Fund managers in some of the ASX’s largest companies have endured another bruising session this earnings season after nearly $11 billion was wiped from supermarket giant Woolworths and software heavyweight WiseTech on Wednesday.
The heavy sell-offs are the latest blow in what has been one of the most turbulent reporting seasons for large caps in years, according to investors.
That’s after building materials company James Hardie collapsed nearly 30 per cent and healthcare giant CSL shed more than $20 billion in value and recorded the largest one-day fall in its history last week.
“Compared to the past five years this has definitely been one of the most volatile reporting seasons I’ve experienced,” Atlas Funds Management chief investment officer Hugh Dive said. “And the fact that it’s happening in large, blue-chip names makes it all the more unusual.”
The ASX is now on track for a third consecutive year of shrinking earnings per share. Large caps are on track to deliver a 7 per cent decline in earnings in the 2025 financial year, with growth stagnating again in FY2026, according to broker E&P Financial.By contrast, companies outside the top 20 are expected to grow earnings by 10 per cent this year and 13 per cent in 2026.
Wilson Asset Management, which owns shares in WiseTech, said the wild swings in share prices reflected how investor expectations had set the stage for oversized reactions.
“We’ve seen instances where a company delivers in line or a slight miss,” said WAM analyst Hailey Kim. “But if the expectations were for a greater miss, then the shares just pop because the short interest on those stocks are quite large.”
WiseTech, one of the ASX’s highest-valued technology companies, slumped 11.9 per cent on Wednesday after it missed analyst forecasts. Revenue grew 14 per cent to $US778.7 million in the year to June 30, just below consensus of $US797 million.
“This reporting season across the entire market the price reaction has been quite oversized,” said Kim. “The reaction [in WiseTech] is not too surprising, given the disappointment in the headline [numbers] and the nuances included in their guidance ranges.”
UBS equities executive director Rob Taubman also noted the sharp increase in volatility for large caps which he said depended on whether results were on par or missed expectations.
“This is a combination of whenever the multiple of the market rallies versus history, volatility tends to rise,” he said. “A higher percentage of capital is now investing on the basis of near-term earnings changes and guides. So both are creating more volatility.”
The market punishment was clear for Woolworths on Wednesday. The shares plunged 14.7 per cent after the retailer cut its final dividend and posted a 17 per cent fall in underlying net profit to $1.4 billion. Its Australian supermarkets underperformed and discount chain Big W also weighed.
Atlas’ Dive added that the outsized market reactions were sometimes amplified by algorithmic trading.
“I think some of it is [artificial intelligence] bots scraping results calls and sometimes drawing the wrong conclusions,” he said. “Small beats or small misses are also leading to much bigger moves than we’d normally see.”
The fund manager said the market dislocation was visible when a stock rallied or sold off.
“We’ve seen it on both sides, some stocks selling off heavily, but also big rallies. Westpac and Lottery Corporation, for instance, jumped on the back of results. The share price moves don’t make much sense if you look at the fundamentals.”
The Lottery Corporation soared 7 per cent last Wednesday after it beat expectations despite posting a double-digit decline in net profit. And Westpac jumped to the highest level in more than 10 years after a strong third quarter.
Dive said this reporting season stood out because even the large blue-chip names have been slammed. “Normally, those companies don’t move so sharply,” he said.
“The reality is Woolworths and Coles are very similar businesses, they both face the same cost structures, and their growth largely tracks Australian GDP. So seeing Woolworths punished that heavily doesn’t really make sense.”
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