Reporting season is here, and it's a prime time for savvy investors to uncover hidden gems among ASX shares! When analysts, those sharp-eyed financial experts, give a business a 'buy' recommendation, it's worth noting. But what happens when numerous experts all point to the same ASX share as a compelling buy? This often signals a significant opportunity that savvy investors shouldn't overlook. While only time will truly tell if these predictions pan out, understanding why these experts are so bullish can be incredibly insightful.
Let's dive into two non-tech companies that are currently generating a lot of buzz.
Amcor (ASX: AMC)
Imagine a company so well-regarded that 18 different analysts are recommending it as a 'buy'! That's the current situation for Amcor, a prominent player in the flexible and rigid packaging sector, according to Commsec's compilation of expert opinions. One of these enthusiastic supporters is UBS, which has set a price target of $91.25. This suggests a healthy double-digit percentage increase in the stock's value over the next year, which is certainly an attractive prospect for investors.
UBS recently noted that Amcor's earnings per share (EPS) for the second quarter of FY26 were quite solid, landing right in the middle of their projected guidance and even 3% above market expectations. Looking ahead, Amcor is still anticipating an impressive 12% to 17% growth in FY26 EPS. While the market is currently pricing in the lower end of this range, UBS sees potential for more.
But here's where it gets particularly interesting: UBS highlighted that the company has provided third-quarter EPS guidance of between 90 cents to $1. Furthermore, they are confident in achieving at least $260 million in synergies by FY26, with a staggering $650 million projected over a three-year period. The momentum for growth synergies also appears to be building, with $100 million in annualized sales already secured.
Why does UBS maintain its 'Buy' rating? They believe Amcor offers a compelling 12% 3-year EPS CAGR (Compound Annual Growth Rate). This growth is underpinned by the successful delivery of those substantial synergies and a positive impact from the all-stock merger with Berry. UBS also suggests that the potential for EPS upgrades could accelerate as synergy realization picks up pace over the next two years. Moreover, Amcor's updated capital allocation strategy is designed to channel more free cash flow towards reducing debt, investing in high-growth areas, and potentially returning capital to shareholders through buybacks. This strategic shift, if executed well, could lead to a re-rating of the stock's P/E ratio from its current 11x to a more typical 15x, a level it often trades at when demonstrating double-digit EPS growth.
And this is the part most people miss: While the focus is often on immediate earnings, Amcor's long-term strategic moves, like the synergy realization and capital allocation, are laying the groundwork for sustained future growth. Do you think these strategic initiatives are enough to justify the bullish outlook?
AGL Energy Ltd (ASX: AGL)
Another ASX share that's catching the eye of experts is AGL Energy Ltd, with nine buy ratings currently in place. This prominent energy retailer and generator is also a favorite among analysts at UBS, who have set a price target of $11.00.
Recent performance has been strong, with AGL's underlying operating profit (EBITDA) and net profit coming in 7% and 21% ahead of market expectations, respectively. This outperformance was driven by robust realized gas retail pricing and strong generation availability.
UBS points out that AGL is well-positioned to navigate the expected long-term market volatility. By owning low-cost capacity assets like its Loy Yang A and Bayswater power stations, which offer operational flexibility, AGL is set to capture a larger share of higher-priced periods. This strategic advantage is expected to fuel year-over-year EBITDA growth through to 2030, provided generation availability remains consistent.
Looking ahead, UBS forecasts AGL's EBITDA to grow at a 10% CAGR and net profit at a 15% CAGR between FY26 and FY30. These projections are more optimistic than what many other market analysts are suggesting.
Here's a fascinating development: AGL's battery portfolio is reportedly performing significantly better than anticipated. UBS reiterated that these batteries are capable of sustaining post-tax unlevered asset returns at the higher end of their 7-11% target range, even with the rapid growth in both utility-scale and residential battery installations. This indicates a strong and potentially underestimated revenue stream.
UBS further elaborates on why AGL is an attractive investment: As the market increasingly recognizes the value of low-cost capacity assets, UBS believes that market estimates will likely be revised upwards, supporting a growing dividend profile. The potential for stronger payouts to shareholders could be a significant upside for investors.
Now, let's consider a potentially controversial point: While AGL's operational strengths are clear, the energy sector is subject to rapid technological advancements and regulatory changes. Do you believe AGL's current strategy is robust enough to adapt to future disruptions, or are there underlying risks that the market might be underestimating? Share your thoughts in the comments below – I'm eager to hear your perspective!
