Criterion: Jumbo share moves have investors guessing the real state of our corporate health

• Double-digit share moves were common during the just-concluded reporting season, often on scant news
• Australian consumers appear to be holding up well, but the US trends are worrying
• Financial stocks set a positive tone

The just-concluded profit-reporting fiesta shows that when it comes to the share market, Isaac Newton was wrong.

Every action doesn’t have an equal and opposite reaction.

The reporting month for June-balancing companies, August was marked by an unusual incidence of double-digit share price moves.

These were both up and down – but more commonly the latter. Or maybe that’s because the so many of the big names blew up so spectacularly.

“It’s probably the most volatile reporting season I can remember,’ says Investors Mutual portfolio Daniel Moore.

“In terms of share price reactions, if you miss or beat by a small percentage the share prices are having outsized moves.”

A tale of two grocers

For instance, Coles Group (ASX:COL) shares on Tuesday surged close to 10% on signs that the stalwart retailer was gaining market share at the expense of  Woolworths (ASX:WOW).

The next day Woolies shares fell 14%.

“I have never seen Woolworths or Coles move more than 10%,in an opposite direction,” Moore says.

Elsewhere, shares in struggling foreign student wrangler IDP Education (ASX:IEL) on Thursday vaulted 29% – after reporting a 66% earnings slump.

Are things so bad?

The skittish reactions mask the real state of corporate Australia and consumer sentiment.

The results seemed poor, but arguably that was because of clangers such a CSL (ASX:CSL) 17% selloff and the 20% birching administered to the hitherto heroic Guzman y Gomez (ASX:GYG).

But Macquarie Equities data paints a different picture. As of the start of the week, the firm estimates a net earnings “beat” of 7%, relative to consensus market expectations.

Last time around, companies missed consensus by a net 2%.

“Margins are still the main source of positive surprise, with a small beat on sales,” the firm says.

Crucially, current year earnings are not expected to be spectacular – but they shouldn’t go backwards.

Financials set a solid tone

Earlier in the reporting season, investors were buoyed by the strong showing of financial services stocks.

Even the beaten-up AMP (ASX:AMP) – an early bird reporter – was in the good books.

Shares in the September balance date Westpac (ASX:WBC) went on a trot after a strong June quarter, while a similar update from National Australia Bank (ASX:NAB) was also well received.

Wealth platform Hub24 (ASX:HUB) and Praemium (ASX:PPS) reported strong profit gains and fund inflows.

Zip Co (ASX:ZIP) highlighted the renaissance of the maligned buy now pay later sector, with the shares zipping up 20%.

Consumers are still consuming

Australian consumers are a robust lot, as evidenced by well-received results from Baby Bunting (ASX:BBN),  Super Retail Group (ASX:SUL) Nick Scali (ASX:NCK) and Universal Store Holdings (ASX:UNI).

Yesterday, the traditionally hit-and-miss Harvey Norman Holdings (ASX:HVN) capped off the reporting jamboree with a powerful 47% net profit surge, to $518 million.

Chairman Gerry Harvey attributes this to “measured global expansion, continued investment in transformation and in-store innovation”.

Coles CEO Leah Weckert says: “We’re definitely seeing some green shoots in terms of customer sentiment.

“That really has come from the interest rate cut and people starting to feel a bit more optimistic about household budgets.”

Woolies CEO Amanda Bardwell says that consumers are “cross shopping” – probably at Aldi for bargain Norwegian herrings.

Subdued valuations might make retailers a steal – but they also are in a more literal vein.

Coles, Super Retail and Wesfarmers (ASX:WES) all referred to the impact of shoplifting, either the opportunistic variety or organised crime.

At least Australian consumers are faring better than their US counterparts, who face the prospect of very real tariff hits.

The US housing market is rapidly souring as evidenced by James Hardie’s (ASX:JHX) surprise  earnings plunge that saw the shares poleaxed 27%.

Do earnings matter?

The exaggerated share movements suggest investors are ignoring fusty fundamentals such as profits, cash flow and yields.

As Macquarie notes, the market’s recent record highs result not from earnings trend, but the promise of  further rate cuts resulting in more liquidity.

In theory, Moore says, results should not result in double-digit share gyrations.

“The value of a company is its cash flow well into the future,” he says.

“Should one result determine the value of a business that much?”