Profit results in the 2005/06 reporting season
were slightly above analysts' expectations with median earnings
up 19.5% and earnings per share up 13.5%. This generally positive
tone was reflected in the stock market too with company share
prices rallying by an average of 0.3% on the day of their profit
announcement.
EARNINGS
SURVEY
2005/06 Profit Reporting Season
|
| Median
Sales Growth (%) |
12.3
|
| Median
Net Profit Growth (%) |
19.5
|
| Median
Earnings Per Share Growth (%) |
13.5
|
| Median
Net Profit Margin (%) |
7.9
|
| Median
Dividend Yield (%) |
4.1
|
| Average
Share Price Reaction (%) |
0.3
|
Source: Wren Research, Sep-06
|
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|
Although there were plenty of headlines about
companies being hammered for bad results, this was more the
exception than the rule. Only 7% of
stocks were sold off by more 5% on the day of their profit release.
That compares with 11% of stocks in 2004/05.
The main negative finding was that median net profit margins
have fallen to their lowest level in three years. This suggests
that pricing power is limited and that higher energy and raw
material costs are being absorbed. The squeeze was particularly
noticeable in the industrial sector with nearly one-quarter
of companies reporting a net profit margin of less than 4%.
The Wren Research Survey of Earnings Results is based on a sample
of 200 listed company results that were released during August
2006.
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