The February reporting season revealed moderate earnings upgrades by Australia’s biggest ASX-listed companies.

But rising costs, ahead of revenue, put a dampener on the overall results.

“There was a strong tone to the reporting period,” write Credit Suisse analysts Hasan Tevfik and Peter Liu.

“However, we believe it could have been better if companies focused more on costs.”

Non-financial revenues were revised higher by 1.4% and operating costs gained by more, 1.6%.

According to Tevfik and Liu, the February 2018 reporting period delivered a net downgrade of 0.1% to ASX200 earnings per share.

Over the last 15 years, the median downgrade was 0.5% during a reporting period.

“While there were not market-wide upgrades like February 2017, we regard the reporting period as Not Bad,” the analysts say.

The stocks suffering the biggest dollar downgrades include Commonwealth Bank, Wesfarmers and Fletcher Building.

Without these, ASX200 earnings per shares would have been up by was upgraded by 0.8%.

Credit Suisse says expectations are now for 7% EPS growth for June 2018 and a further 6% in June 19.

“Although slow, the growth outlook is solid enough to support our view of the ASX 200 Index, reaching 6500 by December 2018,” ,” write Tevfik and Liu.

UBS believes results were marginally better than expected when measured against beats versus misses and average revisions to full
year estimates.

“While reporting season has, as always, been mixed at the stock level FY18 & FY19 estimates have on average been edged 1% higher for large caps, which is a bit better than the Australian norm,” write UBS strategist David Cassidy and associate analyst Jim Xu.

“Revision trends have been less positive on a size weighted basis with estimates edging only 0.2% higher, being dragged back in part by the banking, and telco sectors.

“The most significant large cap positive surprises in our view have come from Qantas, Flight Centre, Fairfax, a2 Milk, Resmed, Computershare, CSL, Insurance Australia Group Origin Energy.

“Significant negative surprises have in our view come from Vocus Group, Suncorp Group, Tabcorp Holdings, South32, Star Entertainment Group, Domino’s Pizza Enterprises, Harvey Norman.”

UBS has retained its full year year ASX200 target of 6275. Consensus estimates for full year EPS growth stands at 6.6% and 4.3% ex
resources.

“However, Australia’s aggregate growth rate is pedestrian in a global context and while reporting season has confirmed pockets of growth, valuations in these growth areas are no bargain,” the analysts write.

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.