Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

In a relatively quieter week for rating changes, brokers in the FNArena database upgraded five recommendations while downgrading a further nine, extending 2012's trend in favour of more downgrades. Total Buy ratings currently stand at 50.57%.

Commonwealth Bank ((CBA)) was among the upgrades, Deutsche Bank moving to a Buy recommendation from Hold previously. The change reflects better relative value in the stock compared to the other major banks, this as CBA's traditional premium to the sector has been eroded somewhat in recent weeks.

The remainder of the upgrades were in resource stocks, with Citi upgrading Kingsgate Consolidated ((KCN)) to Neutral from Sell post the company's quarterly production report. The call is a valuation one given recent share price weakness, as Citi has trimmed earnings estimates and price target to reflect updated commodity price and foreign exchange assumptions. Others in the market have similarly adjusted earnings forecasts and price targets for Kingsgate without changing ratings.

Citi also upgraded Western Areas ((WSA)) to Buy from Neutral post what was regarded as a solid quarterly production report. Higher grades boosted production in the period and Citi continues to have a bullish view on nickel prices.

Not all in the market are as optimistic as Citi, as Credit Suisse downgraded Western Areas to Neutral from Outperform given lower nickel prices impacted on earnings for the company. In Credit Suisse's view there is limited valuation upside from current levels at present.

Oil Search ((OSH)) scored an upgrade to an Overweight rating from Neutral previously by JP Morgan, the broker suggesting successful appraisal at P'nyang offers greater certainty with respect to a third train at the PNG LNG project. This implies share price upside from current levels. The entire market is not in agreement, as Citi downgraded Oil Search to Neutral from Buy on valuation grounds to reflect recent share price performance.

OZ Minerals ((OZL)) was upgraded to Outperform from Neutral by Credit Suisse on valuation grounds, this reflecting recent share price weakness. Helping justify the upgrade in rating was a quarterly production report viewed as solid by the broker.

A downgrade to Hold from Buy by Deutsche Bank reflects the broker's view ASX ((ASX)) is running out of steam at current levels, as recent data suggest trading and capital raising volumes are failing to respond to recent stock market upside. Minor cuts to earnings estimates saw Deutsche trim its price target, a move matched by others in the market.

Citi downgraded AWE ((AWE)) to Neutral from Buy, this given the view while there remains significant upside potential in the stock, there is also a higher level of associated risk. The change comes after further delays to the BassGas project were announced.

Issues in its rail division were enough for Macquarie to downgrade its rating on Bradken ((BKN)) to Neutral from Outperform, while earnings forecasts and targets were also lowered across the market to reflect the revised guidance from management. Achieving new guidance will still be a challenge in Macquarie's view, while gearing is also something the broker sees as worth watching.

Valuation was the driver of Deutsche's downgrade for CSL ((CSL)) to Hold from Buy, as it comes at the same time as the broker lifted earnings forecasts and price target for the stock to reflect greater Ig market share.

For the same valuation reason, RBS Australia has downgraded Orica ((ORI)) to Hold from Buy, while the broker also sees potential for new management to clear the decks at the interim profit result next month.

Downgraded earnings guidance from Seven West Media ((SWM)) was not well received, as both UBS and Citi downgraded to Hold recommendations from Buy ratings previously. UBS sees the stock as fully valued based on its revised forecasts and price target, while higher cost expectations also played a role in Citi's downgrade in rating.

A better than expected interim result saw price targets increase solidly for Australian Pharmaceutical Industries ((API)), this on the back of changes to broker earnings estimates. Post its quarterly production report, Mincor enjoyed some increases to earnings estimates and price targets, while lower earnings guidance saw forecasts reduced for Boral ((BLD)).

 

 

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

 

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