Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features PALADIN ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: PDN

By Chris Shaw

In the past week downgrades to recommendations from the eight brokers in the FNArena database have again outweighed upgrades to the tune of 14 to eight, the result being total Buy ratings now stand at 49.16%.

Among the positive ratings changes was RBS Australia shifting to a Buy rating on Campbell Brothers ((CPB)) from Hold previously, the broker taking the view there is now a buying opportunity in the stock given recent macro-driven selling across the market. Supporting the upgrade is RBS's expectation the upcoming full year result will include some positive commentary from management.

Gloucester Coal ((GCL)) has been upgraded by Macquarie to Neutral from Underweight previously, this a valuation call following changes to the broker's forex and commodity price assumptions. Similarly Macquarie has been busy changing ratings elsewhere among resource plays, with Paladin ((PDN)), Western Areas ((WSA)) and Whitehaven Coal ((WHC)) also upgraded post the review. Paladin is lifted to a Neutral recommendation, while both Western Areas and Whitehaven have been upgraded to Outperform from Neutral.

Macquarie also made a change among industrial stocks by upgrading Woolworths ((WOW)) to Buy from Neutral, this as the broker sees potential upside now the company is putting together a solid strategy to deal with increased competition from the Wesfarmers ((WES)) owned Coles. Along with the upgrade Macquarie lifted its price target for Woolworths.

For JP Morgan, GPT ((GPT)) is now worthy of a Buy rating following relative underperformance against the REIT sector of late and given potential from the unlisted wholesale funds market. Some changes to earnings estimates mean an increase in price target.

Primary Health Care ((PRY)) is well placed to enjoy some margin recovery given improved market dynamics in the view of BA Merrill Lynch, and with the stock offering value at current levels the broker has upgraded to a Buy from Neutral previously. Price target has been lifted slightly.

On the downgrades side Toll Holdings ((TOL)) caught most attention, both UBS and Deutsche Bank lowering ratings to Hold from Buy following updated profit guidance from the company. Tough market conditions mean greater earnings volatility and UBS in particular doesn't see this as likely to attract investors at present. The revision to guidance saw brokers across the market adjust earnings estimates and price targets for Toll.

A below expectations quarterly from Alacer Gold ((AQG)) saw BA-ML lower earnings estimates and cut its price target, while the broker also downgraded to a Neutral rating from Buy previously given some uncertainty with respect to future capital allocation decisions. 

Valuation was behind Macquarie downgrading both Cabcharge ((CAB)) and Coca-Cola Amatil ((CCL)) to Neutral ratings from Outperform previously, while earnings estimates for the latter were trimmed post a trading update. 

Macquarie also downgraded Charter Hall Retail ((CQR)) to Sell from Buy on a similar valuation basis as the stock is now trading above the broker's price target, while Dexus (DXS)) was another property play to be downgraded by the broker on valuation grounds following recent gains. Macquarie has moved to a Neutral rating on Dexus from Buy.

Recent share price moves were also behind UBS's decision to downgrade Hastings Diversified ((HDF)) to Neutral from Buy, while Credit Suisse has made the same change for Industrea ((IDL)) as the share price has responded to a proposed takeover offer from GE of the US. 

A lack of earnings certainty with respect to Pacific Brands ((PBG)) has prompted Credit Suisse to downgrade the stock to Hold from Buy, a change reinforced by management cutting off potential M&A talks. 

Sonic Health Care ((SHL)) has acquired some additional pathology assets and the deal itself is a positive in the view of Credit Suisse, but again valuation has driven a downgrade to a Neutral rating from Buy previously. It is a similar story with SP Ausnet ((SPN)), Credit Suisse happy enough with the recent full year earnings result and capital raising but downgrading its rating to reflect recent share price gains. 

Given Incitec Pivot ((IPL)) is more exposed to soft explosives demand at present and following a somewhat lower quality profit result JP Morgan has downgraded to a Sell rating from Neutral previously, while others to cover the stock have generally trimmed earnings forecasts and price targets.

Over the week the most significant increase in price target was enjoyed by Cabcharge, while the largest cuts were for Toll, Alacer, CSR and Lynas Corporation ((LYC)). Centro Retail has seen earnings forecasts increased the most, while CSR, Toll Holdings and Australian Infrastructure ((AIX)) have experienced the most significant reductions in earnings estimates across the market.

Total Recommendations	Recommendation Changes
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