ASX shares have had a fairly strong year. The benchmark S&P/ASX 200 index (ASX: XJO) set to finish 2024 more than 8% in the green.
As we look ahead to early next year, ASX listed companies will be reporting their financial results for the period ending December 31, 2024.
Two companies are well positioned as we roll into earnings season according to the experts. These are ResMed Inc (ASX: RMD) and Telstra Group Ltd (ASX: TLS).
While these companies are in completely different sectors – healthcare and communications, respectively – they share one thing in common: both are projected to report strong earnings this period. Let's take a closer look.
ASX shares projected to report strong numbers
First off the block is ResMed. It is in the sleep apnoea treatment business. Sleep apnoea is treated using continuous positive airway pressure (CPAP) machines. This is ResMed's niche.
After competitor Philips recalled its CPAP machines due to potential health risks in 2021, ResMed stepped up to claim a huge chunk of market share.
Sleep apnoea is a huge domain. We're talking a market with an estimated 1 billion people affected worldwide, according to medical journal The Lancet.
And ResMed now holds approximately 80% share of this market, Airlie Funds Management estimates.
Airlie also notes that, from FY12 to FY23, the ASX share grew revenues by 11% per year on average.
In its Q3 2024 update, ResMed's revenues were up another 11% year over year to US$1.2 billion, keeping this trend. Meanwhile, operating profits were up 34% year on year.
According to Tradingview, the analyst consensus is that the ASX share is expected to produce revenues of US$1.27 billion for this quarter.
If correct, this equals 15.5% year-over-year growth ahead of the long-term trend above.
Consensus also estimates ResMed to pull this to US$2.32 earnings per share (EPS), a 43% growth rate.
Airlie Funds' Emma Fisher reckons there is still plenty of value on offer in ResMed. Even considering its 47% surge this year. Speaking to The Australian Financial Review:
We consider this great value for a global leader with very little debt, generating over $US1 billion annual free cash flow, growing at double digits with almost no competition.
In November, my Foolish colleague James noted that Ord Minnett had a buy rating on ResMed with a price target of $40.05. The broker is forecasting a total EPS growth of 13% in 2025.
Telstra set to deliver the goods
The second ASX share expected to deliver strong numbers is Telstra. Shares in the telco giant have climbed a more modest 2% this year.
But they've rallied hard from their June lows. There they bottomed at $3.42 apiece and have surged 18% to fetch $4.03 at the time of writing.
We have to examine half-yearly data for Telstra, as the telco giant reports its earnings on this basis (versus quarterly). The six months ending December 31, 2024 (today) is the period in question. This corresponds to H1 FY25.
According to broker data obtained from Tradingview, consensus analyst estimates project Telstra's sales to grow to $11.84 billion in H1 FY25, up from $11.7 billion in the second half of FY24. This is a growth of 1.3%.
But they also expect profits to grow by 50% over this same period, forecasting EPS of 9 cents for the half. Profit growth is expected to outrun sales growth.
That means every dollar of new revenue is projected to produce $38 additional profit for the telco giant this half (50% / 1.3% = 38).
Goldman Sachs is one broker that's been consistently bullish on Telstra this year.
In its December 23 note on the company, Goldman reiterated that Telstra is the "incumbent telecom operator in Australia". It expects 'low risk' profits from the telco:
We believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive.
Goldman values the ASX share at $4.50 apiece. It also forecasts fully franked dividends of 19 cents per share in FY25.
Foolish takeaway
ResMed and Telstra might cater to different investor tastes, but experts still rate both stocks highly.
Both ASX shares are also poised to deliver solid numbers in their upcoming earnings if brokers are correct in their projections.
Time will tell if the companies will execute on this or not.
