Top broker tips 4 shares to disappoint this earnings season

On Monday I had a look at a few shares that Goldman Sachs had tipped to surprise positively during earnings season.

Today I thought I would look at the shares which it believes could disappoint this month. Here they are:

Aurizon Holdings Ltd (ASX: AZJ)

Although Goldman believes that strong coal markets will lead to the rail freight operator delivering a first-half result in-line with expectations, its analysts think there is a chance that management may talk down its medium-term outlook in light of the recent Queensland Competition Authority decision cap its revenues. The broker has a sell rating and $4.45 price target on Aurizon’s shares.

Coca-Cola Amatil Ltd (ASX: CCL)

The beverage company has guided to full-year net profit after tax in-line with its FY 2016 result of $418 million. But Goldman believes that Coca-Cola Amatil could fall short of this due to structural headwinds from declining carbonate consumption and low growth in the Indonesian market as a result of weak wages growth. Goldman has a sell rating and $7.20 price target on its shares. If this proves to be accurate then I think its shares could slide lower.

Domain Holdings Australia Ltd (ASX: DHG)

Although Domain has already announced its revenue growth for the half following the shock departure of its CEO last month, no details were provided in relation to margins. Goldman suspects that the level of cost growth could be greater than expected due to Domain’s investment in its transactional businesses and competition from REA Group Limited (ASX: REA). The broker has a neutral rating and $3.30 price target.

Medibank Private Ltd (ASX: MPL)

According to the note, Goldman expects Medibank will highlight an improvement in its market share trend and is likely to benefit from the low level of hospital utilisation growth through the September 2017 quarter. However, it is concerned with the outlook for top-line revenue growth. Especially after its recent premium increase was the lowest in 17 years and lower than the industry average rate. Goldman’s analysts have a sell rating and $2.72 price target on the private health insurer’s shares. I agree with the broker on this one and would avoid Medibank.

While the shares above may be set to disappoint, I think these quality shares will be the stars of earnings season.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Coca-Cola Amatil Limited and REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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