A not-so-serious guide to Australia's reporting season

Oh, reporting season. It's an opportunity for companies to rise to the occasion and deliver meaningful returns to shareholders. But it wouldn't be reporting season without a fair share of disappointments and frightening selloffs. 

Each year, twice a year, companies reveal their financial results to the market, outline major changes on the horizon and provide some guidance on what investors can expect over the months and years ahead.

Despite there being hundreds of companies that will report their results to the market in the coming month, all within different sectors and with a variety of products and services, there are a few similarities that investors who have been around long enough have come to expect. 

1. The 'better-than-expected' result 

Reporting season is all about living up to analyst expectations and sometimes, a company manages to shoot the lights out. 

Smashing analyst expectations often results in a few things:

• The stock opens higher and rallies intraday
• The stock receives a bunch of broker upgrades the next day
• The optimism and upgrades result in another day or two of outsized gains

Goodman Group (ASX: GMG) is a prime example from the August 2023 reporting season. The company announced a solid set of numbers and the stock rallied 5.7% on the day of the result and another 7.3% the following day.

2. The miss

Reporting season isn't reporting season without a major blowup - a result so bad you think "Did the company even try?"

Iress (ASX: IRE) shares nosedived 35.5% last reporting season after its results came in significantly below analyst estimates. The company also downgraded its guidance and suspended its dividend. There were no winners. 

3. The AI buzzword

AI was all the rage in 2023. It still is. 

So which companies are going to try and catch some of the hype by mentioning AI?

4. Cyclical earnings

Battery metal prices including lithium, cobalt and nickel have fallen off a cliff. There are only so many times you can blame unnamed research houses for manipulating the market or pulling up some comment about the long-term CAGR of electric vehicles. Now it's time to face reality (or rather, most of this has already been priced in and now it's time to see the numbers).

Pilbara Minerals (ASX: PLS) reported its December quarter report earlier this week, with quarterly revenue down 46% quarter-on-quarter, to $264 million. 

5. Just massage the numbers

Accounting standards and reporting methods are becoming more convoluted than ever. Make sure you're reading and comparing the right numbers.

I once saw a US-listed company report "combined FY23 & Q1 FY24" in one column.

6. Show me the numbers

It's often smoke and mirrors with software companies. A headline like "xyz signs $50 million contract with xyz" often fails to translate into real earnings.

7. Buying right before earnings

There's no other way to put it. Buying a stock right before earnings is gambling. Will the results be flat? Knock expectations out of the park? Miss expectations by a mile? Who knows.

8. Keep calm

2023 gave us a million reasons to sell. Yet 2024 has kicked off with the S&P 500 scoring four consecutive all-time highs.

You're likely going to go through a lot of emotions during reporting season. Keep calm. Stick to your guns (unless you have really bad guns, then you're in trouble).