After the relentless barrage of ASX earnings announcements during the August reporting season, the one thing that stood out the most for Goldman Sachs was the number of companies that rallied on better-than-expected results only to give up those gains in the days and weeks that followed.
Goldman’s Australian equity strategist Matthew Ross said almost half of the companies on the S&P/ASX 200 Index rose or fell by 5 per cent on their earnings result, compared with a long-term average of 28 per cent.
The price action has been attributed to the rise of passive investing, pod shops and quant funds, which trade on daily market events and mean that small beats and misses can trigger outsized share price reactions.
While the heightened sharemarket volatility has become a well-established theme of reporting season, Ross said this time around, many companies had given up their gains from their earnings results by the end of August, which he said he didn’t understand.
Of the 21 ASX 200 companies that jumped by more than 10 per cent on their earnings result, the average share price has fallen 4 per cent since then, with seven of them underperforming the market by 10 per cent.
The most prominent example of this trend was medical software imaging group Pro Medicus, which popped 11.9 per cent to $196.75 when it reported on August 18, but has since fallen more than 12 per cent to $172.70.
Another is financial services group MA Financial, which rocketed 18 per cent to $7.10 when it reported on August 20, but has since lost nearly 28 per cent to close at $5.13 on Thursday.
Buy now, pay later giant Zip surged 18.2 per cent on the same day to $3.05, but has since plummeted 22 per cent to $2.38, while Car Group, which owns the popular vehicle listings platform Carsales, jumped 10 per cent to just shy of $30 when it reported on August 10, but has since fallen 13.2 per cent.
ARB Corporation, which makes and sells bull bars, roof racks and accessories for four-wheel drive vehicles, jumped 13.9 per cent to $21.51 when it reported on August 25, but has since dropped 11.4 per cent.
And fast fashion jewellery chain Lovisa soared almost 13 per cent to $27.62 when it reported on August 26. But it has since plunged 16.2 per cent to close at $23.15 on Thursday.
Ross said the primary outlier to this emerging trend was blood plasma giant CSL, which rocketed 17.3 per cent to $157.82 when it reported on August 18, and has risen another 10 per cent since then. It helped healthcare to return 19.3 per cent in August, which UBS said was the highest monthly return for the sector on record.
On the other hand, slowing credit growth and housing worries led banks to fall 9.3 per cent, their worst share price month since June 2022.
Morgan Stanley equity strategist Chris Nicol told clients on Thursday that his main takeaway from the latest reporting season was that a company on the ASX simply meeting earnings expectations was no longer good enough.
Full-year results delivered more earnings beats than misses, but constrained outlooks and weak sentiment weighed on future growth and earnings levels.
“While Australia avoided a broad earnings meltdown, the outlook remains highly uneven, with downside risks continuing to build, particularly in domestically exposed sectors,” Nicol said.
“Share price performance increasingly reflected the quality and sustainability of forward earnings, the credibility of guidance, valuation support, and capital allocation discipline.”
Source: https://www.afr.com/markets/equity-markets/the-one-thing-that-caught-goldman-sach-s-notice-this-earnings-season-20260903-p60u1t