Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


Market cheers first-batch of earnings: Charts of the week

Lewis Jackson  |  16 Aug 2021Text size  Decrease  Increase  |  
Email to Friend

We’re only halfway through the earnings calendar but the market likes what it sees so far.

Share prices rose an average of 1.31% after earnings were announced across 32 companies under Morningstar coverage.

Narrow-moat Pinnacle Investment Management (ASX: PNI) led the pack rising 8.95% in the hours after it announced net profit grew more than 100%. On the other end, narrow-moat AGL (ASX: AGL) closed 5.53% lower on news net profits fell 34%.

Today’s Chart of the Week looks at how the market has reacted to the first batch of corporate earnings. To gauge market sentiment, we’ve measured the change in closing share price between the earnings announcement date and the day before.

This measure provides some insight as to whether market expectations were met or not. In some cases, markets react to future guidance rather than reported results, say Morningstar analysts.

Good news has outweighed bad over the last three weeks of earnings. Markets reacted negatively to 12 of the 32 companies from our calendar.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Positive reactions were concentrated in financial services. Pinnacle, QBE (ASX: QBE), Suncorp (ASX: SUN) and Genworth Mortgage Insurance Australia (ASX: GMA) all rose by more than 7%.

Strong results don’t always translate into a share market bump. REA Group (ASX: REA) announced double digit profit growth only for the share price to fall 4.7%. The share price drop reflected an extended valuation rather than bad news, says Morningstar equity strategist Gareth James.

“We expect the 5% share price fall following the result was more to do with the stock's valuation and 41% increase over the past year than disappointment with the result,” he says.

Of the ten companies with the most positive share market reaction, none are trading in a range Morningstar considers undervalued.

In the case of standout Pinnacle, impressive growth and bright prospects are already priced in, says Morningstar equity analyst Shaun Ler. The shares closed Monday at $15.64, a 30% premium to the fair value of $12.

Earnings will continue till the end of August and tens of companies must still report.

Is there a trend you'd like to see visualised? Get in touch.

is a reporter and data journalist with Morningstar. Tweet him @lewjackk or get in touch via email

© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend