MENU

2 potential August reporting season heroes to watch

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.

These aren’t the only stocks poised to outperform in FY19. The experts at the Motley Fool are tipping another rising superstar to keep delivering the goods.

Click on the free link below to find out what this stock is.

The ASX small cap up 285% with no sign of stopping...

One Australian company has developed a state of the art device that's revolutionizing hospitals all over the world. Even better, this device is so profitable that the company rakes in 90% margins. That's a lot of cash. So no wonder the stock's up 285% since 2008 – with no signs of stopping...

To discover the name and code, simply click the link below. You'll discover our expert's #1 medical technology pick... and you can decide for yourself whether to get invested today.

Click here to claim your free report.

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Brambles Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!