Morning Expresso – Australasia

Research evidence excerpt

Morning Expresso – Australasia

Australian Equity Strategy - Aug 2026 reporting season preview

Strong headline earnings growth masks a softer underlying picture Australia

Consensus forecasts point to 12% year-on-year EPS growth for the ASX 200 in FY26, which would

represent the strongest aggregate growth rate in four years and sit comfortably above the market’s

long-run annual average of approximately 4.5%. However, the headline result is heavily influenced by

the recovery in Mining profits. Excluding the resource sectors, forecast growth falls to around 5.5%;

excluding Financials as well reduces underlying growth to approximately 2.5%. The reporting season

therefore begins with solid index-level earnings expectations, but a considerably less compelling

growth profile across much of the domestic corporate sector.

Earnings momentum in Australia has turned decisively negative

The more important development is the loss of earnings momentum in recent months. Profit forecasts

are now being revised lower across all 11 major ASX sectors, including Resources, which had previously

provided much of the market’s positive revision support. This broadening downgrade cycle raises the

hurdle for companies to outperform during August: results will need not only to meet reported-period

expectations, but also to provide sufficient guidance confidence to arrest further reductions to forward

estimates. By contrast, the US earnings backdrop remains substantially stronger, with S&P 500 profit

growth forecasts of approximately 20% for both 2026 and 2027, supported by Technology-related and

Energy industries.

Geopolitics to feature prominently, but margin risks appear manageable

Elevated oil prices and Middle East-related supply-chain disruption are likely to be recurring themes in