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3 ASX shares that have beaten market expectations

share market beating

Each reporting season, analysts crunch the numbers to develop a consensus on what to expect from each company as they report. Companies that surprise and beat market expectations are usually greeted with extremely bullish price action. History has shown that companies that beat market expectations usually maintain this positive sentiment for weeks and sometimes months to come.

Here are 3 stocks that have outperformed this reporting season.

CSL Limited (ASX: CSL)

Biotherapeutics company CSL set new all-time highs last week when the company reported its solid results for FY19. Earnings for the full year were in line with expectations, with CSL reporting an 11% increase in revenue of US$8,53 billion and a 17% year-on-year improvement in net profit after tax of US$1,919 million. The company reported strong performances across all divisions, with the immunoglobulin and albumin therapies showing better than expected growth. CSL forecasts FY20 profit guidance to be between $US2.05 billion and US$2.15 billion, beating market expectations of US$2.044 billion.

Following these results, analysts at Credit Suisse upgraded CSL shares to an outperform rating and issued a $249.00 price target for the company. Although a broker note shouldn’t serve as a reason to buy a stock, it does show where institutional sentiment lies in the short and medium term. Analysts at Credit Suisse cited CSL’s full-year result and sales growth as catalyst for the upgrade.

JB Hi-Fi Limited (ASX: JBH)

Despite the doom and gloom forecasted for the retail sector, JB Hi-Fi’s FY19 results saw the company’s share price soar to a new 52-week high. JB Hi-Fi beat market expectations for the full year thanks to better margins and an improvement in sales growth.

In the midst of a tough retailing environment, JB Hi-Fi saw a 7% increase in profits reporting a net profit of $249.8 million, beating previous guidance of $245 million. The positive result was driven by The Good Guys improving profit margins and online sales growth, with JB reporting a 23% increase in online sales for FY19.

ResMed Inc. (ASX: RMD)

ResMed beat all market expectations when it reported fourth quarter and full-year results earlier this month, which saw the company’s share price race to all-time highs. The sleep treatment and medical device company continued its solid growth status reporting an 11% increase in full year revenue of US$2.6 billion. ResMed has been a consistent long-term performer and has great growth potential as it expands its software-as-a-service (SAAS) revenue stream.

Analysts at Morgans recently named ResMed as a high conviction buy. The broker cited the company’s “solid growth across the cores business, and exciting pipeline of new products and growing digital platform.” ResMed has great potential for future growth, especially in the US where it is believed approximately 12 million people suffer from sleep apnoea. 

Should you buy?

Companies that beat market expectations during reporting season can outperform for another few weeks or months. CSL and ResMed have been consistent, long-term performers and could continue to experience positive price action given the bullish sentiment from brokers. However, caution should be exercised as some investors will be looking to take profits. On the other hand, JB Hi-Fi may have beat market expectations, however the lack of broker upgrades could mean that investors should think twice before buying shares in the company.

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Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended ResMed Inc. 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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