Despite a buoyant share market propelled higher by the so-called Trump bump, a series of worse-than-expected earnings downgrades and heightened levels of uncertainty dampened expectations ahead of the latest interim reporting season.

Happily the concerns proved largely unwarranted. As profit season draws to a close, a number of features and trends have emerged, with a return to earnings growth in the mining and mining services sectors a key theme. As confidence grows and customers are prepared to commence or expand projects, mining services companies are reporting acceleration in the rate contracts are being awarded. Reporting the company’s half-year results, engineering firm Monadelphous Group provided the most positive outlook on record, noting that Australia’s energy and resources sector was stabilising. Shorter term, Monadelphous said it expected second-half revenues would be “similar” to the first half and warned margins would stay “under pressure” due to cost cutting by customers and high levels of competition.Many other companies provided positive outlook statements and profit upgrades for the first time in several years.

Other takeaways from the reporting season are largely stock-specific.

Macro themes missing

There have been few big picture themes to emerge from the reporting season. The performance of retail companies has been variable. At one end of the spectrum, retailers such as OrotonGroup failed to meet consensus expectations. At the other end, furniture group Nick Scali, music and electronics retailer JB Hi-Fi and Super Retail Group all delivered strong results, exceeding expectations. Similarly, Premier Investments, owner of a range of retail brands including Smiggle, Just Jeans and Portmans, upgraded its guidance and forecast record first-half earnings when it reports its interim results on March 21.

Results from various residential property developers provided evidence that Australia’s housing market remains buoyant, even if it is at the top of the cycle, stimulated by record low interest rates. The Sydney market is clearly strong. With a national portfolio of assets, Cedar Woods Properties posted a strong interim result after experiencing a record number of off-the-plan or pre-sales. Cedar Woods increased its full-year guidance, with the company expecting to deliver a record profit for 2016-17 of approximately $45 million.

Highly priced companies disappoint

Ahead of the reporting season, there were the usual high hopes for companies trading on significant price-to-earnings ratios. Companies such as Baby Bunting, Domino’s Pizza and Bapcor, Australia’s largest car parts supplier, generally disappointed the market and failed to deliver the profit growth needed to push their share prices higher.

Positive outlook

The overall outlook for the sharemarket is positive, underscored by the earnings per-share growth trend. Evidence of Australia’s stronger economic position can be deduced from the fact that few companies mentioned the economy in their results commentary or resorted to blaming weak economic conditions for poor performance.

That said, the economy is patchy. NSW and Victoria are steaming ahead, while WA and Queensland remain the laggards. We expect this year’s federal budget will show an increase in government revenue on the back of higher commodity prices.

Our positive market outlook is tempered by the potential for further volatility caused by the unpredictable nature of the Trump administration. In recent weeks, concerns surrounding the worsening diplomatic ties between the US and its key trading partners and allies weighed on markets around the world. Other global events on the horizon including the French and Italian elections and the triggering of Article 50 in Britain also have the potential to negatively impact the local bourse and contribute to volatility in 2017.