Every six months, investors, analysts, and market participants turn their attention to the latest earnings reports from ASX-listed companies. Reporting season is a crucial time for anyone looking to assess the financial health of businesses, evaluate market trends, and refine their investment strategies. But with a flood of financial data, it can be challenging to make sense of it all.

In this guide, we’ll break down what reporting season is, what information companies release, and how investors can use these insights to make informed decisions.

What is Reporting Season?

Reporting season is the period when publicly listed companies disclose their financial results. These reports provide investors with key updates on earnings, expenses, and profitability, as well as insights into a company’s strategic outlook. Some companies also offer forward guidance, which can impact their stock price depending on how their projections align with market expectations.

For investors, reporting season presents an opportunity to reassess their portfolios, monitor the companies they own, and identify potential investment opportunities.

When Do Companies Report Their Earnings?

ASX-listed companies are required to report their financial results at least twice a year, typically within two months of their balance sheet date.

• Full-year results are usually released in August, as most companies operate on a financial year ending 30 June.
• Half-year results are generally reported in February.

Not all companies follow this schedule, some operate on different financial year-end dates, meaning their reporting periods may vary. Investors can check a company’s website or ASX announcements for details on specific reporting dates.

What Information is Released?

Companies typically provide several key documents during reporting season to give shareholders and analysts a clear picture of their performance. These include:

• Statutory results (Preliminary Final Report): This is the primary financial report, outlining revenue, profit, expenses, and cash flow.
• Annual reports: Some companies release their full annual report alongside their statutory results, offering a more detailed breakdown of financial performance and strategic initiatives.
• Investor presentations: Many companies publish a results presentation summarising key figures and trends.
• Earnings calls and briefings: Management often holds live presentations or conference calls with analysts and media to discuss results and future plans.

Key Metrics to Watch

Understanding financial statements is essential for making informed investment decisions. Here are some critical figures to focus on:

• Revenue Growth: Measures the change in total sales, providing insight into demand and market expansion.
• Net Profit and Earnings Per Share (EPS): Indicate the company’s profitability and how much profit is attributed to each share.
• Dividends: Companies may announce dividend payments, revealing how much profit is being returned to shareholders.
• Debt Levels: A company’s balance sheet should be reviewed to ensure debt is manageable relative to earnings.
• Future Outlook: Pay attention to management’s guidance on expected future performance, as this often drives stock price movements.

Using ASX Reporting Season to Refine your Portfolio

1. Review Your Portfolio Holdings

Before earnings season, assess your current investments. The key question is: Has your long-term outlook changed? If a company adjusts its guidance or reveals concerning trends, it may impact your investment strategy.

Investors should identify companies where risks such as sector disruption or management changes could affect long-term growth. Additionally, stock prices may continue to adjust in the days or weeks following an earnings surprise, a phenomenon known as post-earnings drift.

2. Decide on Entry and Exit Strategies

Should you buy before or after earnings? Buying ahead of earnings can offer upside if a company beats expectations but comes with the risk of a sharp decline if they miss. Waiting until after earnings may provide clarity but might mean missing immediate gains.

If a stock appears to be undervalued, entering before earnings may offer an opportunity to benefit from potential positive surprises. However, waiting until after results are released can provide more clarity and help manage risk.

3. Monitor Sector-Specific Risks and Opportunities

Different sectors react differently to macroeconomic trends. If interest rates are expected to rise or fall, key industries like financials, tech, real estate, and consumer discretionary stocks may be impacted.

Keep an eye on economic indicators and sector trends that could affect company earnings. For example, lower rates generally benefit real estate and growth stocks, while financials may face margin pressure.

4. Expect Volatility but Stay Focused on Fundamentals

Earnings season often triggers short-term price swings, but long-term investors should focus on whether a company’s strategic plans remain intact.

Avoid knee-jerk reactions to short-term earnings misses if the company’s long-term prospects remain strong.

5. Opportunistically Trim or Add to Positions

Earnings season is an opportunity to reassess portfolio allocations. If a stock has become overvalued, it might be time to take profits. Conversely, stocks with strong fundamentals but weak short-term sentiment could present buying opportunities.

Use earnings season to fine-tune your portfolio by trimming high-flyers or adding undervalued positions.

6. Compare Analyst Expectations vs. Actual Performance

Market reactions are often based on how results compare to analyst forecasts, not just raw financial performance. If a company meets expectations but misses the ‘whisper number’ (unofficial earnings expectations), volatility can ensue.

Understand whether earnings surprises are due to short-term factors or reflect deeper structural issues before making investment decisions.

The TAMIM Takeaway

ASX reporting season is a crucial period for investors, offering a wealth of information to evaluate companies and their future prospects. By preparing ahead of time, reviewing key financial data, and staying focused on long-term fundamentals, investors can navigate volatility with confidence.

As always, while past performance provides valuable insights, it does not guarantee future results. Conducting thorough research and staying up to date with market developments will help you make well-informed investment decisions.