Expectations for major ASX shares during earnings season

As earnings season approaches, it is a crucial time to reassess our expectations for major Australian listed companies. Earnings reports serve as a way to confirm or challenge our investment beliefs, although they may not significantly impact long-term investors. Nevertheless, keeping abreast of earnings updates is a simple yet effective method for investors to monitor their investment thesis. In anticipation of the upcoming results, I have selected three prominent ASX constituents and asked our analysts about their outlook.

Commonwealth Bank of Australia (ASX:CBA) is scheduled to release its interim results on Wednesday, 11th February. During the previous reporting period, the results aligned with our analyst Nathan Zaia’s projections without any major surprises. Nathan continues to highlight the sizeable premium at which CBA is trading compared to his Fair Value Estimate of $100. In assessing bank earnings, one key metric to focus on is the Net Interest Margin (NIM) as it reflects the bank’s profitability in generating returns from lending activities. A growing NIM typically indicates improved profitability for the bank.

Nathan outlined the essential metrics and indicators to watch out for in CBA’s upcoming results, emphasizing loan growth, NIM, operating costs, and bad debts. The interplay between loan growth and NIM will be critical, particularly in analyzing how additional expenses might impact loan growth outside of the broker channel. The bank’s strategic approach to technology, the current benefits, and future opportunities will be of particular interest, highlighting the potential role of AI in enhancing operational efficiencies and customer service.

Regarding NIM, Nathan anticipates a relatively stable performance despite the recent increase in loan growth. CBA’s success in expanding loan growth outside the broker channel, coupled with robust household deposit growth, positions the bank favorably in terms of funding cost advantages and capital management. To justify the premium valuation over fair value, Nathan underlines the need for sustained strong NIM, cost efficiencies, and market share gains. However, he notes the challenge in aligning the current share price with intrinsic fundamentals due to regulatory constraints and competitive pressures.

Moving on to CSL Ltd (ASX:CSL), the company is set to announce its interim results concurrently with CBA on 11th February. In the previous earnings release, CSL met analyst Shane Ponraj’s earnings expectations, although sales growth fell short, resulting in a significant decline in shares. Investors will be closely monitoring the upcoming results for any potential shifts in sentiment, especially regarding the impact of staff cost reductions and the delay in the Seqirus business spinoff.

Shane highlighted key metrics and indicators to watch in CSL’s results, including sales growth of immunoglobulins, progress on cost-saving targets, and early sales performance of new products like Andembry. Gross margin expansion in the plasma division, driven by operational efficiencies in blood collection and manufacturing yield improvements, is crucial for investor confidence in CSL’s earnings outlook.

Regarding the delayed Seqirus spinoff, Shane expects minimal impact on current earnings, as the segment contributes a small percentage to group earnings. Although Seqirus faces challenges from declining US influenza vaccination rates, Shane anticipates stability in immunization rates by fiscal 2028, supported by healthcare initiatives and government recommendations.

In conclusion, as we prepare for the upcoming earnings season, monitoring these key ASX constituents closely will provide valuable insights into their financial performance and strategic direction. Stay tuned for the latest updates as these companies navigate through a dynamic and evolving market landscape.