Bring on the reporting season! I think investors will be looking forward to having something else to focus on instead of trade wars, falling property prices, Trump tweets and regulatory scrutiny.
What's more, next month's reporting season should be a relatively positive one and having some good news to chew on would be a welcomed change as the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) struggles to break above its recent ten-and-a-half year highs.
On that happy note, there are two stocks that could bring extra cheer to investors when they hand in their profit results in August and issue their outlook statements for the year.
What's more, these stocks aren't in the resources sector. It's expected that miners and oil producers like BHP Billiton Limited (ASX: BHP) and Oil Search Limited (ASX: OSH) will be among the biggest reporting season winners given how commodity prices have trended over the second half of FY18 and the strength of their balance sheets.
The profit outlook outside of resources is decidedly mixed and that makes it a little more challenging for investors to hunt for opportunities.
But engineering and construction group Downer EDI Limited (ASX: DOW) is one that isn't likely to disappoint.
Its share price jumped 1.3% yesterday to $7.21 after it announced it had won a five-year maintenance and support contract with Chevron Australia. The news got the market excited even though no figures were provided.
I believe the stock is heading higher as Downer is well placed to benefit from two tailwinds for FY19 – increased spending on infrastructure construction and the ramp-up in capital spending by cashed-up bullish miners.
The falling Australian dollar is also a net benefit to the group, in my view, as it will make them more competitive against offshore rivals bidding on the same projects.
The weaker Aussie will put pressure on input costs, but that hurts everyone. But the exchange rate will make it harder for offshore companies to bid aggressively on project work here as many will need to convert their Australian earnings to report earnings in US dollars.
The other stock that could get a boost next month is global logistics group Brambles Limited (ASX: BXB). The company has so far disappointed the market on the earnings front with the stock underperforming with a 2% drop over the past 12 months when the top 200 stock benchmark is up nearly 10%.
Sentiment could turn soon though, according to JP Morgan which calls the stock as its best pick in the transport sector.
"Based on recent discussions with US pallet manufacturers, recyclers, poolers and customers, we think BXB's share price fails to capture the improving outlook for US industry profitability, which should be reflected in FY19+ reported numbers," said the broker.
"We think FY18 will probably mark the low point for CHEP USA's operating margin. If that's so, we believe BXB's share price will be re-rated."
JP Morgan has an "overweight" recommendation on the stock with a price target of $12.50 a share.
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