Spring has been difficult for Australian investors. The S&P/ASX 200 fell 3.1% in September, as bond yields, oil prices and inflation continued to weigh on sentiment. The Reserve Bank added to the pressure on 29 September, lifting the cash rate by 25 basis points to 4.60%. It was the fourth hike of the year and took rates to their highest level since November 2011.
Higher interest rates tend to put pressure on expensive, long-duration shares. Businesses with strong cash flow, pricing power and sensible balance sheets are better placed to handle the environment. Here, we look at one company in each sector that stood out after reporting. Some are high-quality businesses, but that does not necessarily make them good value at today’s share price.
Basic Materials
BHP’s shares closed at $66.23 on 31 August, below a recent record high of 68.77. In FY26, underlying EBITDA rose 27% to US32.9 billion, with copper contributing 54% of group earnings. The company’s full-year distributions totalled $2.431 per share, equivalent to a fully franked yield of about 3.7%.
Copper is becoming BHP’s main earnings driver, while net debt fell to US$8.7 billion despite continued growth spending in Chile, Canada and Australia. We think the business is difficult to fault. The valuation is less compelling: the shares trade at a little over 24 times earnings, and the average broker target of $58.68 is about 10% below the share price. BHP is a quality company to watch, but we would be more interested on a pullback.
Communication Services
Telstra reported FY26 net profit of $2.4 billion, up 2.7%, and announced a further share buyback of up to $1 billion. The full-year dividend rose 10.5% to 21 cents per share, with the final payment 90% franked. The shares were around $4.80 in late August.
Telstra’s results were supported by mobile price rises and cost reductions, including about 1,200 job cuts. But those levers may become harder to repeat each year. The shares fell 3.2% on results day and reached a new annual low in the following fortnight. In our view, the appeal is the reliable, growing income rather than significant capital growth. The trailing yield is about 4.4%.
Consumer Cyclical
Wesfarmers’ FY26 profit rose 8.3% to about $2.9 billion, excluding significant items. The full-year ordinary dividend increased 7.8% to $2.22 per share. Bunnings revenue rose 4.1% to $20.4 billion, while earnings before tax increased 5.1% to $2.45 billion.
Cost-of-living pressure is encouraging consumers to trade down, which is helping Bunnings and Kmart’s everyday-low-price models win share. Bunnings’ early FY27 sales growth is tracking slightly ahead of the 3.9% recorded in the second half of FY26.
The concern is that Bunnings and Kmart account for about 85% of group earnings. Wesfarmers shares fell around 6% on results day, despite an in-line result. Housing-market exposure at Bunnings and the sustainability of elevated commodity prices at WesCEF are also worth watching. Wesfarmers is a great operator, but we think the shares are fully valued.
Consumer Defensive
Coles shares closed at $24.04 on 31 August. FY26 underlying net profit rose 13.7% to $1.25 billion, while the fully franked full-year dividend increased 13% to 78 cents per share. Online sales jumped 26.4% to $5.6 billion, and gross margin improved to 27.8% from 27.4%.
Cost-of-living pressure tends to benefit the major supermarkets, and Coles continued to grow sales. Sales growth in the first eight weeks of FY27 matched the fourth quarter, while momentum in liquor improved.
A higher capital expenditure outlook and a softer early trading update tempered the initial enthusiasm. Woolworths is also competing aggressively on promotions. We think Coles remains well placed, but investors should watch the cost of that competition and the returns on its investment.
Energy
Woodside’s net profit rose 27% to $1.67 billion in the first half of FY26, helped by a 20% increase in realised prices. Production fell 13%. Scarborough was 98% complete, with the first LNG cargo targeted for the December quarter. The shares were around $32.68 in late July.
Supply disruptions in the Middle East pushed oil and LNG prices higher. Brent crude was about US$94 a barrel at the time, up 54% year to date. Production has been the weaker part of the story: the second quarter was affected by a cyclone and a Pluto turnaround, and full-year guidance narrowed to 174–185 million barrels of oil equivalent.
Woodside is also developing Trion, which targets first oil in 2028, and Louisiana LNG, which targets first LNG in 2029. The investment case depends on Scarborough starting up smoothly and energy prices remaining elevated. Oil prices can fall as quickly as they rise, so we think investors should size any position accordingly.
Financial Services
CBA’s FY26 cash net profit rose 7% to $11 billion. Its final dividend of $2.70 was due on 29 September. The shares closed at $152.43 on 18 September, having retreated from a recent rally high near $171.
CBA is arguably Australia’s best bank, but the market knows it. Profit growth slowed to 2% in the second half compared with the first, and net interest margin was 2.05%. At its recent high, the stock traded at roughly 26 times forecast earnings, which we think is demanding for a mature bank.
Higher rates can support margins, but they also increase the risk of borrowers falling behind on repayments. CBA has pulled back from its peak, but we would want a larger discount before becoming more interested.
Healthcare
CSL’s FY26 statutory result was a US 1 billion share buyback. The shares were around $173.88 in late August, compared with a 12-month average broker target of $164.69.
The headline loss obscured some better underlying signs. Plasma trends improved, the company identified about $176 million in cost savings, and the planned Seqirus spin-off gives management more flexibility. The shares rose 17% in a single day following the update.
After that sharp recovery, we think the next stage depends on evidence that plasma margins are rebuilding. CSL’s first-half FY27 results will be an important test.
Industrials
Transurban’s FY26 proportional EBITDA rose 7.5% to $3,063 million, while large-vehicle traffic increased 6.6%. The distribution rose 6.2% to 69 cents per security and was 98.1% covered by free cash flow. The company expects a 72-cent distribution in FY27.
Toll roads can provide some protection against inflation, and Transurban kept operating cost growth below inflation for a third consecutive year. However, distributions are unfranked, so investors should compare yields on an after-tax basis. Traffic growth is also relatively modest. We see this as a steady-compounding business, rather than one likely to deliver rapid growth.
Real Estate
Goodman Group (ASX:GMG)
Goodman’s FY26 operating profit rose 15.7% to $2.67 billion. Data centres now account for 78% of its $19.7 billion development work in progress. The company expects operating earnings per share to grow 9% in FY27 and held its distribution at 30 cents.
Goodman is increasingly an AI-infrastructure developer as well as a warehouse owner. Its secured and prospective power capacity reached 6.4 gigawatts across 16 major cities, while gearing remained conservative at 6.5%.
The risks are concentration and execution. Demand depends on a relatively small number of global cloud and AI customers, while community opposition could complicate data-centre approvals. We think 9% growth is solid, but the premium valuation leaves little room for setbacks.
Technology
Xero shares closed at $58.04 on 29 September, down about 49% in 2026. FY26 operating revenue rose 31%, with 506,000 net customer additions, helped by the Melio Payments acquisition. The average broker target of about $112 implies roughly 95% upside from the recent price.
This is the highest-risk stock on our list. The shares fell about 31% in September, despite no price-sensitive company announcement. Rising bond yields, concerns about interest rates and fears that AI could erode software subscriptions all weighed on sentiment. The business itself has continued to grow.
The investment case depends on AI concerns proving overstated and Xero integrating Melio successfully. We think anyone considering the shares should be prepared for further volatility and keep any position small.
Utilities
Origin reported FY26 underlying EBITDA of $3.22 billion, down from $3.41 billion, while adjusted free cash flow increased to $2.07 billion. Net debt to EBITDA was 1.6 times, below the company’s target range of two to three times. For FY27, Origin expects Energy Markets EBITDA of $1.55 billion to $1.85 billion and Kraken revenue growth above 20%.
Origin received 1 billion equity raise in July. The company also operates 980 megawatts of battery storage.
The market is still working out how to value Octopus and Kraken, while lower LNG prices are weighing on APLNG earnings. Origin offers a defensive energy business with a growth opportunity, but we think investors should weigh those prospects against the uncertainty around its value.
( Source : Market Analysis )
