ASX FY07 reporting season

Reporting season kicks off this week although it will be relatively quiet. The only ASX100 company I know of reporting this week is AWC. Overall for companies reporting full year results earnings growth is expected to be around a very healthy 18%. The Australian economy has performed well in 2007 particularly from a business perspective.

At the moment the US is about half way through 2Q07 earnings season and earnings growth has slowed to around 6%. Clearly Australia is at a different point in the earnings cycle, however given the volatility and uncertainty in the markets at the moment there will be one striking similarity between the US earnings season and our own.

That is that any company that disappoints will be severely punished by the market. That disappointment may not necessarily be on the earnings front. It may be reflected in a more conservative forecast of growth going forward.

Australian investors have gotten used to above average returns and profits over the last few years and any signal that that is about to change could cause investors to reassess their expectations.