‘Cometh the hour’ this reporting season

The Australian investment community is eagerly counting down the days to what’s shaping up to be one of the more eventful reporting seasons in recent years. The reasoning is, for the most part, straightforward: markedly elevated valuations, based on what appear to be meagre aggregate expected earnings growth, set the stage for a season requiring impeccable delivery with pitch-perfect, flawless execution. As recent weeks have shown, the investment environment has been none-too-kind to companies providing downgraded earnings guidance. In short, appease (or at these valuation levels more like delight) the market, or else!

We see the domestic economic backdrop still framed by cost-of-living pressures, mortgage repayments and other household balance sheet constraints. While the recent RBA cuts have provided some welcome relief, more concerning is what appears to be a private sector workforce recalibration to a slower growth environment. At the same time, previously robust public sector job creation (particularly in the care, administration and infrastructure sectors) is naturally retreating to more sustainable levels. This conundrum has to be front of mind for the RBA’s Monetary Policy Board: a domestic economy at or approaching ‘stall speed’, with seemingly little in the way of a spark to ignite private-sector jobs growth.

In response to the Trump Administration’s tariffs and its broader attempt to reset the world trade order, we see more accommodative monetary and fiscal policy settings in Europe, coupled with official interest rate cuts across a range of Developed Market (DM) economies, as helping to place global equity markets ‘on a firmer footing’ as we kick off FY2026. This stands in contrast to recent years, where there was a heavy reliance on the narrower themes of Mag-7 and AI/technology enablement.

At the stock specific level, to an even greater extent than in recent years, the proverbial bar has been set very high heading into August 2025 reporting season. Hence, cometh the hour, for those companies and their management teams to rise to the (valuation) challenge in the weeks ahead.

Four stocks to watch this reporting season

Brambles (ASX: BXB): Trade and tariff issues, as well as tensions in the Middle East and Russia-Ukraine aside, the efficient movement of goods around an integrated global economy remains essential to our everyday lives. We see some further easing in pallet intensity, coupled with improved efficiency and optimisation processes, placing Brambles in a solid position to deliver this season. As has been the case in recent years, continued focus, operational efficiency and execution to drive margins in an environment of low / no outright volume growth.

The incremental cost of pallet pooling, as part of integrated global supply chains, in the price the end-customer ultimately pays remains inherently small. We see this being supportive of margin resilience in BXB’s core business.

Nick Scali (ASX: NCK): The considerable cost-of-living pressures being felt by many everyday Australians remains a defining feature of the domestic landscape. The impact across households and businesses is something we see as quite uneven. Established homeowners, along with a wave of potential downsizers with no or low mortgage exposure are, generally speaking, far less impacted and less sensitive to interest rate changes. We see Nick Scali as an incredibly well-run business, with decades of ‘runs on the board’ in successfully growing and, more recently, integrating businesses, while consistently lifting margins. We believe August reporting season will bring further signs of back-end efficiency gains and ‘Scali-isation’ from the Fabb Furniture UK acquisition, an easing in supply chain costs due to normalising global shipping container rates, and a continued laser-like focus on operational efficiency, margins, cash flow and execution of its profitable growth strategy.

SGH Limited (ASX: SGH): Its ‘big three’ business units – WesTrac, Coates, and Boral – place SGH in an enviable position as a critical player within Australia’s Mining, Infrastructure and National Building ecosystem. We see a backdrop of multi-year, multi-billion-dollar mining and infrastructure projects as conductive to SGH continuing to execute its strategic (and increasingly profitable) growth strategy. As above all-the-while bringing an unwavering and unequivocal focus on operation efficiency, margins

Reliance Worldwide (ASX: RWC): Recognising our inherent cognitive biases, and predisposition to cognitive shortcuts, it should not come as a surprise that not all major index constituents are priced for perfection on meagre earnings growth. Some have already experienced their own dose of tariff and trade ‘turbulence’, where in this case our central phrase ‘Cometh the hour’ is more attuned to demonstrating adaptability, resilience or turnaround potential. In this category is global integrated plumbing supplies and fixtures business Reliance Worldwide (RWC) which operates across its core Repair and Remodel, Commercial and New Residential divisions. Adaptability of its supply chain, in particular de-emphasising China and logically emphasising the US, along with a potentially more constructive outlook in economic activity in Europe and the UK, come together to frame RWC as a stock to watch this August.

Three sectors that are showing appeal

Specialty Real Estate – Housing affordability challenges present a continuously favourable backdrop for self-storage and (well located, high amenity) land lease communities. The efficient movement of goods within an integrated economy, including last-mile urban infill locations, expanding into modern logistics and data centres, are all bright spots we see within the domestic REIT universe.

Health Care – Following what in many respects has been a post-covid normalisation period, we see differentiated higher-margin quality health care businesses focused on improved quality of life and logically extension of life and ‘living well’ as areas of interest in the upcoming reporting period. The health care sector’s appeal also ties in with the broader theme of cost-of-living pressures remaining uneven across households and the wave of low or no mortgage downsizers seeking to enjoy a high-quality active lifestyle.

Major Miners – Broadly speaking, businesses with meaningful interests in major mining projects with low or lowest cost of production, extracting critical and in-demand materials with a fundamental focus on operational efficiency, margins, cash flow generation and strategic execution (with an appropriate investment horizon) have the ability to play a critical role within a diversified investment portfolio. Returning to our prior ‘stage is set’ metaphor, we see major miners as being ‘on the flip side’ and a natural beneficiary of potential ‘failure to delight’ reporting season results, particularly from ‘index heavyweights’ and/or widely held names.