- Reporting season is very instructive for investors, it allows one to do a health check-up on companies and reflect on the outlook for earnings and dividends.
- Analysing the results so far reported shows that much of the upside hasn’t been in the mega-caps that tend to be over owned by investors.
- Small and Mid-caps have fared better, and the earnings outlook continues to support continued outperformance in the months ahead.
- This marked difference in actual versus expected results doesn’t surprise us that much. After all, the large caps (top 50 companies by market cap) are more informationally efficient and are well covered by stock analysts.
- We present a few charts below to demonstrate this point.
- So far, percent beats are ahead of misses. Most companies (44%) have delivered results in line with expectations
- Mid-caps have experienced better surprises than the large or overall market.
- Forward EPS growth for mid-caps is 2X large cap growth over the medium term.
Chart 1: S&P/ASX 200 February 2025 earnings result split
Source: Bloomberg, Index Weighted, as of 21 February 2025, ±2.5% range for beat/miss.
Chart 2: Market-weighted EPS Surprise February 2025 earnings results
Source: Bloomberg,21 February 2025, Large Cap as S&P/ASX 20, Mid Cap as S&P/ASX Mid Cap 50
And looking further ahead, the estimated 3 to 5 years of earnings per share (EPS) growth shows a similar story.
Chart 3: Estimated 3 to 5 years earnings (EPS) per share growth
