Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

In a quiet week for changes to stock ratings the eight brokers in the FNArena database upgraded just three recommendations while downgrading five. Total Buy ratings now stand at 49.31%.

Credit Suisse was responsible for two of the upgrades, lifting its ratings on both OrotonGroup ((ORL)) and QBE Insurance to Buy from Neutral. For Oroton the upgrade is a valuation call and comes on the back of recent weakness in the company's share price. This weakness is giving investors the change to acquire a quality retailer at a more attractive price in the broker's view.

For QBE Insurance the value on offer is also improving, this as premium rate rises are starting to flow through and balance sheet pressures for the group are easing. Benign weather is also helping the investment case for QBE at present according to Credit Suisse.

Seven West Media ((SWM)) was the other upgrade for the week, with Citi moving to a Buy rating from Hold previously. A tough operating environment means things could get worse before they get better and sees Citi adjust earnings estimates and its price target.

While there is scope in Citi's view for Seven West to make a rights issue to address balance sheet concerns, the broker argues the share price is already factoring this in and value is thus seen as attractive at current levels.

On the downgrades side Macquarie has cut its rating on Cabcharge Australia ((CAB)) to Sell from Neutral, reflecting the potential for earnings to be impacted if credit card surcharge levels are capped, as might be the intention from authorities in Australia. Price target has been cut to reflect the potential earnings impact, while the uncertainty leads Macquarie to suggest the shares are more likely to underperform.

Deutsche Bank has downgraded Cochlear ((COH)) to Sell from Hold on market share concerns stemming from the N5 recall and the impact this has had on the company's reputation in the market. Earnings will slip in FY13 in Deutsche's view and the stockbroker has cut its forecasts and price target to reflect this expectation.

While the announcement of a capital raising by Echo Entertainment ((EGP)) has caused Credit Suisse to adjust earnings forecasts and price target, it is recent share price appreciation that sees the broker downgrade to a Sell rating from Neutral. The gains of late make the stock too expensive in the broker's view (even though the cause is take-over speculation).

Credit Suisse has also downgraded Specialty Fashion ((SFH)) to Sell from Neutral given the expectation that ongoing retail headwinds will impact on earnings for some time. Price target has been reduced to reflect lower earnings estimates.

Fletcher Building ((FBU)) has some franchise strength in New Zealand that probably deserves a premium multiple in the view of UBS, but a review of the broker's model sees earnings forecasts cut through FY13.

The changes mean a reduction in price target and given few signs yet of any cyclical upturn, UBS has downgraded to a Neutral rating from Buy previously.

Elsewhere, adjustments to broker models meant relatively modest changes in price targets across stocks under coverage, with no price targets increasing or decreasing by as much as 5.0% during the week. The largest increase was 3.7% for SP Ausnet ((SPN)), while the biggest cut in target was 4.1% for Cabcharge.

Changes to earnings estimates were also relatively modest, ranging from an increase of just over 1.0% for Caltex ((CTX)) to a cut of nearly 9% for Sydney Airport ((SYD)).

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

 

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