Goldman reveals the ASX shares that could surprise to the upside (and downside) this reporting season

While reporting season has technically begun with the release of the Credit Corp Group Limited (ASX: CCP) half year result on Wednesday, it won’t really ramp up until Monday.

So, that gives us a bit of time to look at some of the ASX shares that Goldman Sachs is tipping to outperform or underperform expectations this month.

Potential to outperform

Goldman believes that the following ASX shares have the potential to outperform the market’s expectations in February. Here’s what it is saying:

Breville Group Ltd (ASX: BRG)

The broker has warned short sellers that this appliance manufacturer could surprise to the upside with its full year guidance this month when it releases its half year results. It said:

On Discretionary our top pick remains Breville – De’Longhi 4Q came in better than expected and the stock is likely to short squeeze on stronger than expected full year EBIT guidance at 1H23 results.

Temple & Webster Group Ltd (ASX: TPW)

Its analysts are also very bullish on this online furniture and homewares retailer. In fact, the broker not only expects a stronger than consensus half year result, it is expecting Temple & Webster to outperform over the medium term. The broker commented:

Our FY23/FY24/FY25 revenue forecasts are +2.6%/+5.2%/+3.9% ahead of the market (Visible Alpha Consensus Data). We are more constructive around the medium term revenue outlook despite category level headwinds.

Woolworths Group Ltd (ASX: WOW)

Goldman is expecting this retail giant to deliver a strong result this month. In light of this, it appears to believe the market is being too negative and that it deserves to trade on higher multiples than its arch rival. It said:

We expect an outperformance trend for WOW vs. COL in comp sales see margins beginning to come through from 2Q23 on stronger omni-channel Xmas trading as well as more targeted promotions. On GSe, WOW is trading at a similar FY23E P/E vs. COL.

At risk of underperforming

Unfortunately, Goldman isn’t very positive about the prospects of these ASX shares this month. Here’s why it is tipping them to underperform expectations:

Altium Limited (ASX: ALU)

This electronic design software platform provider has been tipped to fall short of the market’s expectations during the first half. Goldman is expecting Altium to deliver first half EBITDA of US$43 million, which is 3.6% short of consensus estimates. Its analysts are then expecting the same for its full year earnings.

Coles Group Ltd (ASX: COL)

Another ASX share that could underperform expectations according to Goldman Sachs is Coles. It believes that margin compression is weighing on the supermarket giant’s performance. As a result, although it expects Coles’ sales to be a fraction ahead of the market’s estimates in FY 2023, its net profit assumption is 5.2% lower than the consensus. For the first half, Goldman said:

In 1H23, we expect group sales growth of 3.7% and EBIT growth of 0.4% as we expect ~10bps margin compression to 4.6% EBIT margin.

Wesfarmers Ltd (ASX: WES)

Finally, Goldman isn’t feeling very positive on this conglomerate’s prospects this month due largely to its Bunnings business. It warned:

We remain Sell-rated on WES as weaker home improvement trend and negative comps in 2H23 with Bunnings, at highest risk of volume deleverage impacting EBIT margins.

The post Goldman reveals the ASX shares that could surprise to the upside (and downside) this reporting season appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium and Temple & Webster Group. The Motley Fool Australia has positions in and has recommended Coles Group and Wesfarmers. The Motley Fool Australia has recommended Temple & Webster Group. 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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