ASX reporting season arrives twice a year like a financial reckoning, and February 2026 has been no exception. From BHP’s copper pivot to Zip Co’s brutal sell-off following a marginal earnings miss, this season has reminded investors that raw profit figures are only part of the picture.
Now is a good time to hone your analytical skills because the ASX 200 is trading close to record highs while individual stocks are plunging into wild fluctuations. Here are five things every investor should be watching closely during reporting season.
1. Earnings vs Expectations: Not Just the Headline Number
The most important lesson from this reporting season is deceptively simple: share prices do not move based on whether profits rise or fall. They move on to how results compare with what the market already anticipated.
Zip Co (ASX: ZIP) is the starkest example. The buy-now-pay-later company posted record half-year earnings, up 86 per cent year on year, yet shares cratered as much as 38 per cent in a single session because the result came in slightly below analyst forecasts and management guided for flat growth in the second half.
Wesfarmers (ASX: WES) told a similar story: profit grew 9.3 per cent and the dividend lifted, but shares still fell 5.6 per cent because Bunnings and Kmart revenue underwhelmed.
Before a company reports, look up the consensus analyst forecast. When results land, measure them against that benchmark, not against last year’s number. A company growing at 10 per cent can still disappoint if the market had priced in 15 per cent.
2. Forward Guidance: Where Management Points the Ship
Financial results capture the past six months. Guidance shapes what happens next. Investors should pay close attention to what management says about the outlook, including revenue expectations, margin trends, cost pressures, and any changes to full-year targets.
This season, companies with clear, confident outlooks were rewarded handsomely. Those that cut guidance or issued cautious commentary, even with a solid half behind them, were punished swiftly.
Inghams (ASX: ING) is a case in point: the company slashed its full-year EBITDA guidance while trimming its interim dividend, and the market responded with sharp selling as future growth looked clouded.
Listen carefully to the language management uses on analyst calls. Phrases like ‘we are monitoring cost pressures’ or ‘conditions remain uncertain’ are often early warning signs worth heeding.
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3. Cash Flow Quality: Look Beyond the Profit Line
Net profit after tax (NPAT) is the figure that typically grabs headlines, but sophisticated investors know it can be manipulated by accounting choices. Operating cash flow tells a more honest story about whether a business is actually generating money.
Cash flow conversion, the ratio of operating cash flow to reported profit, indicates the quality of those earnings. A company reporting strong NPAT but weak cash conversion may be recognising revenue early or deferring expenses.
Ansell (ASX: ANN) demonstrated this well in February 2026, where operating cash flow jumped despite tariff-related cost pressures, signalling genuine operational resilience beyond the headline figures.
Also examine the balance sheet. Debt levels, interest coverage ratios, and dividend payout ratios all help determine whether a company’s financial position can sustain its stated ambitions, especially in an environment where the RBA has resumed raising rates.
4. Margin Trends: The Pressure Gauge of Every Business
Revenue growth is encouraging; margin expansion is where the real value creation happens. During reporting season, track gross margins and EBITDA margins closely, and compare them not just to last year, but to what management previously projected.
Cost-of-living pressures, wage inflation, and supply chain disruptions have squeezed margins across retail, consumer staples, and manufacturing this season. Wesfarmers flagged that cost-of-living headwinds continued to weigh on consumer behaviour, which explained why strong overall profit growth still disappointed the market.
Conversely, Telstra’s steady margin discipline in a higher-cost environment has been a key reason defensive investors have continued to back the stock.
If margins are contracting quarter on quarter, ask why. Is it structural, meaning ongoing competitive or cost pressures, or temporary, such as a one-off supply disruption? The answer should guide how you interpret the result.
5. Valuation vs Reality: Avoid the Perfection Trap
Perhaps the defining theme of the February 2026 reporting season is what analysts call ‘priced for perfection.’ High-growth stocks trading at elevated price-to-earnings multiples demand flawless results. Any blemish, however minor, triggers a disproportionate sell-off as investors reassess whether the premium valuation is still justified.
The lesson from names like Zip Co and REA Group, which opened down 18 per cent on results day before clawing back some ground, is that entry price matters enormously. Even a fundamentally sound business becomes a risky holding when the market has already priced in years of optimistic growth.
By contrast, companies perceived as boring, the banks, diversified miners, and defensive telcos, have been generously rewarded this season simply for delivering steady, reliable results.
National Australia Bank (ASX: NAB) posted quarterly cash earnings up 16 per cent and hit a record share price. BHP delivered underlying profit up 22 per cent and raised its dividend by 46 per cent. Neither result required heroics, just consistency.
The Bottom Line
Reporting season is noisy, fast-moving, and emotionally charged. Prices can swing sharply within minutes of a result, amplified by headlines, commentary, and short-term positioning.
The investors who navigate it best resist the urge to react to the first number they see. Instead, they step back and focus on five fundamentals.
First, how do the results compare to expectations? Markets move on the gap between perception and reality, not just on whether profits went up or down.
Second, what is management signalling about the future? Guidance, tone, and capital allocation decisions often matter more than the backwards-looking figures.
Third, what is the quality of cash flows? Reported earnings can flatter performance, but cash generation reveals the durability of the business.
Finally, are margins sustainable? Temporary boosts from pricing, cost cuts, or favourable conditions are very different from structurally improved profitability.
In the end, discipline and context matter more than speed. Those who anchor themselves to fundamentals are better positioned to turn volatility into opportunity rather than regret.
Sources:
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- Market Index — Zip obliteration: Why the BNPL darling is down 35% today https://www.marketindex.com.au/news/zip-obliteration-why-the-bnpl-darling-is-down-35-today
- Stocks Down Under — Zip Co (ASX:ZIP) Down 31% on a Strong Half, What Did the Market See? https://stocksdownunder.com/zip-co/
- The Motley Fool Australia — Down 45% in 2026, could you double your money buying the dip in Zip shares now? https://www.fool.com.au/2026/02/21/down-45-in-2026-could-you-double-your-money-buying-the-dip-in-zip-shares-now/
- Bloomberg — Zip Shares Fall Most Since 2014 After Warning on Flat Earnings https://www.bloomberg.com/news/articles/2026-02-18/zip-shares-fall-most-since-2014-after-warning-on-flat-earnings
- com — Zip shares slide nearly 40% after flagging flat second-half earnings https://au.investing.com/news/stock-market-news/zip-shares-slide-nearly-40-after-flagging-flat-secondhalf-earnings-4265580
- Rask Media — Wesfarmers (ASX:WES) share price in focus with profit of $1.6 billion in HY26 result https://www.raskmedia.com.au/2026/02/19/wesfarmers-asxwes-share-price-in-focus-with-profit-of-1-6-billion-in-hy26-result/
- Wesfarmers Investor Centre (Official) — 2026 Half-Year Results https://www.wesfarmers.com.au/investor-centre/company-performance-news/2026-half-year-results
- The Motley Fool Australia — Wesfarmers posts 9% half-year profit growth and boosts dividend https://www.fool.com.au/2026/02/19/wesfarmers-posts-9-half-year-profit-growth-and-boosts-dividend/
- Stocks Down Under — ASX Reporting Season: 4 Stocks to Buy, Hold or Avoid https://stocksdownunder.com/asx-reporting-season-2026-halftime-report/
- BHP Official Media Release — BHP Results for the Half Year Ended 31 December 2025 https://www.bhp.com/news/media-centre/releases/2026/02/bhp-results-for-the-half-year-ended-31-december-2025
- Rask Media — BHP (ASX:BHP) share price in focus as profit soars 22% in HY26 result https://www.raskmedia.com.au/2026/02/17/bhp-asxbhp-share-price-in-focus-as-profit-soars-22-in-hy26-result/
- Market Index — BHP rallies to all-time high as copper earnings surge, dividend jumps 44% https://www.marketindex.com.au/news/bhp-rallies-to-all-time-high-as-copper-earnings-surge-dividend-jumps-44
- The Motley Fool Australia — After a 46% dividend hike, are BHP shares a buy for income? https://www.fool.com.au/2026/02/18/after-a-46-dividend-hike-are-bhp-shares-a-buy-for-income/
- Morningstar Australia — Earnings winners: BHP, NAB & TLS lead the pack https://www.morningstar.com.au/stocks/earnings-winners-bhp-nab-tls-lead-pack
- Yahoo Finance / Market Index — NAB hits record $47.96 as quarterly cash earnings rise 16% to $2bn https://au.finance.yahoo.com/news/nab-hits-record-47-96-021100747.html
- Stockhead — Closing Bell: Earnings season pumps up the volume as banks amplify gains https://stockhead.com.au/news/closing-bell-earnings-season-pumps-up-the-volume-as-banks-amplify-gains/
- The Motley Fool Australia — Inghams shares plunge 13% as earnings slump and FY26 guidance cut https://www.fool.com.au/2026/02/20/inghams-shares-plunge-13-as-earnings-slump-and-fy26-guidance-cut/
- Stocks Down Under — Here are 6 of the best results this ASX reporting season (so far), and 6 of the worst! https://stocksdownunder.com/best-results-this-asx-reporting-season-so-far/
- The Golden Times — Earnings season wrap: five results that tell you where the Australian market is heading https://www.thegoldentimes.com.au/earnings-season-wrap-five-results-that-tell-you-where-the-australian-market-is-heading/
- Discovery Alert — ASX Earnings Reports: Key Metrics & Market Analysis https://discoveryalert.com.au/asx-earnings-2026-reporting-season-dynamics/
- The Motley Fool Australia — ASX Reporting Season Calendar, February 2026 https://www.fool.com.au/asx-reporting-season-calendar/
