The anticipated higher interest rate environment and a recovery in the real economy has seen a number of cyclical ASX 200 heavyweights upgraded to an 'outperform' rating on Tuesday. Here are the ASX 200 shares that brokers think could beat the market in the near-term.
Crown Resorts Ltd (ASX: CWN)
The Crown share price jumped 20% yesterday after Blackstone sent the company an unsolicited $11.85 per share takeover offer. Credit Suisse views this as an opportunistic offer to snap up depressed Crown shares amid weak earnings and regulatory risks. The broker believes the proposal suggests that Crown is unlikely to lose any of its casino licenses.
Credit Suisse raised its target for the ASX 200 share from $12.00 to $13.50 with an outperform rating. The Crown share price closed Tuesday's session at $11.85.
Suncorp Group Ltd (ASX: SUN)
The insurance market is cyclical, moving through hard and soft cycles. Credit Suisse has described current conditions as a continued hard cycle whereby premiums increase and the capacity for most types of insurance decreases. This can be a result of factors such as falling investment returns for insurers or increased severity of losses.
Suncorp shares have been under pressure following the significant flooding in New South Wales and South East Queensland. Credit Suisse has taken the view that Suncorp's current -27% price-to-earnings discount to the market is significantly higher than its five-year average discount of -19%.
It also forecasts earnings growth of approximately 11% in FY23 with the continued hard cycle to drive insurance revenue growth and improved margins. Suncorp shares are rated as outperform with an $11.40 target price representing a 15% premium to today's closing price.
Insurance Australia Group Ltd (ASX: IAG)
Credit Suisse sees an uplift in premium growth in the coming years which will translate to improved margins. The broker views IAG's current strong capital position as supportive of higher dividend payments in the near-term as profits recover.
Credit Suisse resumed coverage on Insurance Australia shares with an outperform rating and $5.35 target price – a 12% premium to today's closing price.
Medibank Private Ltd (ASX: MPL)
Similarly, Credit Suisse analysts expect strong premium growth to underpin Medibank's recent turnaround in penetration rates. The broker believes the company could see earnings upgrades in the near-term.
Medibank shares are rated as outperform with a $3.25 target price, which is around 12% higher than Tuesday's closing share price.
QBE Insurance Group Ltd (ASX: QBE)
Credit Suisse believes QBE is most leveraged to a hard cycle. The company is also the only general insurer with exposure to overseas markets, which are experiencing even stronger rate increases.
The broker has an outperform rating with an $11.80 target price, representing a 23% premium to today's QBE share price.
Ramsay Healthcare Limited (ASX: RHC)
Macquarie Group Ltd (ASX: MQG) highlights the upside to the value of Ramsay's Australian operating business that is not reflected in the current share price. The broker sees positive recent activity trends for its healthcare services and believes this ASX 200 share is well-positioned for positive growth in the medium to long term.
Its shares are rated as outperform with a $75.00 target price. This is almost 12% higher than the current Ramsay share price at the time of writing.
Telstra Corporation Ltd (ASX: TLS)
Telstra provided more details regarding its proposed legal restructure on Monday. Credit Suisse commentary focuses on the establishment of Telstra International, which will hold the telco's subsea cable assets. The broker believes this decision reflects the limited overlap with domestic parts of the infrastructure company as well as potential sensitivity around selling subsea cables.
Overall, the broker takes a positive view on Telstra's move, with an outperform rating and a $3.85 target price. On Tuesday, the Telstra share price closed the day at $3.33.
Xero Limited (ASX: XRO)
Credit Suisse views Xero's recent acquisition of Planday as one with attractive metrics that complement its existing business. Despite the Xero share price hitting 5-month lows in March, the broker believes positive data points and the attractive acquisition will drive short to medium-term value.
Positive industry data suggests Xero will experience another four months of more than 20% revenue growth, says Credit Suisse. The broker upgraded its rating from neutral to outperform with a target price of $136. This represents around 12% upside when compared to the current Xero share price.
