[E-Daily Reporter Kim Kyung-eun ] Ahead of the third-quarter earnings season, analysts predict that the focus of earnings improvement will shift to capital goods and transportation sectors, such as power infrastructure and defense. KoreanAirLines(003490), NEXTIN Inc.(348210), and DaeduckElectronics(353200) were cited as stocks with a high likelihood of delivering earnings surprises in the third quarter.

Seol Tae-hyun, an analyst at DB Securities, stated in a report on the 30th, “The third-quarter earnings season will mark an inflection point where the profit momentum of the semiconductor sector—which dominated the market in the first half—begins to slow, and sector-specific differentiation gains momentum.”

According to DB Securities, operating profit estimates for the third quarter of this year for domestic listed companies covered by at least three research firms have been revised upward by 0.4% compared to the beginning of the quarter. By sector, energy and capital goods led the upward revisions in profit forecasts, while the semiconductor sector was among those contributing significantly to downward revisions.

This reflects the weakening of the earnings momentum in the semiconductor sector, which had driven the stock market rally in the first half of the year. Factors cited for the slowdown in semiconductor profit forecasts include the won’s shift to appreciation, a slowdown in the growth of DRAM average selling prices (ASP), and demand pressures resulting from Big Tech companies moderating the pace of their artificial intelligence (AI) investments. In contrast, the capital goods sector continues to rank among the top contributors to upward revisions in profit forecasts, driven by improved performance at companies such as HD HYUNDAI HEAVY INDUSTRIES, LS, and HD KOREA SHIPBUILDING & OFFSHORE ENGINEERING.

Analysts suggest that in the third quarter, investors should select stocks with high earnings visibility. This is because earnings momentum is spreading to the capital goods sector—centered on power infrastructure and defense—as well as to the transportation sector, where companies can offset rising costs by passing them on to customers through freight rates. Stocks that have secured an order cycle or a visible profit turnaround—such as Taihan Cable & Solution, ILJIN ELECTRIC, KoreanAirLines, and PanOcean—ranked among the top picks for expected earnings surprises.

According to DB Securities’ estimates, KoreanAirLines had the highest projected third-quarter earnings per share (EPS) surprise rate at 28.4%. NEXTIN Inc. followed with 23.9%, followed by DaeduckElectronics (19.7%), Taihan Cable & Solution (16.1%), HYUNDAI STEEL (15.9%), TES CO., LTD. (15.5%), ILJIN ELECTRIC (15.0%), Yuhan (14.2%), PanOcean (13.7%), and LGELECTRONICS (11.5%).

Within the semiconductor sector, earnings are expected to vary by stock. NEXTIN Inc. and TES CO., LTD., which are expected to benefit from diversification of overseas clients and the transition to advanced fine-pitch processes, were included among the stocks expected to deliver earnings surprises. On the other hand, WONIK IPS Co.,Ltd. and PSK HOLDINGS INC. and Soulbrain Co., Ltd. were classified as stocks with concerns over a slowdown in earnings. The estimated EPS surprise rate for WONIK IPS Co.,Ltd. was -12.7%, while that for PSK HOLDINGS INC. and Soulbrain Co., Ltd. was -2.8% each.

Analyst Seol stated, “During the third-quarter earnings season, it will be even more important to streamline portfolios toward stocks with verified earnings turnarounds—driven by confirmed orders and the ability to defend selling prices—rather than betting on undervalued stocks.”