Equity analysts from Macquarie Bank have highlighted 8 stocks best-placed to beat market forecasts this earnings season.
With earnings announcements for the 2017 financial year set to kick off in August, the analysts have, in a research note titled Ready for Battle, outlined which stocks they favour.
The list is made up of stocks for which Macquarie’s view of earnings differs materially from the consensus forecasts.
Here’s the table:
There’s no obvious skew towards a particular sector on the ASX, with the list coveringa broad range of industries from financials to industrial stocks and retail.
Macquarie’s analysis is driven by earnings fundamentals. For the 8 stocks which are the most Ready for Battle, Macquarie expects 2017 earnings to surprise on the upside.
That will then form the basis of an upward revision to forward earnings by the broader market.
“On these 8 stocks, our analysts have high conviction that consensus is likely to revise earnings estimates over the course of the next few months,” the bank said.
In determining which stocks make the cut, Macquarie also considers whether the consensus forecast is trending towards their earnings view.
“We aim to include only those stocks where consensus earnings revisions are generally moving towards our house estimates although we do not count out stocks where the consensus is not shifting towards our forecasts yet,” Macquarie said.
In calculating expected earnings, Macquarie uses one of two metrics — either earnings per share (EPS) or earnings before interest, tax, depreciation and amortisation (EBITDA).
“We focus on either EPS or EBITDA, depending upon the key metric that the investor community tends to focus on, for respective stocks,” Macquarie said.
Looking at the market more broadly before this earnings season, Macqaurie also noted that interim results in May and June have been more positive than in prior years.
The chart shows that earnings in May and June this year were both revised upwards, reversing the trend of previous years when “confession season” typically revealed earnings downgrades: