Reporting Season is in Full Swing: Which stocks Outperformed?

As the Australian reporting season progresses, two key players in the consumer discretionary sector have caught the market's eye with impressive earnings reports. JB Hi-Fi (ASX: JBH) and Nick Scali (ASX: NCK) have both surpassed expectations, showcasing the resilience of a sector many thought would falter under high interest rates. These strong performances not only reinforce the strength of these companies but also bring Harvey Norman (ASX: HVN) into focus as the next potential standout.

JB Hi-Fi (ASX JBH)

JBH delivered solid earnings, beating net profit expectations by 3.7 per cent. This strong result, along with a better-than-anticipated special dividend, sent the share price soaring over 10 per cent, reaching a new all-time high.

Nick Scali (NCK)

NCK also impressed with a 26.1 per cent increase in net profit for the full fiscal year and a 15 per cent revenue growth for FY23. With both companies exceeding expectations in a sector that has outperformed forecasts, the stage is set for Harvey Norman to produce a standout upcoming report, which could present a major buying opportunity in an environment where rapid share price growth is likely.

Harvey Norman (HVN)

Harvey Norman's broad product range, international presence, and significant real estate investments make it more diversified compared to JB Hi-Fi and Nick Scali. This diversification could add further value to the share price, especially if its real estate arm benefits from potential interest rate cuts signalled by governments worldwide—a development that could positively impact property prices.

Notably, Harvey Norman's share price surged nearly 4 per cent on Monday following the earnings reports from JB Hi-Fi and Nick Scali. It's evident speculators are eager to get in before the report is released. As such, I would encourage you to watch this stock closely, as it could emerge as the top pick in this sector and provide some fantastic trading opportunities in the near term.

What were the best and worst-performing sectors last week?

The best-performing sectors included Information Technology, up 6.02 per cent, followed by Consumer Discretionary, up 5.28 per cent and Financials, up 4.77 per cent. The worst-performing sectors included Utilities, down 2.31 per cent, followed by Materials, down 1.26 per cent and Health Care, down 0.13 per cent.

The best performing stocks in the ASX top 100 included Orora Limited, up 32.28 per cent, followed by Pro Medicus, up 17.63 per cent, and JB Hifi, up 14.87 per cent. The worst-performing stocks included Mineral Resources, down 11.20 per cent, followed by Cochlear Limited, down 9.73 per cent, and Origin Energy, down 7.91 per cent.

What's next for the Australian stock market?

With the dust settling from the recent market panic, the All Ordinaries Index saw a resurgence of buyers last week, closing up over two per cent. Unsurprisingly, volatility also subdued compared to last week, creating an intriguing scenario moving forward.

It’s likely that many investors hit the sell button during this month’s week’s turmoil. Where it gets interesting is whether the subdued volatility last week is a result of buyer absorption from the previous week’s panic selling rather than uncertainty about the market's next move.

For instance, the last significant drop in the All Ords occurred on 19 April, with a weekly fall of nearly 4 per cent. This was followed by two weeks of subdued volatility, where prices remained confined within the weekly range set during the downturn.

While there is a possibility we may experience a lull in the market in the short term, like what occurred in mid-April, the good news is that periods of congestion are often followed by rapid expansion, suggesting the market could become more volatile sooner rather than later and move back towards the previous all-time high of around 8,300 over the next couple of weeks.

While this is a higher probability, keep in mind that we are in reporting season, and if it delivers a significant number of surprises, especially negative ones, falls back down to 7,900 points could be expected.

Regardless, the future outlook for the All Ords is clear. As long as the market holds above the 7,900 level, it’s a bullish signal. If the market falls below 7,900 and closes strongly beneath this level, it suggests a shift in market sentiment.

It’s also worth noting that the upcoming U.S. election and hints of potential rate cuts from major global players could fuel the next leg up for the All Ords, so be prepared for some great trading opportunities over the next couple of months.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.