Six ASX Stocks to Watch: Two Buys, Two Sells and Two Holds

One earnings upgrade has sent a technology stock sharply higher, a lithium producer has reported record output, and a data centre operator is grappling with a major guidance cut after infrastructure delays. These developments reveal a widening gap between companies delivering on expectations and those facing costly setbacks. As the Australian sharemarket digests fresh earnings figures, operational updates and shifting market sentiment on 28 October 2026, six ASX-listed companies stand out for very different reasons: Codan (ASX: CDA) and CSL (ASX: CSL) offer potential bullish opportunities, NextDC (ASX: NXT) and Karoon Energy (ASX: KAR) warrant closer scrutiny for signs of sustained weakness, while PLS Group (ASX: PLS) and ANZ Group (ASX: ANZ) face important tests that could determine their next moves. The challenge is separating genuine momentum from temporary market reactions. We examine the latest available developments and price-action signals to identify two potential Buys, two Sell candidates and two Holds.

BUY: Codan's Latest Profit Upgrade Sends a Powerful Bullish Signal

Codan (ASX: CDA) has emerged as one of the ASX's strongest growth stories, with surging demand for defence communications technology driving successive earnings upgrades. At its annual general meeting on 20 October, management raised its first-half FY27 revenue expectation to A$410 million to A$420 million and forecast net profit of at least A$162 million. That compares with first-half FY26 net profit of A$71.2 million, implying growth of at least 127%. The upgrade followed an earlier September update that had already forecast first-half revenue of A$400 million to A$410 million and net profit of at least A$160 million. Demand for unmanned systems in conflict regions has been a major driver, while the company's communications business is also benefiting from growth outside those markets. Management expects FY27 communications revenue growth at the upper end of its previously announced 30% to 40% range.

The latest upgrade has been accompanied by exceptionally strong price action. Codan shares rose 23.9% in the session reported following its latest trading update, reflecting the market's response to the improved earnings outlook. The company's FY26 results provide further context: annual revenue increased 30% to A$875 million, underlying net profit after tax rose 69% to A$175.2 million, and the fully franked annual dividend increased 70% to 48.5 cents per share. However, the bullish case comes with a valuation risk. Demand from conflict regions can be volatile, and the company has acknowledged that visibility over second-half orders from those customers remains limited. After such a sharp rally, profit-taking is also a real possibility. We see Codan as a potential momentum Buy because its earnings upgrades and share-price strength reinforce each other, but the next test is whether the shares can consolidate their gains while the company delivers on its upgraded outlook.

BUY: CSL's Leadership Change Could Mark the Start of a New Chapter

CSL (ASX: CSL) is attempting to restore confidence following a difficult FY26, when impairment charges and restructuring weighed heavily on its reported earnings. For the year ended 30 June 2026, the biotechnology group reported revenue of approximately US$15.8 billion, down 1%, and underlying net profit after tax excluding amortisation of about US$3.1 billion, down 2%. Operating cash flow reached approximately US$3.5 billion, while the final dividend remained at US$1.62 per share. However, a reported net loss of approximately US$2.6 billion reflected US$7.1 billion in impairment charges, largely associated with Vifor. These figures illustrate the difference between CSL's underlying operating performance and the impact of substantial balance-sheet adjustments.

A key recent development was the appointment of Deborah Waterhouse as chief executive and managing director, effective 1 February 2027. Waterhouse currently leads ViiV Healthcare and brings extensive experience in commercial pharmaceuticals and global healthcare operations. Her appointment creates an opportunity to refresh CSL's growth strategy, improve execution and strengthen the development and commercialisation of new therapies. Nevertheless, the leadership transition will not immediately resolve the challenges facing the business. The next phase depends on reliable earnings growth, stronger commercial execution and evidence that restructuring can improve profitability without undermining its research capabilities. We view CSL as a potential momentum Buy rather than a confirmed technical breakout. The case would strengthen if the share price sustains its recovery and future results demonstrate a clearer improvement in earnings.

SELL: NextDC's Guidance Cut Exposes the Cost of Infrastructure Delays

NextDC (ASX: NXT) has suffered a significant setback after delays to electricity infrastructure for its M3 data centre in Melbourne forced management to reduce its FY27 financial outlook. The facility, designed to support 225 megawatts of capacity, has been affected by delays to planned grid works, pushing the next increase in electricity supply into FY28. On 21 October, the company cut its FY27 net revenue guidance to A$475 million to A$500 million from A$615 million to A$640 million. Underlying EBITDA guidance was reduced to A$245 million to A$265 million from A$385 million to A$410 million. Planned capital expenditure was also lowered by approximately A$1 billion, reflecting changes to the timing of development expenditure and infrastructure requirements.

The market reaction was dramatic, with shares reportedly falling about 42% on 21 October. Subsequent reporting showed a partial recovery, with the stock closing at A$5.75 on 27 October and trading at A$6.31 during the 28 October session. That rebound is important: it indicates that the initial sell-off has not necessarily translated into an uninterrupted decline. However, the underlying operational problem remains unresolved. NextDC has said it will prioritise projects with committed customers, investigate alternative power solutions and consider pausing developments without contracted demand. Chief executive Craig Scroggie has forfeited short-term and long-term incentive payments, while chairman Douglas Flynn has announced plans to resign once a successor is appointed. We regard NextDC as a Sell candidate because the guidance reduction and uncertainty over electricity supply materially weaken the near-term earnings outlook. The partial recovery in its shares means the bearish price-action signal should be reassessed against the latest trading data rather than assumed to remain intact.

SELL: Karoon Energy's Production Recovery Does Not Eliminate Execution Risk

Karoon Energy (ASX: KAR) operates oil and gas assets in Brazil and Australia, with financial performance heavily influenced by offshore production, realised oil prices and the reliability of its producing fields. Its third-quarter 2026 results, released on 22 October, showed a sharp rebound in operating activity. Production rose 110% quarter-on-quarter to 2.27 million barrels of oil equivalent, while sales revenue increased 64% to US$191.6 million. The company also progressed its Who Dat East development in the US Gulf of Mexico, which has been sanctioned, with first production expected in the second half of 2028. Work on the Neon development continued, with a front-end engineering and design decision expected in the fourth quarter of 2026. These developments provide a foundation for future production growth, although the benefits will take time to materialise.

There are still operational and funding risks to monitor. Karoon reported an electrical fault affecting production at SPS-92 and one lost-time injury during the quarter. Management maintained its calendar 2026 production and unit-cost guidance following its 28 September update, while the latest report indicated a strong recovery from the previous quarter. That makes a bearish fundamental conclusion less straightforward than the initial Sell label might suggest. Future performance will depend on production reliability, cost control, oil prices and the company's ability to finance development projects without weakening its balance sheet. We would retain a cautious stance only if current price action confirms persistent selling pressure despite the stronger quarterly results. Unlike NextDC, Karoon's latest operating report does not by itself establish a compelling Sell case. The rating should remain conditional on verified market momentum and further evidence of execution risk.

HOLD: PLS Group's Record Output Meets a Major Expansion Commitment

PLS Group (ASX: PLS) delivered a strong September-quarter FY27 report on 28 October, with record production and lower unit costs supporting its lithium operations. Spodumene concentrate production at Pilgangoora reached 267.6 thousand tonnes, up 25% from the previous quarter. Unit operating costs fell 12% to A$539 per tonne, while revenue reached A$563 million and the cash margin from operations was A$392 million. The average estimated realised price was US$1,809 per tonne on an SC5.2 basis, equivalent to US$2,077 per tonne on an SC6 basis. The company also confirmed that the Ngungaju restart had reached full operational status by the end of October. These figures point to improving operating efficiency and a stronger contribution from its expanded production base.

The next challenge is converting that operational progress into sustainable returns while funding a substantial growth programme. PLS has approved the A$1.9 billion P2000 project, which is expected to increase Pilgangoora production capacity to approximately two million tonnes per annum. First production from the new Jimmagunya processing plant is expected in the September quarter of calendar 2029. A 20-year power purchase agreement with Fortescue is expected to reduce P2000 unit operating costs by approximately A$15 to A$20 per tonne. PLS ended the September quarter with A$2.22 billion in cash and A$2.72 billion in total liquidity, and subsequently completed a US$700 million senior notes offering. Although the operational update is encouraging, the expansion will require careful capital allocation and continued discipline as lithium-market conditions evolve. We retain a Hold as a cautious assessment of the execution and valuation risks, not because the latest operating figures are weak. A sustained positive market response could justify a more bullish rating.

HOLD: ANZ's Earnings Outlook Remains the Deciding Factor

ANZ Group (ASX: ANZ) is approaching its next annual results with several important questions facing management. Cash profit, net interest income, lending growth, deposit competition and credit quality will be central to assessing the bank's performance. Australian banks continue to face pressure from competition for deposits and uncertainty over the outlook for interest rates, while operational costs and the quality of lending remain important determinants of profitability. In commentary reported on 26 October, Morgans maintained a Sell rating on ANZ and set a price target of A$34.44. The broker's FY26 cash-profit forecast was A$7.5 billion, reflecting concerns about the company's ability to deliver its revenue targets amid the complexity of its institutional operations, international businesses and reliance on wholesale and term deposits.

The negative broker stance is a material consideration, but it does not automatically determine our own rating. A Hold would require evidence that the current valuation reasonably balances the risks to earnings against the possibility of more resilient results. The upcoming report should provide greater clarity on margins, operating expenses, credit provisions and management's FY27 outlook. ANZ's relative valuation may offer some support, but a lower multiple alone does not establish that the shares are undervalued. We would therefore avoid making a decisive Buy or Sell call until the latest results and current share-price behaviour provide a clearer signal. The Hold rating is a provisional assessment of the balance of risks, rather than a claim that the market has already confirmed a period of consolidation.

The Verdict: Earnings Upgrades and Price Momentum Separate the Leaders From the Laggards

The six companies highlight how earnings expectations, operational execution and market sentiment can create sharply different opportunities across the ASX. Codan's upgraded earnings outlook and strong share-price response make it a potential momentum Buy, while CSL offers a turnaround opportunity as it prepares for a leadership transition following a difficult financial year. NextDC faces the clearest fundamental challenge after cutting its FY27 guidance because of power infrastructure delays, although its subsequent share-price recovery means further downside should not be assumed. Karoon Energy's production rebound complicates the bearish case, making confirmation from its latest price action essential. PLS Group has delivered record lithium production and lower unit costs, but its expansion programme introduces substantial capital commitments. ANZ, meanwhile, remains a results-driven proposition as questions about revenue growth and profitability persist.

Our preference is to focus on companies where business developments and market behaviour reinforce one another. Codan stands out for its earnings momentum, while CSL needs further evidence that its operational recovery can translate into sustainable growth. NextDC remains a candidate for a cautious Sell assessment given its reduced earnings outlook, while Karoon Energy's rating depends on whether its shares continue to weaken despite improving production. PLS Group and ANZ remain provisional Holds pending clearer evidence on valuation, earnings delivery and market direction. These ratings are assessments of the available evidence, not guarantees of future performance. Before acting on them, the latest ASX announcements, closing prices and trading volumes for 28 October should be checked to confirm that each recommendation reflects the most recent market conditions.