Expectations vs. Impact: How Earnings Got Rewarded or Punished This Australian Reporting Season
Australian Equities Reporting Season Wrap - September 2025
Australian equity valuations continue to be near record highs. The gap between the most expensive and cheapest stocks remains at extreme levels, and index-driven flows continue to push up the prices (and index weights) of the largest Australian stocks.
This reporting season, even modest earnings result surprises have driven outsized rewards and punishments in terms of price reaction, highlighting new and growing risks and opportunities for long-term investors who follow both passive and active investment approaches.
In our latest reporting season wrap, we delve into how the ClearBridge Australian equities investment team is cutting through the noise to find the Australian companies where fundamental earnings generation will drive long-term capital and income returns in the coming months and years.
Key Takeaways
- Limited earnings surprises, but outsized price reactions and downgrades
Even small beats or misses were heavily rewarded or punished, with limited correlation between new news, economic drivers and alpha during the season.
- Dividends and capital management supported results
Special dividends, buybacks, and capital returns featured strongly, while leadership transitions in several companies coincided with downgrades and negative price moves.
- AI an emerging theme, but early
Over half of companies referenced AI in results, though most focused on pilots and traditional machine learning; generative AI adoption remains limited but could shift industry economics over time.
- Index flows continue to distort markets
The prices of high index weight stocks are increasingly diverging from fundamentals, with small revisions translating into exaggerated price moves and reinforcing the concentration risk in these stocks.
- Valuations stretched, dispersion extreme
The gap between expensive and cheap stocks remains near record levels, creating both risks in high-flow large caps and opportunities in undervalued companies with stronger fundamentals.
- Implications for investors
For conviction-driven accumulation and income investors, mispricing presents opportunity, while risk-constrained investors may benefit from more nuanced, factor-controlled approaches. Across the board, active, disciplined stock selection remains essential to capture consistent capital growth and growing income going forward.
Related Perspectives
Consistent Alpha Through Fundamental "Active Insights"
The ClearBridge Australian Equity Investment team believe an active fundamental solution can offer significant risk-adjusted value-add relative to a traditional passive or systematic approach.
Read full articleDisclaimer
Past performance is not a guide to future returns. Unless otherwise noted, all data is through to 31 August 2025. Data is calculated using the weighted average of broker consensus forecasts of each portfolio holding – because of this, the returns quoted are estimated figures and are therefore not guaranteed and may differmaterially from the figures mentioned. The figures may also be affected by inaccurate assumptions or byknown or unknown risks and uncertainties.
For broker consensus data, the number of brokers included for each individual stock will depend on active coverage of that stock by a broker at any point in time. A median of brokers is typically utilised. All estimates avoid stale forecasts which are removed after a certain number of days.
Portfolio data is presented for relevant representative ClearBridge Australian equity representative accounts as marked. Returns are shown in A$ gross of management fee. The Australian Equity Income strategy is not constrained by a benchmark, however for comparison purposes it is shown against the S&P/ASX 200 Accumulation Index. Any franked income data assumes a 0% tax rate and that full franking benefits are realised in tax return.
Any information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were, or will prove to be, profitable.