Is the S&P/ASX 200 heading into a profit warning storm?


Pact Group (ASX: PGH) $3.25 as at 15/11/2018

Aveo Group (ASX: AOG) $1.70 as at 15/11/2018

Lendlease (ASX: LLC) $12.78 as at 15/11/2018

James Hardie (ASX: JHX) $16.17 as at 15/11/2018

Lovisa (ASX: LOV) $7.85 as at 15/11/2018 (ASX: KGN) $2.65 as at 15/11/2018


Investors should get into the brace position as it feels like our market is headed right into a profit warning storm with the Pact Group Holdings Ltd (ASX: PGH) share price and Aveo Group (ASX: AOG) share price the latest to get hit by an earnings downgrade.

Packaging company Pact Group revised its FY19 earnings before interest, tax, depreciation and amortisation (EBITDA) to circa $245 million from its earlier guidance of $270 million to $285 million.

Shares in Pact Group crashed 9.7% to $3.25 yesterday and is the second worst performing stock on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index.

The silver lining for Pact Group is that the downgrade isn’t caused by falling demand for its services but difficulty in passing on an unexpected increase in resin and contract manufacturing materials costs.

Meanwhile, retirement property company Aveo is the worst performer on the top 200 benchmark with a 9.8% plunge to $1.70 on Wednesday.

Management warned that the slump in the property market and worries about the upcoming Royal Commission into the aged care sector are impacting on sales.

But Pact Group and Aveo aren’t the only ones to shock the market with a downgrade. If anything, it’s a fairly long list of companies that have come out in the past few weeks with dire earnings news.

This includes building materials supplier James Hardie Industries plc (ASX: JHX) and engineering and construction group Lendlease Group (ASX: LLC).

What’s alarming is that a few market darlings in the retail space, such as Lovisa Holdings Ltd (ASX: LOV) and Ltd (ASX: KGN), have also had to fess up to profit misses.

Fears of more profit warnings is probably one reason why the market remains volatile even after the big October sell-off.

The question is whether we will see an increasing number of companies revising down earnings expectations as we head towards the end of the year.

In the face of these great uncertainties, the Market Matters team is organising a FREE Webinar today at midday to address investor concerns and to share their views on where the market is heading over the next few months.

Click here to find out more about today’s webinar.