Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features NATIONAL AUSTRALIA BANK LIMITED, and other companies. For more info SHARE ANALYSIS: NAB

By Chris Shaw

With reporting season behind us, changes in broker ratings have declined over the past week, the eight brokers in the FNArena database making just five upgrades and 12 downgrades for the period. Total Buy recommendations now stand at 51.31%. Note downgrades continue outnumbering upgrades (and by a wide margin). Note also most upgrades were from Sell to Neutral.

Incitec Pivot ((IPL)) was among the stocks upgraded, Deutsche Bank moving to a Neutral view from Sell previously on valuation grounds. The change follows a period of share price underperformance and comes despite the broker trimming earnings estimates slightly. Others in the market also adjusted earnings estimates and price targets over the week.

Deutsche also upgraded National Australia Bank ((NAB)) to Buy from Neutral, seeing potential for a review of the bank's UK assets to drive as much as 10-15% valuation upside from potentially positive review outcomes. Deutsche lifted its target to reflect this potential, though UBS saw things differently and last week downgraded NAB to Neutral from Buy. A case of "value" is in the eye of the beholder?

A solid interim profit result and potential for earnings growth from the Pizza Capers acquisition saw RBS Australia upgrade Retail Food Group ((RFG)) to Buy from Neutral, while earnings estimates and price target were also lifted.

Here too the move by RBS was at odds with others, as the previous week JP Morgan had downgraded earnings, price target and rating to Neutral from Overweight given the interim result fell short of its expectations.

The acquisition of the Lounge Lizard project saw UBS lift its estimates for Western Areas ((WSA)), the changes enough for the broker to upgrade to a Neutral rating with the stockbroker citing valuation grounds. No other ratings were changed, though brokers did lift earnings forecasts modestly to reflect the acquisition.

Valuation was behind Citi's upgrade to a Buy on Woodside Petroleum ((WPL)), the broker suggesting recent share price weakness means the base business is priced in and investors are now getting effectively a free option on the Browse and Sunrise projects.

This was it, as far as upgrades for the week are concerned.

On the downgrade side of the market, UBS lowered its rating on Adelaide Brighton ((ABC)) to Neutral from Buy to reflect both a lack of obvious short-term catalysts and the potential for some short-term underperformance if the stock enters the ASX100 index.

While the rest of the market is positive JP Morgan has downgraded Ausenco ((AAX)) to Neutral from Overweight given significant share price gains in recent months, while the broker has similarly downgraded Bank of Queensland ((BOQ)) to Underweight from Neutral given concerns margins may come under renewed pressure in coming months. Earnings and price target for BOQ were also lowered.

Recent outperformance by DuluxGroup ((DLX)) has been enough for UBS to downgrade to a Neutral rating from Buy previously, while the broker makes the same downgrade on Gloucester Coal ((GCL)) to reflect revised valuation on the back of adjusted merger proposal terms.

The news Kagara Zinc ((KZL)) may not be able to continue as a going concern prompted both UBS and Macquarie to downgrade to Sell ratings from previous ratings of Buy and Neutral respectively, both brokers also slashing earnings estimates and price targets.

Oroton Group ((ORL)) also experienced two downgrades during the week, though the changes from UBS and RBS were to Neutral recommendations from Buy previously. The changes reflect the similar view the apparel category will continue to experience tough trading conditions and increasing cost pressures. In a similar vein, UBS also downgraded The Reject Shop ((TRS)) to Neutral from Buy.

For Sandfire Resources ((SFR)) Citi has moved to a Neutral rating from Buy previously as while progress continues at the DeGrussa development, there appears little scope for short-term upside in the broker's view. Earnings forecasts were also adjusted across the market, though UBS noted earnings for the company at present are largely immaterial as the focus is on moving into the production phase of operations.

While there were no significant increases in price targets over the past week, brokers have lowered targets for Hutchison Telecommunications ((HTA)) to reflect a weaker FY11 result that also showed a continuation of subscriber losses.

 

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

 

Click to view our Glossary of Financial Terms