Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 420

It's the middle of reporting season: what's really happening?

For equity analysts and fund managers in Australia, Christmas comes twice a year, every February and August, when most Australian listed companies reveal their semi-annual profit results. Companies also guide what growth in profit, revenue, profit margins or dividends that shareholders can expect over the following financial year. However, Covid-19 has seen fewer companies commit to guidance given the uncertainty around lockdowns and the increase in class action lawsuits by litigation funders keen on profiting from negative deviations in company earnings.

This can be a stressful time for a fund manager. When companies reveal unpleasant surprises, the company's stock price tends to get sold down hard. Alternatively, it can be enjoyable when the company reports a good result that validates the investment case.

In this piece, we will go through how Atlas approaches each day during reporting season.

Before reporting season

In the lead up to reporting season, Atlas reviews all the stocks in the portfolio and considers the key factors and financial metrics that investors will be looking for on results day. We compare our forecasts to the consensus analyst forecasts. We are trying to identify which companies are performing ahead of expectations and, more importantly, which companies have the potential to disappoint.

The spread over the month

Companies listed on the ASX with a June year-end have until the last day of August to release their financial results, otherwise, they are suspended from trading on 1 September. However, results are not released evenly throughout the month as companies tend to avoid reporting either in the first or last week of the month, preferring the middle weeks.

There are days when several large companies report on the same day and often at the same time, which often results in the market making swift and not well-considered decisions as to whether the result was either good or bad. Frequently we see a stock trading down on what Atlas considered to be a favourable result, only to see the company's share price recover the following day after investors have digested the financial reports.

The below chart shows the distribution of results during the August reporting season, with the week starting 16 August being the heaviest. Wednesday 18 August 18 will be challenging for analysts with CSL, Coles, Dominos Pizza, Fletcher Building, Deterra, Santos, Supercheap Auto, Tabcorp, and Vicinity Centres reporting.

On the day

Generally, companies post their financial results with the ASX around 9am. This gives investors an hour to digest the facts and figures before trading on the stock exchange begins at 10am.

During this period, we will be combing through the profit and loss, balance sheet and cash flow statements, comparing our forecasts to what the company actually delivered. It is also important to compare how a company has performed against their peer group. For example, in isolation, Coles report reporting a slight decline in sales and a steady profit margin could signal a great result if Woolworths and Metcash reported significant decreases in sales and shrinking profit margins.

Company management will then formally present their results to shareholders on a conference call or in-person during the morning, generally between 9 am and midday. These presentations are directed towards the institutional investment community and are effectively closed to the media and public, and can take between one and two hours.

The management team gives greater detail on the factors contributing to the profit result and explains any potentially contentious issues. The most informative part is always the question-and-answer session, which allows investors to gauge how confident management is in tackling the most controversial problems coming out of their financial accounts.

Typically, it will only be the sell-side (broker) analysts asking management questions, with the large institutional investors such as fund managers or super funds saving their questions for behind closed doors. The problem with this is that in addition to writing research, some sell-side analysts want to protect their relationship with the company and keep on its good side for future lucrative investment banking deals. Frustratingly this can sometimes see soft questions being served up for management or avoiding the hard questions when the management has made some mistakes.

After the presentation of the results, we will generally have a quick discussion to see if there have been any fundamental changes to our thoughts and discuss the market reaction. The immediate market reaction can often be misleading, as most of the trading on results day is done by hedge funds or high-frequency traders rather than long-term fundamental investors.

Lunch with the company

Before Covid-19, one of the benefits of being a good client of one of the investment banks was the opportunity to have lunch with the company management team, though there have been few of these events since 2019.  These events were formerly held in the bank's boardroom and are fully catered events, though it is rare to see anybody accepting a glass of wine with their steak or fish. Many fine bottles of wine from the cellars of the investment banks get opened, offered around the table by waiters and then returned to the sideboard with one glass poured out. Analysts are genuinely concentrating on what is said.

Whilst this may seem to offer institutional investors an advantage over retail investors, new insights are rarely gained in these events. They are essentially a group meeting of rivals trying to understand what others think about the company. Further, if you know the company well or have a particularly insightful question, an analyst will save that for a one-on-one meeting with the company.

Often several large and complicated companies report on the same day, so unless an individual company has had a particularly good or bad result, it is poor time management to spend 1.5 hours over lunch picking through the financial accounts of a company that has performed as expected.

Immediately afterwards

Over the following week, the company will then organise individual one-hour meetings with their largest institutional shareholders both in Australia and overseas. Before these meetings, it is essential to be well prepared, as this is frequently the best forum to understand whether you should buy more of a company's stock or completely sell out.

During our meetings with the management teams, we will generally seek clarity (on behalf of our investors) on specific issues that we feel weren't covered to our satisfaction at the formal presentation. While some of these meetings can be quite hostile or very friendly, they are a valuable forum for both parties to give feedback on how our client's capital has been managed in the past and how that capital should be employed in the future.

I have been in these meetings where management has raised a potential strategy that seemed aggressive and quite alarming. In one case, I left a meeting to immediately begin selling down the fund's position. The company was facing both a falling oil price and published decisions of their large clients to delay or abandon projects, all public information. These issues were largely glossed over in the earlier analyst call in favour of softball questions. A similar flippant response to these concerns was given in our meeting with management, which resulted in the action taken.

After the management meetings and subsequent to reviewing the financial results of a company's competitors, Atlas is then in a position to determine what changes (if any) are made to our valuation of the company and whether the security's weight in the portfolio is still appropriate in light of competing investment opportunities.

 

Hugh Dive is Chief Investment Officer of Atlas Funds Management. This article is for general information only and does not consider the circumstances of any investor.

 

RELATED ARTICLES

Bank results scorecard and the gold star awards

Bank reporting season scorecard May 2021

Bank scorecard 2020: when will the mojo return?

banner

Most viewed in recent weeks

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Latest Updates

Economy

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Investing

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Property

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Shares

ASX reporting season: Room for optimism

Despite mixed ASX results, the market has shown surprising resilience. With rate cuts ahead and economic conditions improving, investors should look beyond short-term noise and position for a potential cyclical upswing.

Property

A Bunnings play without the hefty price tag

BWT Trust has moved to bring management in house. Meanwhile, many of the properties it leases to Bunnings have been repriced to materially higher rents. This has removed two of the key 'snags' holding back the stock.

Investment strategies

Replacing bank hybrids with something similar

With APRA phasing out bank hybrids from 2027, investors must reassess these complex instruments. A synthetic hybrid strategy may offer similar returns but with greater control and clearer understanding of risks.

Shares

Nvidia's CEO is selling. Here's why Aussie investors should care

The magnitude of founder Jensen Huang’s selldown may seem small, but the signal is hard to ignore. When the person with the clearest insight into the company’s future starts cashing out, it’s worth asking why.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.