It's a harsh reality that no matter how well run a S&P/ASX 200 Index (ASX: XJO) business is, some of their fortunes are heavily dependent on the whim of external cycles.
Conversely this also means that, despite the economic doom and gloom, some ASX 200 shares are currently in a position to ramp up their earnings.
Let's take a look at a couple of stocks cited by the analysts at Alphinity Australian Share Fund:
Image source: Getty Images
'Back to delivering above-market volume growth'
Building materials provider James Hardie Industries plc (ASX: JHX) is looking forward to a revival in the real estate and construction markets after they were battered by steep interest rate rises.
Already the share price has rocketed more than 54% since the start of the year.
The Alphinity team, in a memo to clients, described James Hardie as having "managed through a challenging industry environment and have come through at the other end in a good position to benefit as headwinds ease".
The company has also had to overcome recent internal challenges after its chief executive was booted out for behavioural reasons.
"Despite going through a potentially destabilising management change last year, and even though US mortgage rates have ticked up again, the company appears to have stabilised and be back to delivering above-market volume growth."
James Hardie shares are reasonably popular among the professional community. CMC Markets currently indicates 11 out of 17 analysts rate the stock as a buy.
A terrible 2022 in the rearview mirror now
The second example of a business that's now "firmly in an earnings upgrade cycle", according to Alphinity analysts, is AGL Energy Limited (ASX: AGL).
The energy provider has, to say the least, been through a lot the past 18 months.
"The company has been through the perfect storm of weak wholesale electricity prices, an ill-thought-through attempted demerger and subsequent management and board changes."
The Alphinity team feels like it could be through the worst of it, and that the energy market is turning in its favour.
"While the broader energy transition from fossil fuels to renewables remains a formidable challenge for AGL from an energy generation perspective, wholesale electricity prices have recovered strongly and now appear to be underwritten in the medium term by higher gas prices."
For AGL, these circumstances should mean more than just a "strong recovery" in earnings.
"It will improve its balance sheet strength, which will be an important factor in funding the capital expenditure required for the company to transition to a more renewables-based energy generation portfolio."
AGL shares also have many fans among professional investors. According to CMC Markets, seven out of 11 analysts currently rate the stock as a buy.
