2 ASX Stocks Positioned for Earnings Surprise
Earnings season often delivers more than just numbers. It reshapes narratives. When a company reports results that exceed expectations, the market response can be swift because surprises force analysts and investors to rethink assumptions. These moments are rarely random. They tend to appear when expectations are cautious, when structural improvements are underappreciated, or when parts of the business are improving faster than consensus models suggest.
Two ASX stocks that sit in this zone of possibility are Qantas Airways Ltd and BlueScope Steel Ltd. Both operate in cyclical industries, both have faced heavy scrutiny, and both have elements in their current setup that could lead to earnings outcomes stronger than the market is prepared for.
Qantas Airways: beyond the ticket price story
Airlines are often judged narrowly through passenger volumes and ticket pricing. For Qantas, that view misses a large part of the picture.
Why an earnings surprise is plausible
Qantas delivered a solid FY25 result, with underlying profit before tax rising by about 15 percent year on year. What stood out was not just flying activity, but how diversified earnings have become.
One of the most important contributors is the loyalty business. Qantas Frequent Flyer is no longer a side division. It is a high-margin, cash-generative operation tied to banks, retailers, and partners rather than seat capacity. Data from recent disclosures suggests this segment continues to grow earnings at a faster rate than the core airline.
Because loyalty earnings are more predictable and less fuel-intensive, they can offset softness elsewhere. If loyalty EBIT grows faster than analysts expect, total group earnings can surprise even if passenger growth is modest.
Cost efficiency as a quiet lever
Qantas has been modernising its fleet, bringing in more fuel-efficient aircraft over time. While fleet investment weighs on near-term capital spending, it lowers unit costs across fuel, maintenance, and reliability.
Airline earnings surprises often come not from demand spikes, but from cost control. If fuel hedging, labour efficiency, or maintenance costs track better than expected, margins improve quickly. Even small percentage improvements matter at scale.
International travel still matters
International travel demand has normalised unevenly. Many forecasts remain conservative, particularly around yields rather than volumes. If international routes deliver higher load factors or stronger pricing than models assume, revenue can beat expectations without dramatic capacity changes.
What needs to align
For Qantas to deliver an earnings surprise, a few things need to come together:
- Loyalty earnings continuing to outpace expectations
- Domestic and international yields holding up better than feared
- Fuel and labour costs staying within guidance
- Forward booking indicators supporting confidence rather than caution
Signals worth watching
Quarterly traffic data, commentary on loyalty partnerships, and updates on cost per available seat kilometre often hint at outcomes before the full result lands.
BlueScope Steel: when low expectations meet operational leverage
BlueScope sits at the other end of the industrial spectrum. Steel earnings are cyclical, volatile, and heavily influenced by spreads rather than volumes. That volatility is exactly what creates surprise potential.
Why the bar is set low
BlueScope’s recent earnings have been pressured by softer steel pricing and margin compression. As a result, consensus expectations for near-term performance remain cautious. History shows that when expectations are reset downward, the hurdle to beat becomes lower.
Steel companies often surprise when conditions are not great, but less bad than expected.
Capital discipline sends a signal
One notable development has been BlueScope’s decision to return capital through a special dividend, funded by asset sales and surplus cash. This signals confidence in underlying cash generation and balance sheet strength.
While dividends do not change operating earnings, they influence perception. Companies that return capital while maintaining flexibility often end up being reassessed more favourably, especially if cash flow resilience proves stronger than expected.
Cost control and capex restraint
BlueScope has indicated a pull-back in capital expenditure in future periods. Lower capex does not directly lift earnings, but it improves free cash flow and reduces pressure on margins.
If realised costs come in lower than consensus assumptions, even stable revenue can translate into higher earnings. In cyclical businesses, cost discipline is often the difference between meeting and beating expectations.
Steel spreads and timing effects
Steel earnings are highly sensitive to spreads between input costs and finished steel prices. These spreads can improve quietly before they show up in reported numbers.
If spreads stabilise or improve slightly earlier than expected, earnings can surprise even without a broad steel market recovery. Timing matters as much as direction.
What needs to align
For BlueScope to surprise on earnings:
- Steel spreads must be firmer than consensus assumptions
- Cost reductions need to flow through faster than expected
- Utilisation rates at key operations remain stable
- No major operational disruptions occur
Signals worth watching
Half-year guidance updates, commentary on realised spreads, and changes in cost outlook often provide early clues.
Why these two share surprise potential
Qantas and BlueScope operate in very different industries, yet they share common characteristics that often precede earnings surprises.
Both are cyclical, which means analysts tend to be conservative when visibility is limited. Both have business segments that are improving beneath the surface. Both benefit disproportionately from small improvements in cost or pricing.
Earnings surprises rarely come from blue-sky scenarios. They come from reality being slightly better than pessimistic assumptions.
Risks that should not be ignored
Earnings surprise potential cuts both ways.
For Qantas, weaker travel demand, higher fuel prices, or labour disruptions could limit upside. Airlines remain exposed to external shocks.
For BlueScope, steel pricing could stay weaker for longer, or input costs could rise unexpectedly. Global economic slowdowns still matter.
The presence of risk does not negate surprise potential. It simply explains why expectations remain cautious.
A practical mindset for investors
Investors looking for earnings surprises do not need certainty. They need asymmetry. Situations where expectations are modest, but operational levers exist.
For Qantas, that lever is earnings mix and cost efficiency. For BlueScope, it is cost discipline and the possibility that conditions are less challenging than assumed. Watching data releases, management tone, and operational indicators often reveals whether an earnings surprise is forming before the headline number arrives.
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