The media is usually quick to gives its verdict on the profit-reporting season and whether companies are missing consensus analyst forecasts.
What matters more is the outlook for 2012/13 earnings per share (EPS) growth, and on that score results so far have been mixed.
It is still too soon to draw firm conclusions; just over half of companies due to report (by market capitalisation) had posted their earnings as Investor Weekly was published.
More will be known by month's end. But early trends suggest analysts are rapidly lowering their EPS forecasts for 2012/13 earnings.
Macquarie Equities Research, for example, has downgraded its aggregate 2012/13 EPS forecast for companies it researches by 1.3 percentage points to 7.5 per cent.
With analyst earnings downgrades still outnumbering upgrades, it is likely the market will continue to lower its aggregate expectation for 2012/13 EPS growth.
That is the bad news. The good news is consensus earnings forecasts for 2012/13 appear to be adjusting quickly to expectations of slower growth.
That could help the share market rally later this year or next if signs emerge that more companies can beat lowered analyst expectations.
The past few years have had a recurring theme of consensus earnings forecasts being set too high and analysts collectively too slow to reduce their forecasts in a volatile market.
Too many companies, it seems, expected a cyclical recovery in earnings as the economy strengthened, and too many analysts followed suit with their forecast.
That trend appears to be reversing, judging by the early weeks of the reporting season.
In an insightful research note this week, Macquarie said: "FY13 forecasts are being adjusted more broadly compared with the FY12 results. This may indeed suggest a more rapid adjustment is taking place this reporting season for the upcoming year, [which is] a positive development if it indeed leaves the FY13 forecast more realistically set."
An interesting early trend was more EPS downgrades for the second half of 2011/12, compared to the first half.
Typically, analyst downgrades for first-half earnings tend to outnumber downgrades for second-half earnings, Macquarie says. Again, it suggests analysts are collectively lowering EPS forecasts more aggressively, which in turn is feeding into lower forecasts for 2012/13.
Macquarie says the second-half earnings results for industrial companies in the current profit-reporting period "suggests margin pressures may be abating and that stronger-than-forecast revenue growth appears to have supported margins, rather than independently higher margins".
Macquarie's resource earnings estimates for 2012/13 are also falling: forecasts for EPS growth have been downgraded from 13.2 per cent to 11.2 per cent, largely because of higher operating costs. It says the EPS forecasts are premised on commodity prices remaining well above spot-price levels. "Should commodity prices remain at current levels (or decline further) material EPS downgrades are certain for the sector," it says.
Macquarie also notes EPS growth forecasts for banks in 2012/13 have been slightly downgraded, while its forecasts for Australian real estate investment trusts are largely unchanged.
Clearly, there are still risks 2012/13 aggregate earnings will miss consensus forecasts.
A weak resource sector and sluggish EPS growth for banks are big headwinds for an Australian share market that is dominated by these sectors.
But at least the bar for earnings forecasts is being lowered faster, which creates the prospect of earnings upgrades finally starting to outnumber downgrades, a precursor for a sustained share market rally.
Much depends on the global economy stabilising, commodity prices retracing more lost ground, and the local economy gaining more impetus.
Should that happen, the market might find it has, for the first time in a long time, priced in too much bad news for EPS growth forecasts.
