Leading broker tips 3 ASX shares to positively surprise during earnings season

Goldman Sachs is tipping Afterpay Ltd (ASX:APT) and these ASX shares to positively surprise during earnings season…

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Earnings season is here and Goldman Sachs has been busy looking at shares that its analysts believe have the greatest potential to surprise. This is in respect to earnings beats or misses, guidance surprises, or capital management.

Three ASX shares that the broker is tipping to surprise positively are listed below. Here’s what you need to know:

Afterpay Ltd (ASX: APT)

Goldman Sachs believes that Afterpay could outperform margin expectations in the first half of FY 2021. It is currently forecasting a net transaction margin of 2% but suspects this metric could come in higher.

It commented: “APT indicated in its 1Q21 trading update that Net Transaction Profit Margins had been maintained in line with FY20 (~2.3%). Our 1H21E is 2.0% as 2Q tends to have higher loss rates associated with peak retail sales in Nov/Dec.”

“However, as there is limited evidence of a deterioration in credit cycle in its key geographies; this is an area of potential positive surprise which could deliver better operating leverage than our forecasts assume, though we acknowledge seeding of new markets (start-up costs) and merchant growth (co-marketing expenditure) may dilute this leverage to an extent.”

Domino’s Pizza Enterprises Ltd (ASX: DMP)

This pizza chain operator is another company which the broker is tipping to positively surprise later this month. According to the note, the broker believes the company’s largely digital order-based delivery and takeaway business model has benefitted the company greatly during the pandemic.

And while store growth in certain markets will have been challenging because of lockdowns, Goldman believes it could surprise in France. It also suggested that commentary on potential acquisitions could go down well with the market.  

It said: “Apart from earnings, sales and store growth momentum in France is a key factor that could provide upside surprise to the market. Additionally, any favorable news on the ongoing search for potential acquisitions could also offer an extension of the future growth runway.”

SEEK Limited (ASX: SEK)

A third ASX share which Goldman Sachs is tipping to surprise is SEEK. It believes the job listings company will deliver a solid half year result and could upgrade its full year guidance to above current market expectations.

The market is currently expecting SEEK to deliver operating earnings of $404 million in FY 2021 but it feels this could be lifted to $420 million.

It commented: “We believe this upgrade will be a result of the continual improvement in macro trends (listings, unemployment etc.) relative to the October levels (which is what guidance was based on). We also believe SEK will provide an update around the sale process for Zhaopin, which could help reduce SEK gearing and help to accelerate growth.”

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Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited and SEEK Limited. 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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