CBA to BHP: How We’re Rating Key ASX Players in 2025

Macroeconomic Moderation Offers Breathing Room, but Uncertainty Lingers Australia’s equity market is entering a more complex phase in 2025. Inflation has moderated, with the Consumer Price Index stabilising at an annualised 2.4% through April, giving the Reserve Bank of Australia scope to adjust policy. In May, the RBA cut the cash rate by 25 basis points to 3.85%, and futures pricing now reflects a strong probability of another reduction in July. Early-year GDP growth was solid, but forecasts have turned more cautious as trade tensions escalate and policy clarity weakens. The labour market, while still relatively firm, showed signs of easing with unemployment ticking up to 4.1% in January. Collectively, these signals suggest the market is entering a transitional period, with monetary easing acting as a partial counterbalance to rising global and domestic headwinds. Investor Focus Shifts as Sector Valuations Diverge and Rate Cuts Loom Within the ASX 200, a notable change in sector leadership appears to be taking shape. Resources and financials continue to represent the bulk of the index, together accounting for 58% of its composition, but investor attention is turning towards the mining sector. Drivers include signs of policy stimulus out of China, a stabilisation in lithium pricing, and the implications of a lower domestic interest rate environment. By contrast, elevated bank valuations, Commonwealth Bank trades at nearly twice the valuation of its U.S. peers, are beginning to look stretched, especially if rate cuts weigh on net interest margins. The market’s forward price-to-earnings ratio has compressed to 15.3x, while dividend yields remain broadly supportive at 4.2%. In this environment, we see growing importance in taking a selective, bottom-up approach as valuation gaps widen and sectoral fortunes diverge. Global Forces Take Centre Stage in Shaping Market Direction Geopolitical and international policy developments are playing an increasingly central role in driving Australian equity performance. China’s recent tightening of rare earth export controls and the prospect of revised U.S. tariffs have introduced new layers of volatility, especially in sectors with global supply chain exposure. The ASX is opening more frequently in close alignment with movements on Wall Street, reflecting the market’s growing correlation with international sentiment. Domestically, corporate activity remains robust, over 48,000 company disclosures were filed last year, with nearly a quarter classified as price sensitive. Meanwhile, short interest has risen sharply during periods of elevated uncertainty, and mid-cap stocks have notably outperformed large caps so far this year. These dynamics suggest a market in recalibration, where local fundamentals alone are no longer sufficient to set direction. For investors, a more global and agile perspective will be essential as policy, trade, and capital flows reshape the investment landscape. With the broader macro picture established, attention naturally turns to the companies that exert the greatest influence on the ASX 200. The index’s top 10 constituents not only drive market performance but also serve as a barometer for sentiment across sectors such as banking, resources, and consumer staples. Now, let’s take a closer look at these stocks, providing our assessment of their positioning and outlook, and offering our view on whether each warrants a buy, hold, or avoid designation at this stage of the cycle. Source: Investor Pulse, Research [1] Commonwealth Bank of Australia (ASX: CBA): Why We See a "Buy" Rating Source: CBA, weekly chart (2025) We initiate coverage of Commonwealth Bank of Australia (CBA) with a Buy recommendation, supported by its consistent earnings delivery and sustained market leadership amid a challenging economic backdrop. The bank’s half-year results to December 2024 demonstrate operational strength, with statutory net profit after tax rising 8% to $5.13 billion, alongside a 4% increase in revenue from ordinary activities to $14.1 billion. Such performance reinforces CBA’s standing as a high-quality institution within the Australian banking sector. Looking ahead, UBS forecasts a solid FY25, anticipating NPAT of $10.28 billion, earnings per share of $6.14, and a return on equity of 13.8%, supported by a favourable net interest margin, low credit losses and strong loan growth. CBA’s shareholder appeal is further strengthened by an increased interim dividend, fully franked and representing 73% of cash NPAT. CBA’s valuation commands a premium, with a P/E ratio of 31.2x, well above peers and the broader financial sector, reflecting its ‘highest quality’ status rather than short-term fundamentals. Despite profit declines in FY24, its share price has defied bearish sentiment to reach record highs, a testament to the market’s appetite for reliability during uncertain times. The bank’s strong capital position, evidenced by a CET1 ratio of 12.2%, and ongoing $1 billion share buy-back programme underpin investor confidence. In a slowing growth environment, investors gravitate towards CBA’s predictability and stable earnings. The bank stands to benefit from an anticipated easing of monetary policy in 2025, which should support households and business confidence. Projections of healthy housing and business credit growth bolster its volume prospects. Meanwhile, disciplined credit practices and a robust balance sheet position CBA to support productive lending, contributing to broader economic activity. In sum, CBA’s operational strengths, combined with a supportive macroeconomic outlook, present a compelling investment case. While market sentiment may fluctuate, its solid earnings profile and commitment to fully franked dividends justify a long-term buy stance on the bank. National Australia Bank Ltd (ASX: NAB): Why We Are Issuing a "Hold" Rating for Now Source: NAB, weekly chart (2025) National Australia Bank (NAB) merits a “Hold” rating at present. The bank’s 1H25 results underline operational strength, with cash earnings rising modestly compared to both the previous half and the same period last year. Statutory net profit reached $3.583 billion, supported by a 1.7% increase in revenue. NAB continues to offer a solid fully franked dividend yield near 4.34%, which remains a key attraction. Shares trade close to their 52-week peak following a strong performance through 2024 and into 2025, with a price-to-earnings ratio around 16.3 to 16.5 times reflecting current fundamentals and near-term expectations. This valuation suggests limited upside from current levels, presenting a balanced risk-reward profile. Strategically, NAB’s renewed emphasis on customer advocacy, speed, simplicity, and technology modernisation is making steady progress. The bank reports encouraging growth in home lending via proprietary channels, increased retail transaction account openings, and a rising share of SME lending. The balance sheet remains well capitalised, with a Group CET1 ratio of 12.01% and collective provisions steady at 1.42% of risk-weighted assets. Management remains cautiously optimistic on the Australian and New Zealand economies but flags escalating global trade tensions as a principal risk. The net interest margin held steady at 1.70% in 1H25; however, stripping out Markets & Treasury contributions reveals a modest decline amid deposit competition, rising wholesale funding costs, and lending pressures, challenges mirrored across the sector. Earnings per share growth forecasts are moderate, with projections of 4.3% for FY25 and 1.9% for FY26, suggesting that current market pricing largely factors in steady, if uninspiring, growth. NAB’s commitment to shareholder returns is evident in its upcoming fully franked dividend of 85 cents per share. Cost discipline remains a focus, with productivity targets exceeding $400 million for FY25 and ambitions to limit cost growth below the 4.5% recorded in FY24. While the absence of imminent catalysts tempers prospects for outperformance, NAB’s well-established franchise, cost control, and strategic focus underpin a stable outlook. Future share price gains will depend on the bank’s ability to translate its strategic initiatives into tangible market share and margin improvements within a competitive environment. We recommend existing shareholders maintain their positions, while new investors may prefer to await clearer signs of earnings acceleration or a more compelling entry point. Wesfarmers Ltd (ASX: WES): Why We Are Maintaining a "Hold" Rating for Now Source: WES, weekly chart (2025) Wesfarmers’ diversified portfolio continues to navigate a challenging retail and industrial landscape, prompting us to retain a “Hold” rating. The group posted a statutory net profit after tax of $1.467 billion in the first half of FY25, following $2.557 billion for the full year FY24. Despite a commendable track record and notable share price gains over the past two years, the company’s elevated valuation, trading on a price-to-earnings multiple close to 37 times, appears to price in much of the anticipated earnings growth, thereby constraining near-term upside. This premium reflects both the resilience of its brands and the risks inherent in delivering on market expectations. The core retail businesses, including Bunnings and the Kmart Group, remain subject to consumer spending patterns and broader macroeconomic pressures. While recent results demonstrated solid operational execution, emerging headwinds such as a potential construction slowdown may temper growth prospects, particularly for Bunnings. Forecast earnings growth of around 7.9% per annum and a projected return on equity of 33.2% over three years are robust but may not justify further multiple expansion in the current environment. Ongoing strategic initiatives, digital transformation and portfolio management among them, will be critical to maintaining momentum. Given the significant share price appreciation in recent years and the demanding valuation, a cautious stance remains warranted. Wesfarmers continues to be a high-quality conglomerate with strong management and a supportive dividend yield, but we would prefer to see a more attractive entry point or clearer evidence of accelerated earnings growth before revising our rating. At present, “Hold” remains the appropriate recommendation. Macquarie Group Ltd (ASX: MQG): Why We Are Maintaining a "Buy" Rating for Now Source: MQG, weekly chart (2025) We reaffirm our "Buy" rating on Macquarie Group (MQG), driven by its resilient and diversified business model that continues to deliver solid results. For the year ended 31 March 2025, Macquarie reported a 5% rise in net profit after tax to $3.715 billion, with the second half showing a notable 30% jump compared to the first. This performance highlights the group’s ability to navigate challenging global markets while improving its return on equity to 11.2%, reflecting strong operational execution and strategic focus. Key divisions such as Macquarie Asset Management (MAM) and Banking and Financial Services (BFS) posted robust growth, with MAM’s profit contribution rising 33% thanks to higher performance fees and a significant asset sale, and BFS growing 11%, supported by an expanding loan book and deposits. Meanwhile, Commodities and Global Markets (CGM) faced headwinds from weaker commodity markets but was partly offset by strength in Financial Markets. The steady contribution from Macquarie Capital rounds out a balanced divisional mix, showcasing the growing importance of the group’s annuity-style businesses, which now make up over half of net operating income and help reduce earnings volatility. Macquarie’s strong capital position, with a surplus of $9.5 billion and a solid CET1 ratio, underpins flexibility for future investments and shareholder returns, including a generous dividend and ongoing share buy-back program. Its global reach and leadership in niche markets position it well for growth in infrastructure, renewables, and technology sectors. Combined with disciplined cost management and strategic capital allocation, we believe Macquarie offers both defensive qualities and growth potential, reinforcing our confidence in it as a long-term buy. Goodman Group (ASX: GMG): Why We Are Maintaining a "Buy" Rating Source: GMG, weekly chart (2025) We maintain our “Buy” rating on Goodman Group (GMG), supported by its strong growth trajectory and strategic position in the industrial property and data centre markets. The company ranks highly on growth metrics, with an Obermatt Growth Rank of 75, reflecting solid revenue and capital expansion relative to peers. This growth is driven by sustained demand for modern logistics facilities and digital infrastructure assets, with expectations for significant increases in revenue and earnings in the coming years. Goodman’s financial position remains resilient, backed by prudent capital management and a healthy balance sheet. Its Obermatt Safety Rank of 75 and a below-average debt-to-equity ratio provide a solid foundation for its ambitious development pipeline. The recent $4 billion capital raise reinforces market confidence and equips the group to pursue growth opportunities, particularly in the rapidly expanding data centre sector. The company’s focus on high-quality logistics and digital infrastructure assets positions it well to capitalise on structural trends such as the rise of e-commerce, supply chain evolution and the surge in data demand driven by cloud computing and artificial intelligence. While valuation metrics appear stretched, reflected in a low Obermatt Value Rank, this is typical of a business aggressively investing in future growth. Goodman’s ongoing reinvestment may suppress near-term distributable earnings but is expected to generate substantial long-term value, justifying its current valuation and supporting our positive view. BHP Group Ltd (ASX: BHP): About Why We Are Avoiding BHP for Now Source: BHP, weekly chart (2025) We currently advise investors to avoid BHP Group despite its position as a mining giant and record nine-month production in copper and iron ore through March 2025. The company is facing significant headwinds, mainly due to softer commodity prices. Iron ore prices fell from around USD 145 per tonne at the start of 2024 to about USD 100 by mid-January, contributing to an 18% decline in realized prices during FY24 and a 39% drop in profit. The Reserve Bank of Australia’s Commodity Price Index also declined 7.7% year-on-year in May 2025. Adding to this pressure is uncertainty around China, which accounts for over 70% of seaborne iron ore demand, with steel production forecast to contract by 2% this year, further dampening demand. BHP has made progress in operational efficiency and is pursuing an ambitious decarbonization strategy aiming for carbon neutrality by 2050. This includes capital-intensive projects like the $1.5 billion Pilbara electrification initiative. However, the transition remains costly and complex, with major developments such as the $12 billion Jansen potash mine in Canada unlikely to contribute to near-term earnings growth. Operational setbacks in FY24, including weather disruptions and port maintenance, alongside Chilean tax reforms and geopolitical uncertainties, add to the challenges. The company’s revenue and earnings per share are expected to decline in the coming fiscal year amid these pressures. While BHP trades at a forward P/E near 10x, below the ASX 200 average, its PEG ratio of around 6x suggests limited growth potential relative to its valuation. The dividend was cut by roughly 50% from record levels due to lower profits, though the yield remains above 5%. Future dividends are expected to depend heavily on the commodity cycle, with forecast payouts around USD 0.75 in FY26 and USD 0.99 in FY27. Given these earnings risks and the uncertain outlook for commodity prices and Chinese demand, we believe there are more attractive opportunities elsewhere until the market environment becomes clearer. CSL Ltd (ASX: CSL): Why It Is Not on Our Radar for Now Source: CSL, weekly chart (2025) CSL Limited is currently off our active investment list as the biotech giant navigates a challenging backdrop. Despite its status as a global leader with a strong track record, the company’s shares have weakened considerably, falling nearly 12% since the start of 2025 and down around 22% from their August 2024 peak. The primary concern lies with CSL’s substantial U.S. operations, where potential policy shifts and tariffs have prompted a comprehensive review of its supply chain, an undertaking likely to involve significant costs and operational disruption. The company has maintained its FY25 guidance for underlying net profit after tax (NPATA) growth of between 10% and 13% in constant currency terms and reported a modest 5% increase in NPATA for the first half of the year. However, longer-term clarity appears to be lacking. At a recent conference, CSL did not reaffirm its previously stated target of achieving a 20% return on invested capital (ROIC) by FY30, raising questions over its future return ambitions. Its financial profile remains that of a mature blue-chip, with a FY24 debt-to-equity ratio of 62.8%, a five-year average dividend yield of just 1.5%, and a return on equity (ROE) of 14.6%. These figures, alongside the potential for margin pressure from supply chain and capital expenditure demands, suggest caution when considering valuation. Operationally, CSL is advancing initiatives such as the rollout of its Rika plasma collection platform and ongoing research and development efforts. Yet, the uncertainties surrounding U.S. policy and tariff impacts, combined with recent share price weakness, advise a cautious approach. We would seek greater clarity on how these external risks will be managed, alongside a stabilisation in the share price and firmer long-term growth prospects, before revisiting an active investment stance in CSL. Telstra Group Ltd (ASX: TLS): It Is on Our Radar Now and Worth Considering Source: TLS, weekly chart (2025) Telstra Group has emerged as a name demanding closer attention. Its newly unveiled “Connected Future 30 Strategy,” building on the groundwork laid by the T22 and T25 initiatives, sets out a five-year plan to capitalise on its strengths in mobile and digital infrastructure. The company is targeting mid-single-digit compound annual growth in cash earnings through to fiscal 2030, alongside a commitment to a sustainable and progressive dividend policy. This marks a strategic pivot from the disruption experienced during the NBN transition and declining legacy revenue streams towards a more proactive growth agenda. A key catalyst for Telstra’s ambitions lies in the accelerated shift from 4G to 5G, a transition that historically supports mobile earnings growth. The company plans to inject a further $800 million over four years to enhance its 5G capabilities, aiming to maintain its position as the most reliable and resilient network operator. Its “Network as a Product” initiative, which monetises attributes such as uplink speeds, latency and security, is expected to underpin most of the connectivity revenue by 2030. Cost discipline remains central, with Telstra building on $2.7 billion of savings from T22 and an ongoing $500 million target under T25, increasingly leveraging artificial intelligence to drive efficiencies and deliver positive operating leverage annually through the decade. Investor sentiment has shifted positively, reflected in a 38% share price rise over the past year and total shareholder returns nearing 90% over five years. Although earnings per share have declined at 3.1% annually and revenue has slipped marginally over the same period, the company’s clear targets for cash earnings growth and an improved return on invested capital, aiming for 10% by 2030, suggest an inflection point. This signals a more disciplined capital allocation approach with an emphasis on sustainable dividend growth. What sets Telstra apart is its dual focus on growth and capital efficiency, supported by rigorous cost management and declining capital intensity. For investors seeking a combination of income and growth potential, Telstra presents a compelling turnaround narrative worthy of serious consideration.