Morgans names the ASX cyclical shares to buy for earnings season

With earnings season kicking off this morning with the release of the Credit Corp Group Limited (ASX: CCP) half year result, investors may be wondering which ASX shares could be buys before they report.

Well, the team at Morgans has been busy looking at the companies it has under coverage and has picked out a few cyclical ASX shares that it finds “interesting” right now.

These are construction services company Acrow Ltd (ASX: ACF), airline operator Alliance Aviation Services Ltd (ASX: AQZ), baby products retailer Baby Bunting Group Ltd (ASX: BBN), fund manager GQG Partners Inc (ASX: GQG), and energy producer Santos Ltd (ASX: STO).

What did the broker say about these cyclical ASX shares?

Commenting on the market and these ASX shares, the broker said:

We see the S&P/ASX 200 index rangebound in 2024. FY24 EPS is forecast to decline 5% before rebounding 5% in FY25, leaving the heavy lifting down to P/E multiple expansion, but at 16x vs the 14.5x 20-year historical average, there is limited scope for further expansion barring a sharp retreat in interest rates.

While we do not expect the index to do much at the headline level, high-level numbers conceal significant variation across sectors. Cyclicals including consumer and commercial services, media, retail and capital goods offer mid-to-high EPS growth into FY24 at lower relative valuations. Cyclical stocks that look interesting include Acrow, GQG Partners, Alliance Aviation, Baby Bunting and Santos.

What about ratings?

Morgans has price targets of $1.22 on Acrow shares, $5.20 on Alliance Aviation shares, $2.05 on GQG shares, $2.00 on Baby Bunting shares, and $7.80 on Santos shares.

For all but Santos, the broker has add ratings and valuations on these ASX cyclical shares that imply at least 10% upside from current levels.

And in the case of Alliance Aviation, its price target suggests upside of over 50% from current levels. This could make it worth watching very closely during earnings season.

The post Morgans names the ASX cyclical shares to buy for earnings season appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Acrow and Alliance Aviation Services. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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