Morgans warns that these ASX shares could disappoint in FY23

Investors may expecting too much from these ASX shares in the second half…

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

Key points
  • The second half of FY 2023 is now well underway
  • A few companies had soft starts to the year but maintained their full-year guidance
  • Morgans believes they could ultimately disappoint in FY 2023

With earnings season now behind, it's time to focus on the second half of FY 2023.

And while the next few months are likely to be very successful for many companies, this may not be the case for all.

According to a note out of Morgans, its analysts believe that some ASX shares are expecting too much from the half. So much so, it suspects that they could fall short of guidance and is warning investors to be careful.

Which ASX shares could disappoint in the second half?

Morgans has warned that there are six ASX shares in particular that could be destined to disappoint in FY 2023.

These are energy company AGL Energy Limited (ASX: AGL), packaging giant Amcor (ASX: AMC), health and safety products company Ansell Limited (ASX: ANN), baby products retailer Baby Bunting Group Ltd (ASX: BBN), property listings company Domain Holdings Australia Ltd (ASX: DHG), and telco Superloop Ltd (ASX: SLC).

The broker highlights that with their guidance for the full year maintained after a soft first half, they will need a significant improvement in their performance in the second half. This is something that is far from guaranteed in the current environment. It commented:

Notable companies (DHG, AGL, AMC, BBN, ANN, SLC) missed forecasts in February. Still, they maintained their full-year guidance, setting the scene for potential earnings disappointment if operating conditions don't recover as planned.

Consensus industrial estimates suggest a second half earnings skew (49%:51%) which is curious given the economic backdrop and is at odds with the typical pre-COVID first half skew (56%:44%). More specifically, 49% of companies are expected to be skewed to 2H, well above the 25% in pre-COVID times. So if post-reporting earnings trends hold, small caps could be again vulnerable at the upcoming May 'confession' season.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Baby Bunting Group and Superloop. The Motley Fool Australia has positions in and has recommended Amcor Plc. The Motley Fool Australia has recommended Ansell and Baby Bunting Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A man in his 30s with a clipped beard sits at his laptop on a desk with one finger to the side of his face and his chin resting on his thumb as he looks concerned while staring at his computer screen.
Broker Notes

Buy, hold, sell: Life360, Northern Star, and Sigma shares

Are these popular shares buys? Here's how analysts rate them.

Read more »

Business man marking buy on board and underlining it.
Broker Notes

6 ASX All Ords shares elevated to strong buy status after March sell-off

The ASX All Ords fell 8% in March after the US and Israel attacked Iran and oil and gas prices…

Read more »

Red buy button on an Apple keyboard with a finger on it.
Broker Notes

Brokers name 3 ASX shares to buy right now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman using a pen on a digital stock market chart in an office.
Broker Notes

Could these ASX stocks double by the end of 2026?

These 5 stocks could be undervalued.

Read more »

An investor wearing a dressing gown and holding a cup of coffee in a yellow mug gives a satisfied smile.
Broker Notes

7 ASX 200 shares just upgraded to strong buy ratings

Looking for inspiration after the March sell-off?

Read more »

A couple sitting in their living room and checking their finances.
Broker Notes

Buy, hold, sell: CSL, Magellan, and Woodside shares

Do analysts think these blue-chips are in the buy zone? Let's find out.

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Broker Notes

Up 32% this week, are Guzman Y Gomez shares a good buy today?

A leading analyst delivers his outlook for Guzman Y Gomez shares.

Read more »