The Australian stock market is poised for its first year of positive earnings growth since the 2022 financial year, largely fuelled by commodity upgrades, according to Goldman Sachs strategist Matthew Ross. Resource sector earnings have seen a 20 per cent upgrade in the first half, with commodity prices suggesting a further 10-20 per cent increase at spot prices. However, broader market earnings trends remain soft, with a 7 per cent cut since August results, indicating some margin expansion is still needed in the second half. Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base. It helps companies and institutions raise capital, complete strategic transactions, and manage their investments.
Investors should anticipate continued cost pressures due to higher-than-expected inflation impacting margins. While many companies have announced cost-cutting strategies, the recent resurgence in inflation could hinder their ability to achieve these targets. For the banking sector, Goldman Sachs expects costs to remain a key focus, alongside the impact of higher interest rates and capital adequacy on net interest margins. The firm suggests that moderating premium rate increases will put increased pressure on costs across insurance stocks, including general, health, and brokers.
Healthcare companies are facing ongoing wage pressures, while discretionary retailers have experienced a promotional environment that is impacting gross profit margins, despite improved sales. These factors highlight the diverse challenges and opportunities across various sectors of the Australian market.
Goldman Sachs has identified potential surprise candidates such as Qantas, Macquarie, Computershare, Breville, Woolworths, QBE and CSL, while expressing caution on Brambles, NAB, Woodside and Australian Clinical Labs. These insights provide a valuable perspective for investors navigating the current economic landscape.
