UBS published a bunch of research reports last week.
I've sifted through them and come up with three S&P/ASX 200 Index (ASX: XJO) companies they say should perform well over the next 12 months.
Let's see who they like.
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SGH Ltd (ASX: SGH)
UBS has reinitiated coverage of SGH, the diversified industrial company, after a blackout period when SGH was attempting to take over BlueScope Steel Ltd (ASX: BSL).
The broker said in their research note, they expect SGH to continue with their M&A strategy, "and to remain disciplined on capital returns hurdles''.
They noted that SGH has recently announced a $500 million buyback, "with leverage now below its mid-cycle target, and at a level that SGH does not expect to constrain its ability to drive inorganic growth''.
UBS said SGH's portfolio companies included uniquely positioned businesses with strong franchises and leading market positions.
They said the companies "are supported by focused management teams that run these operations with an 'owner's mindset' in terms of pursuing operational excellence and consistent cash generation''.
This puts the company in a position to support M&A opportunities and quickly reduce debt as needed.
UBS has a price target of $58 on SGH shares compared to $42.62 at the time of writing.
BlueScope Steel Ltd (ASX: BSL)
UBS said a key issue for BlueScope is where the US steel spread prices settle.
The broker is forecasting a moderation in steel prices from the second quarter of 2027, "as higher prices attract additional imports into the US market''.
But they added there were risks to the upside on steel pricing, "while medium-term demand indicators … have all improved slightly from cyclical lows, supporting a favourable risk-reward outlook''.
UBS said they saw scope for BlueScope to instigate a "sustained step-up in shareholder returns, with buybacks likely to become an increasingly important component of capital management''.
UBS has a price target of $37.50 on BlueScope shares compared to $32.15 at the time of writing.
CSL Ltd (ASX: CSL)
CSL disappointed the market in May with a major earnings downgrade, but the question now is whether it's plain sailing from here.
UBS is hopeful of steady – but not negative – results from CSL, although they note there are still headwinds in the sector.
They said in their note to clients:
Our channel checks suggest competitive conditions have not eased in most major markets and this will inform cautious guidance for FY27, but we are hopeful management will report some recent contract wins.
The broker added:
Under the interim CEO, CSL has refocused on its core plasma business, particularly in the US. Industry feedback suggests the core US hospital market remains sound and CSL has recently gained share, albeit at lower prices. In China, end patient albumin demand appears to have stabilised but the market remains oversupplied.
UBS has a price target of $158 on CSL shares compared to $115.50 at the time of writing.
