Macquarie favors BSL, RWC, REH in Australian earnings season

Investing.com -- Macquarie released its Australian equity strategy update, showing net earnings per share beats of 5% in week two of the earnings season, down from 23% in week one.

Dividend per share surprises were more positive at 21% and emerged as the strongest driver of initial price reactions. The net dividend beat showed a 65% correlation with two-day stock reactions, better than any other metric. More than half the companies with dividend beats also benefited from higher bond yields, which likely helped fund the payments.

Guidance came in soft with net surprises of negative 13 percentage points, which Macquarie said is normal for August as companies reset expectations for the new year. Guidance has not been the biggest driver of price reactions so far this season, but the firm expects this to change by the end of the reporting period.

Global cyclicals posted the most positive earnings per share surprises, likely due to their U.S. exposure. Macquarie expects this trend to continue as the domestic economy slows.

For upcoming results, Macquarie favors BlueScope Steel (ASX:BSL), Reliance Worldwide (ASX:RWC), and Reece (ASX:REH) based on solid momentum, recent upgrades and U.S. exposure. The firm also favors NWH as an AI enabler and GPT as an interim result that should face less impact from financing cost headwinds.

Macquarie said it is least favorable on Growthpoint Properties (ASX:GOZ), Whitehaven Coal (ASX:WHC), The Lottery Corporation (ASX:TLC), TPG Telecom (ASX:TPG) and Fortescue (ASX:FMG) due to weak momentum and no net 2027 earnings per share upgrades.

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