With earnings season just about to kick off, Goldman Sachs has been busy running the rule over a number of popular ASX shares in order to see which are likely to outperform expectations and which are likely to disappoint.
The companies that Goldman Sachs expects to surprise positively in August were named here earlier. Whereas a number of the shares it believes could disappoint next month are listed below:
Adelaide Brighton Ltd (ASX: ABC)
Goldman Sachs suspects that cement price deterioration for its South Australian business could weigh heavily on this building products company's performance in FY 2019. Overall, the broker is concerned that Adelaide Brighton could fall short of its full year NPAT estimate of $166 million. Especially given the company has "guided to a larger than normal 1H/2H19 earnings skew of 35/65%."
Bendigo and Adelaide Bank Ltd (ASX: BEN)
As this regional bank's deposit base has the highest exposure to retail/SME stable deposits and given its skew to more rate-inert deposits, Goldman notes that it has less opportunity to reprice these products lower as cash rates fall. As a result, it expects the bank's net interest margin trajectory to underperform its peers.
Sims Metal Management Ltd (ASX: SGM)
With scrap markets across both seaborne and domestic channels remaining challenged, and with little evidence of a recovery, its analysts "believe that volumes this half for SGM will likely to remain subdued. As a result, we think there is downside risk to consensus estimates, which in our view have not fully incorporated the volume drop off." Goldman expects FY 2019 EBIT of ~$216 million, which is around 7% below the consensus median estimate of $230 million.
Spark New Zealand Ltd (ASX: SPK)
According to the note, its analysts this telco company to "disappoint at its FY19 result, with revenue growth below guidance (i.e. +0-2% vs. GSe -0.3%) and capex above (GSe NZ$440mn vs. c.NZ$410)." This is due to its weak first half and the NZ government's decision to reject its 5G network proposal.
Tabcorp Holdings Limited (ASX: TAH)
Goldman expects Tabcorp to benefit from a strong run of jackpots in its Lotteries division and merger synergies from its Tatts acquisition, but it expects management to disappoint with cautious guidance for FY 2020. This is due to structural challenges it continues to face in its wagering business and the fact that the strong jackpot run is unlikely to be repeated next year.
Treasury Wine Estates Ltd (ASX: TWE)
Finally, its analysts expect this global wine company to deliver on expectations and achieve EBITS growth of 24.8% in FY 2019. However, due partly to lower grape production in FY 2017 and subdued trends in the Americas, it has forecast EBITS growth of just 11.9% in FY 2020. This is well short of Treasury Wine Estates' guidance of 15% to 20%.
