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Top broker tips 5 shares to surprise during earnings season

Earnings season gathered pace last week with a number of key results releases.

On the whole, the results were positive, especially with the likes of IDP Education Ltd (ASX: IEL) and Insurance Australia Group Ltd (ASX: IAG) which pleasantly surprised the market.

While not all companies are going to beat market expectations like IDP Education and IAG did, Goldman Sachs believes a few shares are well-positioned to surprise.

According to a note out of the investment bank, the five shares listed below have been tipped to outperform expectations this month.

Afterpay Touch Group Ltd (ASX: APT)

Analysts at Goldman Sachs believe Afterpay is likely to surprise this month following its recent update. The broker notes that the ANZ business is performing strongly and generating higher revenues than expected. Together with its strong start in the U.S., the broker expects a solid half year result. Further, Goldman believes that management may provide commentary around retail launch partners in the UK when it releases its results.

Coles Group Ltd (ASX: COL)

Goldman Sachs expects Coles to post 3.5% comparable sales growth in its key supermarkets segment during the first half. It also believes the second quarter will have been stronger for its liquor segment. In addition to this, the broker believes that Coles’ balance sheet is strong and it will be able to comfortably fund its development plans, payout an 85% dividend, and maintain its targeted leverage ratios.

CSL Limited (ASX: CSL)

The broker has tipped CSL to outperform in the first half due to robust market conditions for immunoglobulins. It revealed that industry data is pointing to volumes growth of 6% to 7% year on year despite a surprising dip in October. In addition to this, it expects pricing tailwinds in the U.S. and Europe to boost its top line and support its margins.

NEXTDC Ltd (ASX: NXT)

Another company tipped to positively surprise this month is this data centre operator. Goldman believes NEXTDC is well-positioned to take advantage of the industry-wide tailwinds of cloud migration and the Internet of Things. Furthermore, the broker believes that material contract wins at its Sydney 2 facility will highlight the growing demand for hyperscale data-centre capacity across Australia.

Qantas Airways Limited (ASX: QAN)

Goldman believes that Qantas is the best placed airline under coverage to benefit from falling fuel costs due to its strong deployment of fuel cost recovery mechanisms and hedging platform. Its analysts believe the market is underestimating the airline’s control of the domestic market and ability to recover profits through numerous factors including increased airfares and capacity management.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, and Insurance Australia 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 Scott Phillips.

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