UPDATE: As earnings season approaches, Macquarie Group Ltd (ASX: MQG) has issued a stark warning about the upcoming reporting period. Analysts predict a notable 3% decline in aggregate ASX earnings for FY25, marking the third consecutive drop. This news could lead to heightened volatility for investors as the season kicks off next month.
The urgency of the situation is underscored by the fact that the market’s price-to-earnings ratio has risen to 20x. Investors should brace for potential sell-offs, as the broker notes that any earnings misses will likely be sharply punished in this environment. The forecasted rebound of only 2.4% in FY26 appears weak, raising concerns over conservative guidance that may reset expectations lower.
Macquarie’s analysts will be closely monitoring management’s outlook commentary during this earnings season for signs of improving activity levels. They will emphasize three main areas: i) outlook statements, ii) management of tariffs, and iii) concrete data on the productivity benefits from AI investments.
In a shift that could surprise many, Macquarie anticipates a significant rotation away from banking stocks and into the healthcare sector. This pivot could favor companies such as CSL Ltd (ASX: CSL) and ResMed Inc (ASX: RMD). According to the firm, “US results suggest the big rotation should occur from Banks to Health,” indicating a potential shift in investor sentiment.
Among the ASX shares expected to outperform are Challenger Ltd (ASX: CGF), Hub24 Ltd (ASX: HUB), Pinnacle Investment Management Group Ltd (ASX: PNI), Qantas Airways Ltd (ASX: QAN), Telstra Group Ltd (ASX: TLS), and Woodside Energy Group Ltd (ASX: WDS). Analysts believe these companies could deliver surprising results in the coming weeks.
With the earnings season set to kick off shortly, investors are advised to remain vigilant and watch for updates closely. The stakes are high, and the potential for market shifts is significant as companies navigate these challenging economic conditions. Keep an eye on how these developments unfold as they could impact your investment decisions moving forward.
Stay tuned for more updates as this story develops.
