The ASX earnings upgrade cycle is the best we've had in decades and we may yet see a new raft of ASX shares lifting their profit predictions for the year ahead.
Already we have seen a wide range of companies upgrading their profit expectations as they emerge from COVID-19.
This has been happening for several months. The analysts at Macquarie Group Ltd (ASX: MQG) believes the trend is the best in recent memory.
Image source: Getty Images
More ASX earnings upgrades to come
"Net-earnings revisions have been positive for the last 7 months plus the first half of April," said the broker.
"This is a longer string of positive revisions than at any time during the commodity boom.
"Forward earnings are already up 23% from the low in August 2020, and we think earnings could rise another 15-20% over the next year."
ASX shares that have upgraded earnings expectations
Some of the ASX large caps that have posted some of the best upward earnings revisions in recent times include the James Hardie Industries plc (ASX: JHX) share price and BlueScope Steel Limited (ASX: BSL) share price.
Their efforts have been well rewarded as their share prices are at record or multi-year highs!
Other ASX large cap shares that have also increased their earnings estimates include the Cochlear Limited (ASX: COH) share price and Brambles Limited (ASX: BXB) share price.
The next group of ASX shares to beat market expectations
The bigger question facing investors is which ASX share could be next in line to better consensus expectations.
The experts at Macquarie have identified several on its "buy" list that they think are cum-upgrade.
Among resources shares, the broker picked the Woodside Petroleum Limited (ASX: WPL) share price and South32 Ltd (ASX: S32).
Others include the Nine Entertainment Co Holdings Ltd (ASX: NEC) share price, Woolworths Group Ltd (ASX: WOW) share price and Reliance Worldwide Corporation Ltd (ASX: RWC) share price.
Beware the potential down-graders
On the flipside, the broker also identified ASX shares that could get hit with an earnings downgrade.
Three in particularly stand out as Macquarie has slapped them with an "underperform", or "sell", rating.
These are Zip Co Ltd (ASX: Z1P) share price, Tyro Payments Ltd (ASX: TYR) share price and InvoCare Limited (ASX: IVC) share price.
"We continue to favour reflation trades, with an overweight in resources and a preference for value," added Macquarie.
"We still think US bond yields are too low, with US fiscal spend and the Fed eventually signalling the tapering of QE being potential catalysts for higher yields."
