The days are stretching longer, the mid-year school holidays are over, and it's time for another earnings season. Many ASX companies will be reporting their FY24 or half-yearly results in the next month or so.
That means now is an excellent time to learn more about the companies in your investment portfolio and those on your watchlist.
Company executives often provide detailed commentary about a business's inner workings during reporting season, giving investors a great opportunity to hear directly from insiders.
As this insightful time draws near, we asked our Foolish writers for their thoughts on the best ASX share to buy ahead of the earnings season.
Here is what they told us:
6 best ASX shares to buy before earnings season (smallest to largest)
- Jumbo Interactive Ltd (ASX: JIN), $1.00 billion
- Temple & Webster Group Ltd (ASX: TPW), $1.08 billion
- DroneShield Ltd (ASX: DRO), $1.49 billion
- Super Retail Group Ltd (ASX: SUL), $3.28 billion
- Qantas Airways Limited (ASX: QAN), $9.76 billion
- Telstra Group Ltd (ASX: TLS), $44.83 billion
(Market capitalisations as of market close 19 July 2024).
Why our Foolish writers love these ASX stocks
Jumbo Interactive Ltd
What it does: If you've ever purchased a lottery ticket or made a charitable donation online, there's a fair chance you have seen Jumbo Interactive in action, from managing online art union ticket sales to processing over $850 million in digital lottery sales.
By Mitchell Lawler: I don't believe I can time the market, so I won't sit here and pontificate about how the Jumbo Interactive share price will pop on results. Instead, my preference for Jumbo heading into earnings season rests on the software company's consistency.
Jumbo Interactive has held a prominent spot in my portfolio for around six years now. Yet, I can't think of a single time when I was disappointed by the performance displayed – not the figures but the performance.
A company can have a bad set of numbers from time to time – it happens. What I'm looking for is continual progress on the overarching goals.
In my opinion, Jumbo Interactive is a poster child for dependability. I expect another half-year of exceptional work under Mike Veverka's stewardship, with further expansion of the software-as-a-service and managed services divisions.
Motley Fool contributor Mitchell Lawler owns shares of Jumbo Interactive Ltd.
Temple and Webster Group Ltd
What it does: Temple & Webster is the largest Australian pure-play online retailer of furniture and homewares. It sells more than 200,000 products from hundreds of suppliers. The business also offers a wide range of home improvement products on its TheBuild website, which customers can use to renovate and redecorate.
By Tristan Harrison: The Temple & Webster share price has dropped around 30% since March 2024, so it's a lot cheaper now. But it's making more revenue than ever.
In May, the business reported that its revenue had "remained strong" over the second half of FY24. Sales from 1 January to 5 May 2024 were up 30% year over year. To me, that's an appealing level of growth. Both repeat and first-time customers are driving sales growth, which is a good sign.
The company's balance sheet is in good shape, with more than $100 million cash and no debt, which will enable it to fund both organic and potential acquisitions, as well as an ongoing share buyback.
Temple & Webster continues to invest in developing market-leading capabilities around technology, artificial intelligence (AI) and data, which can set it apart from other online and physical store competitors.
As the ASX share grows, rising revenue should reduce fixed costs to a lower percentage of revenue, boosting overall margins.
Temple & Webster aims for $1 billion of annual sales within three to five years, which would allow margins to increase. In the long term, the company aims for its' business as usual' earnings before interest, tax, depreciation, and amortisation (EBITDA) margin to grow to more than 15%, up from 3.7% in FY23. I think its profit can grow significantly in the next five years.
Motley Fool contributor Tristan Harrison owns shares of Temple & Webster Group Ltd.
DroneShield Ltd
What it does: DroneShield develops and sells AI-powered hardware and software to detect and disable drones. The company's clientele encompasses governments, militaries, airports, commercial venues, prisons, and critical infrastructure worldwide.
By Bernd Struben: I've recommended DroneShield as a top stock pick before. But after the past week's selling action, I believe the ASX All Ords drone defence stock is a top buy before the company reports its half-year earnings results.
DroneShield has achieved powerful growth metrics over the past year, alongside the ongoing proliferation of nuisance and hostile drones worldwide. And with the AI revolution only likely to increase those risks, companies with proven technology to mitigate drone threats are well-placed for ongoing growth.
As for DroneShield's recent performance, the company's first quarter 2024 revenue of $16.4 million was up a stellar 900% from Q1 2023. At the end of April, DroneShield had a $27 million contracted backlog with a sales pipeline of more than $519 million.
In the second quarter, the company saw a successful capital raising and several new multi-million sales orders. I think the half-year results could give the share price a healthy boost.
Motley Fool contributor Bernd Struben does not own shares of DroneShield Ltd.
Super Retail Group Ltd
What it does: Super Retail Group is a leading Australian retailer offering various outdoor and leisure products through well-known brands like BCF, Rebel, and Supercheap Auto.
By Kate Lee: During earnings season, stock prices usually fluctuate based on the company's results compared to market expectations. This means that even if earnings are strong, if market participants expect even better results, stock prices are likely to drop, and vice versa.
In that sense, I believe the consumer sector is a safe place to invest in ahead of the upcoming earnings season because expectations are fairly low.
Even after a 15% surge from the recent low of $12.6 in May 2024, shares of Super Retail Group are still trading at 13 times earnings, compared to its historical range of 7x to 18x.
According to S&P Capital IQ, analysts forecast Super Retail Group's earnings-per-share (EPS) to decline over the next few years from $1.15 in the last 12 months to $1.12 in FY26.
Such low expectations indicate there's room for a pleasant surprise when the tide starts to turn, although the exact timing is difficult to pinpoint. While discretionary spending in the country remains under pressure, this might have been already priced in the ASX consumer share.
Another interesting trend in the share market is the sector rotation. As the Australian Financial Review highlighted, many equity strategists believe that investors are likely to shift away from well-performing sectors, such as ASX banking shares, to less favoured corners of the market, such as real-estate investment trusts (REITs) and small-caps.
By the same logic, I think this sector rotation, driven by the search for better value, could benefit low-PE shares like Super Retail Group.
Motley Fool contributor Kate Lee does not own shares of Super Retail Group Ltd.
Qantas Airways Limited
What it does: Qantas is Australia's flagship carrier airline, responsible for the eponymous Qantas brand, the Jetstar low-cost airline, Qantas Freight, and the lucrative Frequent Flyer business.
By James Mickleboro: Qantas could be a great pick ahead of earnings season — I believe the Flying Kangaroo is destined to deliver another bumper profit when it releases its results in August. This view is underpinned by the transformation of its business model since COVID and its structurally stronger earnings.
Despite that, the airline's shares are still valued at a discount compared to peers and its own history. I'm optimistic that its full-year results could be the catalyst for a re-rating of its shares to higher multiples. And with analysts suggesting that dividends could return in FY 2025, now could be a great time to buy.
Goldman Sachs certainly believes this is the case. The broker has given Qantas shares a buy rating and $8.05 price target. It said, "We expect QAN's earnings capacity to sustainably improve relative to pre-COVID, which is not reflected in Qantas's current valuation."
Motley Fool contributor James Mickleboro does not own shares of Qantas Airways Limited.
Telstra Group Ltd
What it does: Telstra is an ASX 200 blue chip share that needs little introduction to most Australians. It is the largest telecommunications company in the country and the leading provider of both mobile and fixed-line telephony and internet services.
By Sebastian Bowen: It might sound strange at first, but Telstra is one of the ASX 200 shares that I am most keen to hear from this earnings season. Telstra is scheduled to report its full-year earnings on 15 August next month.
This telco has been through the wringer in 2024, as investors became apathetic towards Telstra shares following its decision to keep some of its infrastructure assets in-house last year. But I think there is a significant chance that Telstra's earnings will surprise to the upside when it delivers its report.
Recent price rises won't have trickled through to last financial year's numbers yet. But previous price hikes would have and could help Telstra deliver a better-than-expected full-year result for FY24.
If Telstra announces a final dividend of 9 cents per share for FY24, which I think is possible, its shares could well regain some of their former glory soon after. Regardless of what the company announces, I'm very excited to hear from Telstra this earnings season.
Motley Fool contributor Sebastian Bowen owns shares of Telstra Group Ltd.
