The ASX February reporting season has started in earnest, and it's a critical one.
With consumers and businesses starting to reel from nine months of interest rate rises, all eyes will be on whether ASX companies can survive the downturn in one piece.
The team at Wilsons is upbeat.
"We believe the reporting season will be relatively positive," equity strategist Rob Crookston said in a memo to clients.
"The cyclical sectors may provide more positive results than the market expects after continued strength in the global and domestic economies in the last half."
However, investors will need to be selective about the ASX shares they buy, with every word of outlook statements pored over.
Fortunately, Crookston's team has done the hard yards to come up with four stocks that they believe have the best prospects heading into their February updates:
Advertising businesses could surprise
Late on Wednesday, Nine Entertainment Co Holdings Ltd (ASX: NEC) announced it had grabbed the Olympics off incumbent Seven West Media Ltd (ASX: SWM).
The $315 million agreement gives Nine the broadcast and digital rights for the next five games, consisting of three summer and two winter events.
Nine, due to report on 23 February, is one of Wilsons' picks.
"We may see upgrades in the sector over reporting season as higher-than-expected consumer spend corresponds to higher-than-expected ad spend," said Crookston.
"Nine should be a key beneficiary of this opportunity, especially as the stock derated over 2022 and currently sits on a relatively modest PE of ~11x."
Jobs classified site Seek Ltd (ASX: SEK) has stunningly rallied 23.5% year-to-date, but Crookston reckons "there is still room" for its 21 February report to positively surprise.
"We expect a strong showing from Seek as it benefits from a resilient jobs market."
The Wilsons team is looking for a confirmation of its previously stated full-year guidance and "continued strength in the ANZ labour market".
"A strong interim result could lead to consensus earnings upgrades for FY23/FY24," said Crookston.
"We also like the structural story for Seek — significant upside from dynamic pricing model, strategic initiatives and growth fund — that should mitigate any fallout in a cyclical peak in the job market."
'Start of an earnings upgrade cycle'
After years of underperformance, the share price for biotech giant CSL Limited (ASX: CSL) is finally starting to approach its pre-COVID highs.
The post-pandemic era could not come fast enough for healthcare stocks, according to Crookston.
"We expect CSL's earnings recovery to be a beat, driven by better-than-expected plasma collections," he said.
"This, coupled with new product approvals, could lead to a possible guidance upgrade."
The signs point to a potential "start of an earnings upgrade cycle for CSL", he added, revealing that his team is overweight on the stock.
CSL will report Tuesday.
The Qantas Airways Limited (ASX: QAN) share price is up 50% since June, but Wilsons reckons the party will continue into its 23 February results announcement.
"Qantas is set for a bumper earnings season. After being forced to postpone travel plans due to the pandemic, consumers are shrugging off 15-year high ticket prices," said Crookston.
"The business has the capacity to surprise the market positively, and we do not think the valuation is pricing a further upgrade."
Wilsons analysts suspect China's post-COVID reopening could give the airline another tailwind to take off on.
"We think the market underestimates the recovery in Chinese tourists as it did for domestic travel over the last 12 months. This could be discussed in trading updates of travel or international education stocks."
