25/01/06 Potential Results Season Surprises, By ABN

With profit reporting season about to get underway in the Australian market ABN Amro has attempted to assess which companies could produce positive or negative earnings surprises that are likely to result in share price movements.

As the broker notes there are a number of potential catalysts for such share price changes, including the difference between the reported result and the consensus estimates, the announcement of capital management initiatives and other news not already factored into share prices and valuations.

Among its potential positive surprise the broker includes AMP (AMP), as the strong equity market should be supportive for the company’s earnings. The broker rates the stock as Buy.

Macquarie Airports (MAP), which it also rates as Buy, is also a positive contender as the broker suggests there remains potential for an upgrade to its forecast distributions.

Both Sonic Healthcare (SHL) and Brambles (BIL) offer the potential for stronger earnings than the market is expecting, the former from both its domestic and offshore operations and the latter from Chep and Cleanaway.

The broker also notes there is the potential for a surprise acquisition in the case of Sonic and rates both stocks as Buy.

With the chance of CTP reserve releases the broker picks Suncorp-Metway (SUN) as another potential positive surprise, its Buy rating on the stock supported by the chance of stronger than expected earnings given the company’s exposure to the Queensland economy.

Three stocks the broker currently rates as Hold but which it suggests could potentially surprise on the downside are BHP Billiton (BHP), Insurance Australia Group (IAG) and PaperlinX (PPX), the first as a result of cost pressures, the second reflecting increased competition and the third as a result of tough trading conditions.