The COVID-19 lockdowns of our two biggest cities have prompted brokers to upgrade their earnings calls on several ASX 200 shares.
While the protracted lockdowns in Sydney and Melbourne are weighing on the S&P/ASX 200 Index (Index:^AXJO), every crisis produces winners and losers.
It's easy to see who the losers are with economists predicting that Australia's GDP could shrink in the current quarter.
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ASX 200 shares getting a lockdown upgrade
But these are boom times for ASX 200 shares that undertake COVID testing. In fact, Goldman Sachs reckons that the market is underestimating the upside for the sector.
"Following the recent increase in COVID-19 cases in Australia, PCR testing volumes have increased significantly, with daily records being surpassed frequently through recent weeks (current peak: 163k, set on 2-Jul)," said the broker.
"The current trailing 30-day average of 98k is the highest level achieved so far."
To put that in context, the 30-day average during August last year when infections hit a peak in Australia was 64,000 tests.
Earnings tailwinds to last a while longer
The more infections nature of the Delta-variant of the virus is driving the demand for tests. It doesn't help that only around 13% of the population in Australia is fully vaccinated.
It's going to take many more months before we get to "herd immunity" levels, which experts believe is north of 60%.
In the meantime, the Healius Ltd (ASX: HLS) share price, Sonic Healthcare Limited (ASX: SHL) share price and Australian Clinical Labs Ltd (ASX: ACL) share price are set to benefit.
Focus on fundamentals
"Given the materiality of COVID-19 testing for the ASX-listed pathology providers SHL, HLS and ACL (GSe: 17-28% of FY21E revenues), our new PCR volume estimates drive +6-10% EBIT upgrades in FY21E and +9-47% in FY22E," said Goldman.
"Whilst significant uncertainty remains, we continue to expect a sharp tapering in COVID-19 testing demand through FY22-23E, but also a greater degree of investor focus on base business fundamentals through this period."
Goldman is recommending investors buy the Healius share price and Australian Clinical Labs share price. It rates the Sonic share price as "neutral".
Lower claims to lift earnings of these ASX 200 shares
Another group of ASX 200 shares that got an earnings upgrade are general insurers. Jarden estimates that the lockdowns will lead to significantly lower vehicle accident claims. Insurers could save around $20 million to $30 million.
That's good news for the Insurance Australia Group Ltd (ASX: IAG) share price and Suncorp Group Ltd (ASX: SUN) share price.
Savings of up to $30m
"Our analysis of prior lockdowns indicates IAG and SUN enjoyed motor claims savings of 1.5% of impacted GWP per week of restrictions in CY20," said Jarden.
"Overlaying similar metrics for estimated Greater Sydney motor GWP implies potential claims benefits of $30m for IAG and $20m for SUN if the lockdown ends on 30 July as planned.
"With Victoria also entering another snap five-day lockdown, this could add a further $4-5m pre-tax benefit for IAG/SUN."
ASX 200 shares to buy today
The earnings boost isn't as significant as for COVID testing ASX 200 shares, but at least the outlook for these insurers isn't looking bleaker.
Jarden is recommending the IAG share price as a "buy" and Suncorp share price as "overweight".
