Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features ARISTOCRAT LEISURE LIMITED, and other companies. For more info SHARE ANALYSIS: ALL

By Chris Shaw

As reporting season came to a close this week the market saw more balance between ratings upgrades and downgrades by the eight brokers in the FNArena database. Seventeen upgrades and 18 downgrades meant total Buy recommendations slipped slightly, falling to 57.6% from 57.9% last week. It would appear the dynamic in stockbroker ratings has changed post the August reporting season when upgrades significantly outnumbered downgrades, despite the share market churning higher in the second half of that month.

Sims Metal Management's ((SGM)) better than expected profit result and an improving outlook saw three upgrades to Buy ratings, while some increases to forecasts and improved valuation from recent share price weakness were enough for Ridley ((RIC)) to also enjoy an upgrade to a Buy rating.

Improved earnings visibility implies less earnings risk for Ausenco ((AAX)) and this was enough to generate two upgrades to Buy ratings post interim results, while an overshooting to the downside in valuation terms for Goodman Fielder ((GFF)) saw upgrades for that stock. Others to see upgrades included Aristocrat Leisure ((ALL)), Air New Zealand ((AIZ)) and Tap Oil ((TAP)).

On the downgrades side, Mortgage Choice ((MOC)) saw one rating cut on the back of recent relative outperformance, while increased capex expectations and resulting disappointing guidance for FY12 prompted cuts in ratings for Transfield ((TSE)).

Automotive Holdings ((AHE)) was also downgraded given ongoing tough trading conditions have impacted on earnings estimates, while a lack of near-term momentum saw Woolworths ((WOW)) downgraded by two brokers post its earnings result.

Better value elsewhere in the sector was behind a downgrade for Insurance Australia ((IAG)), while a disappointing full year result meant a rating cut for Kingsgate Consolidated ((KCN)). Others to receive downgrades in ratings included GWA International ((GWA)), GUD Holdings ((GUD)), Southern Cross Media ((SXL)) and Seven Group ((SVW)), largely due to further deterioration in the earnings outlook for each company.

Those enjoying increases in price targets included Envestra ((ENV)) and Hastings Diversified ((HDF)) after respective solid profit results saw some increases to earnings estimates, as well as QR National ((QRN)) after it also posted a solid profit for the financial year.

Mortgage Choice saw target changes in both directions with the end result a slight net positive, while a takeover offer for Charter Hall Office ((CQO)) saw brokers adjust target prices higher. GPT ((GPT)) also enjoyed slight target increases as earnings estimates were adjusted for a share buyback, while targets also rose for Kingsgate, Sims and AGL Energy ((AGK)).

Cuts to forecasts for Transfield carried through to reductions in price targets. It was a similar story for Goodman Fielder, Seven Group And Ausenco. Higher costs have impacted on earnings and targets for Independence Group ((IGO)), while boardroom in-fighting saw a reduction in target for Mount Gibson ((MGX)). Targets were also lowered for Woolworths, Automotive Holdings and Southern Cross.

Solid interim earnings for Hastings Diversified ((HDF)) has seen some increases to earnings estimates, with a similar story playing out for Envestra, Perseus Mining ((PRU)), Aristocrat, Horizon Oil ((HZN)) and Charter Hall Retail ((CQR)).

Earnings estimates have been reduced for the likes of Beadell Resources ((BDR)) as commodity price expectations have been adjusted, while forecasts for Roc Oil ((ROC)) were lowered on higher derivative costs and tax expenses.

Earnings forecasts have also been lowered for the likes of Goodman Fielder, Independence Group, Transfield, PanAust ((PNA)), Atlas Group and for Gunns ((GNS)) post waht stockbrokers perceived as disappointing profit results. 

Total Recommendations	Recommendation Changes
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