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Thanks for joining me this Friday the 5th September, I’m Grady Wulff, Senior Market Analyst with Bell Direct and this is our weekly market update focused on a reporting season wrap and FY26 outlook.
Australia’s August reporting season delivered weaker-than-expected results, with only 20-30 % of companies beating earnings expectations compared with more than 80% in the US. Median earnings downgrades of 3.6% outpaced upgrades of 2% locally.
As the FY25 reporting season comes to an end, several dominant investment themes have emerged that are shaping sentiment heading into FY26. Despite challenging operating conditions over the past financial year, the ASX has continued to hit record highs, with investors responding sharply, often in double-digit swings, to company results. The underlying message is clear: certainty, clarity, and cost control are now more critical than ever in securing investor support.
One of the clearest signals investors are seeking is certainty; whether in the form of sustained dividends, clear and upgraded guidance, or effective cost control. Dividends have become a proxy for financial stability with companies like Commonwealth Bank (ASX:CBA), Northern Star (ASX:NST), and JB Hi-Fi (ASX:JBH) maintaining or growing dividend payouts, reassuring shareholders amid margin pressure and widespread headwinds faced in FY25.
However, guidance has emerged as the primary catalyst for share price rallies or sell-offs. Companies that upgraded FY26 guidance or provided strong strategic roadmaps such as Life360 (ASX:360), Goodman Group (ASX:GMG), and Aussie Broadband (ASX:ABB), were rewarded by investors, even when recent performance was mixed. Conversely, misses in forward-looking guidance were punished, as seen with CSL (ASX:CSL), James Hardie (ASX:JHX), and Woolworths (ASX:WOW), where even solid FY25 performances were overshadowed by cautious outlooks or operational restructuring plans.
Effective cost management has also been pivotal, particularly in a year marked by inflationary pressures and global supply chain challenges. Companies that preserved or expanded margins, such as Nick Scali (ASX:NCK), Bega Cheese (ASX:BGA), and Sigma Healthcare (ASX:SIG), stood out. In contrast, those unable to offset cost increases through pricing power or efficiency gains like Reece Plumbing (ASX:REH) and Domino’s (ASX:DMP) faced harsh investor reactions.
Despite widespread consumer belt-tightening in FY25, retailers have shown surprising resilience, particularly in homewares and technology. Harvey Norman (ASX:HVN), Nick Scali and JB Hi-Fi reported strong sales and robust underlying demand, while Coles (ASX:COL) outperformed rival Woolworths by executing its value-led strategy effectively and gaining market share. However, results were mixed across the broader consumer space, with companies like Endeavour Group (ASX:EDV) and Domino’s struggling with margin compression, changing consumer preferences, and operational headwinds.
Sector-specific tailwinds also played a defining role in FY25. Gold miners, led by Northern Star, had a standout year, capitalising on soaring gold prices and strong free cash flow. Similarly, companies with AI, data centre, or healthcare technology exposure, such as Pro Medicus (ASX:PME) and Goodman Group, continue to command premium valuations thanks to long-term growth tailwinds.
Meanwhile, the housing crisis in Australia has created fertile ground for developers. Cedar Woods (ASX:CWP) beat expectations, underpinned by strong presales and a robust pipeline. Property-linked sectors, like automotive (Eagers Automotive) and home goods (Harvey Norman), also benefited from solid consumer demand in H2FY25, despite macroeconomic pressures.
FY25 results have highlighted the ongoing importance of China and the risks tied to global expansion. Treasury Wine Estates saw mixed results with strong Penfolds sales post-tariff removal but these were offset by weaker Chinese demand. BHP also faced softer iron ore demand from China, though rising copper trends and capital discipline supported investor sentiment.
Tariffs and geopolitical instability became headwinds later in FY25, particularly for companies expanding into the U.S. and Europe. James Hardie, for instance, faced weak consumer demand, high costs, and policy uncertainty, all weighing on earnings guidance.
With large-cap valuations stretched, investors are shifting toward small and mid-caps for growth. Outperformers like Life360, Aussie Broadband, Cedar Woods, and Sigma Healthcare have benefited from innovation, strategic expansion, or cost transformation. This trend is likely to continue into FY26, with more focus outside the ASX 20.
The gap between results beats and misses is widening, showing a growing divide in market performance. Valuation discipline is returning. Even strong performers like CBA saw share price drops if results lacked upside or valuations were already high. This underscores that earnings quality, growth visibility, and capital discipline now matter more than headline numbers.
Looking ahead, the FY26 outlook is cautiously optimistic. Rate cuts are on the horizon, inflation appears contained, and cost bases are stabilising across many sectors. However, margin pressures remain, particularly for banks and exporters, and growth is expected to be more selective.
Themes shaping FY26 include:
- Cost management as the foundation for margin stability or expansion.
- AI and data centre investment driving long-term value in tech-adjacent sectors.
- Retail sector resilience, particularly for value-led or premium brands.
- Gold and commodity exposure providing inflation hedges and free cash flow strength.
- Geographic diversification and exposure to housing or property sectors being attractive for long-term positioning.
At the same time, strategic clarity and leadership stability are key. Companies experiencing CEO transitions, such as JB Hi-Fi, are being watched closely by investors for any signs of strategic deviation or operational risk.
In summary, FY25 reporting saw sharp divergence in earnings and investor reactions. Certainty; via dividends, guidance, or cost control, remains key to attain investor attraction and confidence. As FY26 begins, companies with strong balance sheets, diversified earnings, and exposure to AI, infrastructure, gold, or property are best placed to outperform. Volatility will persist, making strong execution and credible growth plans essential.
Locally from Monday to Thursday the ASX200 posted a 1.63% decline as Megaport (ASX:MP1) and Generation Development (ASX:GDG) tumbling over 14% and 12% respectively, offset Genesis Minerals’ (ASX:GMD) more than 12% gain.
The most traded stocks by Bell Direct clients this week were CSL (ASX:CSL), and 4D Medical (ASX:4DX). Clients also bought into Woolworths (ASX:WOW), and Mineral Resources (ASX:MIN) while taking profits from CBA (ASX:CBA), Westpac (ASX:WBC), BHP (ASX:BHP), Fortescue (ASX:FMG), Wesfarmers (ASX:WES) and Vault Minerals (ASX:VAU).
And the most traded ETFs by our clients were led by Vanguard Msci Index International Shares ETF (ASX:VGS), iShares S&P 500 AUD ETF (ASX:IVV), and Vanguard Australian Shares Index ETF (ASX:VAS).
Next week we may see investors respond to Australia’s latest Westpac consumer confidence data and NAB’s business confidence data with the expectation of a fall in consumer confidence but a rise in business confidence. Overseas we will gauge the latest economic strength of China’s economy with key trade balance data out early in the week and inflation rate, industrial production and retail sales data out later in the week. In the US we will gain the latest update into the US inflation situation with core inflation data out next Thursday.
And that’s all for today and this reporting season, happy investing and happy FY26.
