Companies that surprised the share market were punished or rewarded more than usual in the last profit reporting season as share prices fluctuated sharply.
That is the clear message from analysis by Goldman Sachs and Morningstar of corporate results in the period ending 30 June.
Goldman Sachs Co-head of Australian Research and Head of Portfolio Strategy & Quant Research Matthew Ross said excessive share price volatility around results was a huge focus.
He said a record 46% of stocks moved up or down by more than 5% on results days, with moves in response to earnings revisions often multiples of what was typically seen, especially for stocks that delivered modest beats and upgrades.
“This pattern tended to extend with stocks continuing to outperform as long as they hadn’t disappointed,” Ross said.
He said although demand was higher than during the consumer spending recession a year earlier, the recovery fell short of expectations however, with more stocks missing revenue targets.
More than 40% of companies reported earnings that were below expectations, which was more than the 30% long-run average.
“Cautious outlook commentary saw analysts cut year-ahead revenues harder than at any point since Covid, but a renewed focus on cost-out helped mitigate downside,” he said.
The sharp changes in prices was also noted by Morningstar, which found the standard deviation of price changes on results days had spiked to more than 10% by the time 151 of the companies it covered had reported, from about 7% a week earlier.
“Perhaps most remarkable is the big uptick in share price volatility,” Morningstar Equity strategist Lochlan Halloway said.
Ross said a number of companies improved the details of their artificial intelligence (AI) strategy, with more providing examples of revenue opportunities compared with a focus on cost and productivity previously.
Although input costs like wages, rents and energy continued to moderate, he saw a clear trend towards new ‘cost-out’ programs being announced.
He also expected potential shifts in corporate strategy due to the number of senior management changes announced.
