Top broker picks 6 ASX 200 shares with earnings surprise potential

A leading broker picks its top half dozen this reporting season.

red pen and sheet of paper with A plus written on it

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Highlights:

  • How ASX 200 shares trade this month will likely depend on this reporting season
  • The biggest winners tend to be those that beat expectations as opposed to those with big earnings
  • Goldman has 6 ASX 200 shares on its buy list that it thinks will exceed market expectations

The reporting season is ramping up and will help set the tone for S&P/ASX 200 Index (ASX: XJO) shares for the month.

Your ability to pick the winners and avoid the losers will be key to outperforming. The biggest winners from any profit season tend to be those that deliver beyond expectations. This is more so than shares with the biggest earnings growth numbers.

From that perspective, Goldman Sachs has compiled a list of ASX 200 shares that it thinks can beat the street and are rated "buy" by its analysts.

ASX 200 shares with reporting season upside

Nine Entertainment Co Holdings Ltd (ASX: NEC) could be one such hero this month. This is in part thanks to its exposure to property listing website Domain Holdings Australia Ltd (ASX: DHG).

The broker believes that property listings have performed well ahead of market expectations in the December quarter.

Further, Nine Entertainment may undertake a capital return or make a strategic investment thanks to its strong balance sheet.

The second ASX share to watch during reporting season is the global metal and electronics recycling company Sims Ltd (ASX: SGM).

Strong results from its international peers and Chinese scrap import data is helping drive Goldman's forecast of a significant jump in Sims' margins. The broker's 2H earnings forecast for the company is well ahead of consensus too.

Conviction buys for the February reporting season

Goldman is also tipping great things for zircon and titanium dioxide producer Iluka Resources Limited (ASX: ILU). The company is also on its conviction buy list.

The miner has the potential to deliver above consensus as the zircon and titanium dioxide markets entered a 3-year deficit last year. This lack of supply is driving up prices for the commodities.

Another ASX 200 share that is on Goldman's conviction list is Healthco Healthcare and Wellness REIT(ASX: HCW).

The broker believes that the market is underappreciating the real estate investment trust (REIT)'s upside potential driven by its solid balance sheet, relatively secure income stream, and ample external growth opportunities.

ASX 200 shares that look appetising

Meanwhile, salmon producer Tassal Group Limited (ASX: TGR) could also prove to be a good catch, according to the broker.

"TGR is set to report a strong 1H22 result, with further momentum to build through FY22 as a beneficiary of significantly improved market supply/demand conditions," said Goldman.

Finally, Domino's Pizza Enterprises Ltd (ASX: DMP) shares could also deliver a pleasant surprise.

The fast-food chain came under pressure recently due to its disappointing performance in Japan, but Goldman thinks its results may trigger a turnaround.

The broker believes Japanese trading conditions are starting to improve and that management's growth initiative Project Ignite will drive stronger store rollouts in Australia and New Zealand.

Motley Fool contributor Brendon Lau owns Iluka Resources Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

Smiling man working on his laptop.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Broker Notes

3 ASX 200 shares just scored significant broker upgrades. Here's how

The brokers’ bullish assessments for these ASX 200 shares include share price gains of up to 13%.

Read more »

Three miners looking at a tablet.
Broker Notes

Should you buy Pilbara Minerals shares today?

We canvas the experts' views on this ASX lithium stock following last week's FY24 half-yearly report.

Read more »

Young businesswoman sitting in kitchen and working on laptop.
Broker Notes

3 no-brainer ASX shares to buy under $30

Analysts think these shares are top buys for investors right now.

Read more »

A young female investor sits in her home office looking at her ipad and smiling as she sees the QBE share price rising
Broker Notes

3 ASX 300 shares receiving broker upgrades today (one with 25% potential upside)

This trio of ASX 300 stocks released their earnings results for 1H FY24 yesterday.

Read more »

A woman shows her phone screen and points up.
Growth Shares

2 ASX shares showing 'strong growth' that offer value right now

This pair of quality stocks have upward momentum that can't be denied right now, rising 38% and 15% since the…

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Investor sitting in front of multiple screens watching share prices
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave the thumbs up to these ASX shares last week. Why are they bullish?

Read more »