earnings and sales, while electrical discounting leading into June may also present a risk.
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