8 ASX stocks UBS is backing to surprise this reporting season

UBS is telling clients that the earnings tide has turned against ASX small caps heading into August reporting season, and that the safest bets are the handful of names where both the result and the outlook are likely to beat.

Across the investment bank's Emerging Companies coverage, only 15% of stocks have seen consensus earnings upgrades of more than 5% for the next reported year (FY27), while 44% have copped downgrades of more than 5%. Despite bearish earnings momentum, share prices have continued to hold up, with 38% of the coverage re-rating more than 10% on a forward price-to-earnings basis, against just 18% that have de-rated by the same margin.

UBS says this combination of higher prices and falling forecasts creates a setup where stocks that miss earnings expectations get severely punished. Given this backdrop, the analysts are steering clients towards conviction over hope. Its eight key picks are names where they see the result and guidance both landing on the right side of expectations, and five of them, carry what UBS calls double-positive risk, meaning upside to both.

Top picks for August reporting season

Here are the eight, all of which are Buy rated, and why UBS backs each one.

NextDC (NXT), target $22.55: The most de-risked growth story of the group. UBS says 92% of consensus revenue between FY27 and FY30 is already contracted, which underpins a forecast 44% four-year EBITDA compound annual growth rate. The stock trades on 33.2x forward EV/EBITDA, but strip out contracted earnings and the capital tied up in its land bank and UBS puts the underlying multiple at 15.6x. The recent capital raise means fresh contract wins can be read as good news rather than balance-sheet strain, and UBS sees several catalysts ahead, including data approvals on new sites and progress on the S4 build.

Megaport (MP1), target $24.20:The AI leverage play, and the priciest name in the group. Since buying Latitude in November, Megaport has signed contracts worth 6.4 times the acquired unit's entire annual recurring revenue. The stock is up ~135% from its June low, the only Key Pick that has risen rather than fallen. It sits on 38.8x FY26 EV/EBITDA, which falls to 10.4x by FY27 as Latitude revenue lands. In that sense, Megaport carries the risk of trading at a high multiple that is heavily reliant on growth execution.

NRW Holdings (NWH), target $7.95: This is viewed as a relatively cheap contractor. UBS forecasts approximately 18% annual earnings growth over the next three years, which values the company at 11.4x FY27 EBITA compared to engineering peers that trade near 14x. The order book alone covers 1.6 times its FY27 revenue forecast, and UBS thinks the market is overstating the hit from the Fimiston contract rolling off in October.

SiteMinder (SDR), target $7.15: The shares have more than halved since October, yet UBS still views this as one of the most defensive travel names because 75% of gross profit comes from subscriptions at 87% margins, insulating it from the cyclicality hitting peers like Flight Centre and Helloworld. It was run-rating 27% constant-currency ARR growth at the half, and UBS argues anything above 20% at the result should drive a re-rate.

Superloop (SLC), target $4.15: UBS forecasts EPS growth of around 49% a year through FY29 before any acquisitions, driven by consumer net-add momentum and expanding margins as it holds pricing steady and keeps costs contained. So a very strong growth compounder.

Service Stream (SSM), target $2.85: A steady grower, where UBS sees earnings growing by 11% annually, backed by a net-cash balance sheet. UBS sees upside coming from utilities margins edging toward 6% and defence work, where it thinks the guided 5% margin is conservative against peers.

WEB Travel (WEB), target $4.60: The cheapest of the group on 10.4x forward earnings. WEB delivered a credible FY26 result with second-half revenue-to-TTV margin of 7.1%, a fourth consecutive half above 6.5%, as its push into directly contracted hotels offset competitive pressure and a rival cutting price to grab share. UBS argues expectations are now so low that any normalisation creates room for a positive surprise, helped by the fact WEB has little exposure to the Australian consumer.

Kelsian (KLS), target $5.50: The re-rate candidate, as Kelsian trades on around 11.4x versus a mid-cycle 15.6x, and UBS sees the multiple recovering over the next six months. The case rests on protection from fuel and labour cost pass-throughs, recent contract wins in Liverpool and Auckland, and net debt falling below 2x after the Tourism divestment. A 4.5% fully franked yield with potential for 8% three-year dividend growth adds to the appeal, and UBS expects little downside surprise at the result given the recent trading update.

The bottom line

Since February, the ASX Small Industrials (ex-financials) forward price-to-earnings has slipped only marginally, from 20x to 19x, even as sector earnings forecasts have been cut far more sharply. That gap between price and fundamentals leaves perfectly priced stocks dangerously exposed to a soft result. The eight companies above are where UBS sees the risk sitting on the upside. Across the rest of the market, investors have quietly priced in more good news than the earnings trend can support.