CRITERION: Reporting season shows the good, the bad and the ugly on the ASX

As the profit reporting season unfolds like an elongated art house classic, investors will be looking through the side plots for the real script about whether Australia is likely to avoid the recession it probably doesn’t need to have.

At the end of week two, it’s a score of 3.5 Rotten Tomato stars: the domestic economy – and profits – are holding up well, albeit with pockets of strength and weaknesses.

With JB HiFi (ASX:JBH) – always a handy bellwether – investors were happy to look beyond the headline 0.4 per cent sales decline for the full year, instead zeroing in on post balance date strength.

Online furniture and homewares leader Temple & Webster (ASX:TPW) took us Back to the Future – to the heady pandemic boom – with a 26 per cent revenue surge to $498 million.

A slew of discretionary retailers including Universal Store Holdings (ASX:UNI) and Accent Group (ASX:AX1) already had released encouraging pre-release updates, indicating sales growth in like-for-like terms.

Of course such results are merely the trailers relative to the numbers from the blockbuster Commonwealth Bank (ASX:CBA) – a.k.a. Show me the Money or Too Big to Fail.

The world’s most expensive bank defied the pundits with a profit that was not quite as much as last time around – but still a lot. CEO Matt Comyn describes the economy as “resilient”, despite creeping consumer and mortgage delinquencies (albeit below historical averages).

The most widely-held stock, Telstra (ASX:TLS) reported a 12.8 per cent profit decline, to $1.8 billion. But it didn’t matter because the telco maintained its dividend for the yield-hungry masses.

Other companies with well-received results include Amcor (ASX:AMC), Seven Group Holdings (ASX:SVW), Evolution Mining (ASX:EVN) and home-grown radiology hero ProMedicus (ASX:PME). The loser’s list is shorter, but it was Dog Day Afternoon for employment house Seek (ASX:SEK) and blood products giant CSL (ASX:CSL).

As broker Wilson’s notes, we should be looking through the prisms of low expectations.

“Since the interim reporting season in February, more companies have received consensus earnings downgrades than upgrades, leaving 2023-24 to be the second consecutive financial year of below average growth,” the firm says.

In earning per share terms, earnings are expected to shrink 3.5 per cent across the board.

Wilsons describes pockets of strength, mainly in the consumer discretionary, healthcare and financial (banks and financial) sectors.

This implies the potential for earnings upgrades, “given the conservative posture of consensus estimates.”

In the retailing milieu, keep an eye on Super Retail Group (ASX:SUL), Premier Investments (ASX:PMV), ARB Corporation (ASX:ARB), Breville (ASX:BRG) and – of course retailing big daddy Wesfarmers (ASX:WES).

In the sprawling small caps sector, Goldman Sachs sees “more misses and beats” on earnings, but it really depends on where you are looking.

A US-oriented family security outfit, Life360 (ASX:360) has developed a broader cult following than Withnail and I and last week’s June quarter numbers did not disappoint.

Goldman Sachs also calls out ReadyTech (ASX:RDY), which provides software to enable payroll management and the administration of tertiary and vocational education.

On the flipside, the upcoming utterances from tech stocks including Data#3 (ASX:DTL), Dicker Data (ASX:DDR), Macquarie Telecom Group (ASX:MAQ) and Hansen Technologies (ASX:HSN) could disappoint.

The firm also reckons leading chicken plucker Inghams (ASX:ING) may fall fowl of expectations, although we thought the humble chook was the go-to protein in tough times.

As with Oppenheimer going into its third hour, there’s still much more to run in the sprawling classic known as the reporting season, a.k.a The Good, the Bad and the Ugly.

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