Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features DOWNER EDI LIMITED, and other companies. For more info SHARE ANALYSIS: DOW

By Chris Shaw

It has been much different in most weeks so far in 2012, but recommendation upgrades and downgrades in broker ratings were nearly equally balanced in the week past, the FNArena database showing recommendations were lifted in 13 cases against 11 cuts. Buy ratings now account for 49.43% of all recommendations. Also the fact that upgrades actually outnumbered downgrades has so far remained the mere exception in 2012.

Among those upgrades were Centro Retail ((CRF)), with both Macquarie and UBS moving to Buy recommendations from Neutral previously on news the company has settled a class action. While the settlement amount was larger than most in the market had forecast, the brokers suggest a more positive view is justified as uncertainty has now been removed.

Downer EDI ((DOW)) also scored a number of upgrades over the week, Macquarie, JP Morgan and Deutsche Bank all moving to Buy ratings from Hold previously and Credit Suisse to a Neutral recommendation from Sell.

The upgrades follow an update by the company at its annual investor day that saw full year earnings guidance reiterated and brokers take greater confidence in the idea a turnaround in operations remains on track. Improved value following recent share price weakness was another factor supporting some of the upgrades.

Also in mining services, Monadelphous ((MND)) enjoyed an upgrade to Outperform from Neutral by Macquarie, this given some increases to earnings estimates pushing up the broker's price target as well as a change in analyst covering the stock.

Despite announcing further write-downs on some problem contracts over the past week Leighton Holdings ((LEI)) has been upgraded to Neutral from Sell by Deutsche Bank. The call is largely valuation driven following recent share price weakness, Deutsche acknowledging there remains some downside risk to earnings relative to full year expectations.

An upgrade for Mount Gibson ((MGX)) to a Neutral from Sell by Macquarie is equally the result of recent share price weakness, which has the stock trading in line with the broker's price target. Similarly Macquarie has upgraded Qube Logistics (QUB)) to Neutral from Sell post recent share price falls.

A change in analyst has resulted in JP Morgan upgrading to a Neutral rating on Spark Infrastructure ((SKI)) from Sell previously, as changes to its model see the broker lift its price target for the stock. Shares price moves are behind BA-Merrill Lynch's upgrade on Tabcorp ((TAH)) to Neutral from Sell, while Macquarie has upgraded to a Buy rating on Wotif.com ((WTF)) following a share price fall of about 15% in recent weeks.

Among the downgrades were Aristocrat Leisure ((ALL)), RBS Australia moving to a Neutral rating from Buy as while the earnings outlook continues to improve, a gain in the share price of about 50% since last September means this is now priced into the stock, explains the stockbroker.

Shares price performance is also the driver for UBS's downgrade to a Sell rating from Neutral on Australian Pharmaceutical Industries ((API)), while Credit Suisse has for similar reason downgraded Dexus Property ((DXS)) to Neutral from Buy.

Citi notes Caltex ((CTX)) has endured a slow start to 2012 and has cut its earnings estimates and price target accordingly. An exit from refining operations would result in minimal value creation in Citi's view and given this and the changes to its model, the broker moves to a Sell rating from Hold previously.

Recent share price strength leaves Discovery Metals ((DML)) priced for perfection in Citi's view and as a result the broker downgrades to a Sell rating. Supporting the move is a reduction in earnings estimates and price target given changes to Citi's cost and capex assumptions.

RBS had been hoping for a better second half performance from Engenco ((EGN)) than is now considered likely and so while the group's turnaround continues the broker suggests some patience is required by investors. To reflect this, the rating is downgraded to Neutral from Buy while the price target has also been cut.

Higher expenditure expectations have resulted in UBS cutting earnings forecasts and price target for Ivanhoe Australia ((IVA)). Add in increased risk of project development delays and UBS sees limited short-term upside, downgrading to a Neutral rating from Buy as a result.

While News Corporation ((NWS)) delivered a better than expected 3Q result there was no lift in full year guidance, which implies a tougher final quarter of the year. RBS sees value at current levels but the UK phone hacking issue is expected to overhang the share price, so the broker has downgraded to a Neutral rating.

Recent share price performance has been enough for RBS to downgrade Seek ((SEK)) to Hold from Buy, a move supported by ongoing weak advertising conditions. Less attractive valuation relative to the sector is the view of JP Morgan following a change in analyst for SP Ausnet ((SPN)), the broker downgrading to an Underweight rating from Neutral previously as a result. UBS sees a fair valuation for Ten Network ((TEN)) at current levels, so the broker has moved to a Neutral rating from Buy previously.

With respect to changes in price targets over the past week the most significant increases were in Super Retail ((SUL)) and Breville ((BRG)), the former coming after a well received trading update. The largest cut in price target was for Discovery Metals, with UBS joining Citi in lowering its numbers for the company.

Earnings estimates rose the most for Centro Retail given the company's settlement of the class action against it, while earnings forecasts were cut the most for Qantas ((QAN)) given changed capacity growth assumptions, Whitehaven Coal ((WHC)) to reflect the proposed acquisition of Coalworks ((CWK)) and Horizon Oil ((HZN)) post the company's quarterly production report.

 

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

 

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