According to a note released today, stockbroker Morgans has named three companies which it expects to disappoint in the upcoming earnings season.
The broker has picked out Aurizon Holdings Ltd (ASX: AZJ), Ansell Limited (ASX: ANN), and QBE Insurance Group Ltd (ASX: QBE) as likely candidates to disappoint in August. So should you avoid these three now?
Aurizon Holdings Ltd
Aurizon is an infrastructure owner specialising in the haulage of coal and iron ore. It's fair to say that its half year results were very disappointing. It reported an 11% fall in revenue, leading to a $108 million loss, compared to a $308 million profit the previous year. For the full year I wouldn't expect too much of an improvement so it might well be one to avoid. It does appear as though conditions have remained tough for the company. It recently announced changes to its senior management structure as part of an ongoing transformation program it hopes will help deliver greater efficiencies in the company's drive to continued improvement in financial performance.
Ansell Limited
Whilst it hasn't been a great year for shareholders of the leading provider of health and safety protection solutions, things have been steadily improving. Its share price is down by about 9% so far in 2016, having clawed its way back from being almost 30% lower. Following a disappointing half year result, its full year results are expected to come in far lower than last year. But at just under 15x forecast full year earnings I believe Ansell could be a good investment for patient buy and hold investors.
QBE Insurance Group Ltd
Due to its exposure to the European market, this insurance giant has been hit hard by the Brexit. Its shares are still down by over 8% since the vote and unfortunately are lacking a catalyst to take them back higher again in my opinion. But having said that, I can't help but feel that the market has now priced in a disappointing half year result. Whilst I currently have a preference for Suncorp Group Ltd (ASX: SUN), I believe there could be an opportunity for patient investors to pick up QBE Insurance shares as a long-term investment.
