ASX earnings preview: REA, CBA and Telstra

The upcoming FY 2022 report is expected to show some level of slowdown as Australian businesses are not immune to the shifting market, rising interest rates and a tight job market.

REA Group (ASX:REA)

Earnings date:

Tuesday, 9 August 2022 at 8.30am (AEST)

Expectation:

• EPS: $3.11 representing an 27% yearly growth
• For fiscal years 2022 and 2023, analysts are estimating that the average annual growth will increase to 19.45%.

Key watch:

The REA Group Ltd has delivered a strong result for the first three quarters of the 2022 financial year. In Q3, the group reported a 23% yearly revenue growth driven by Australian residential businesses and the inclusion of Mortgage Choice, with EBITDA up 27%.

While the fundamentals of the residential property market remain positive, the impact of the rapidly rising interest rate is poised to stay for the next financial year. Hence, investors will presumably interpret the result more as an indicator for the business's next chapter instead of celebrating what has been achieved.

However, even regarding all the macro headwinds, shareholders still have good reason to be confident in Australia’s top one property platform thanks to its exceptional robust balance sheet and unbeatable market share. The company’s free cash flow is growing at a mouth-watering 68%, and its website traffic is three times more than its rivals despite admitting to a moderate decline recently.

Technical analysis:

REA’s share price has managed to ride the ascending trendline, bottoming out from the July low over the past four weeks. The decent support by all three major SMA raises the likeliness of a wider bullish trend to send the price back to $130+, the highest level in four months. On the other hand, any potential pullback should see the support near $120 at play.

REA weekly chart

Commonwealth Bank (ASX: CBA)

Earnings date:

Wednesday, 10 August 2022

Expectation:

• EPS: $5.11, representing a 9.7% YOY growth
• Revenue: up $9.3 billion

Key watch:

The Commonwealth Bank of Australia is expected to report success, likely carrying on the momentum from the first half of the financial year when the company delivered a jaw-dropping 26% increase in Net profit after tax from the previous year.

Investors are particularly keen to get a glimpse of how much May and June’s interest rate increases will bolster the banking sector’s earnings. While the brutal rate increase cycle is expected to translate into interest margin for the near term, the likely tail risks also come from stagnant housing loan growth and emerging cost pressure.

Technical analysis:

For the year to date, the share price for the CBA has outperformed the board stock market with marginal change (-0.8%) while the ASX 200 has dropped by 10%. The CBA share price has enjoyed a strong rebound from mid-June and has been up by more than 17% since then. Based on the daily chart, the price is attempting to consolidate the position above the $100 threshold with $103 set to be the next destination. On the other hand, the RSI is nearly reaching the overbought territory, suggesting a near-term breath could be on the cards first before moving on to the next challenge.

CBA daily chart

Telstra

Earnings date:

Thursday, 11 August 2022

Expectation:

• EPS: $0.14, representing an 40% yearly decline
• Revenue: $21.85 billion, up 4% from last year

Key watch:

Over the past decade, Australia’s leading telecommunications company has been surrounded by headwinds and investors are looking forward to the forthcoming result with optimism that Telstra is ready to move on to the next chapter. The hope not only stems from the welcome of a new CEO after seven years but because the company has recently projected to deliver profit growth.

Outside of the business’s outlook, as a long-regarded 'defensive stock', Telstra’s dividend yield will be another focus. Telstra is aiming to pay an annual dividend of 16 cents per share which would translate into a fully franked dividend yield of four per cent.

Technical analysis:

The share price for Telstra has climbed from the bottom of the year at $3.7 during the past month. The level of $4 is set to be a significant challenge as a notable fail at this level in April triggered two months of selling. Moreover, the gap between $4 to $4.1 has proved to be a key hurdle should the price attempt to return to its level early this year. On the flip side, the price should find solid support from its 20- and 100-days moving average at around 3.95.

Telstra daily chart