Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features RIO TINTO LIMITED. For more info SHARE ANALYSIS: RIO

By Chris Shaw

The past week has seen downgrades again outnumber upgrades, as the eight brokers in the FNArena database have cut ratings on 10 stocks while lifting recommendations on just three. Total Buy ratings remain at 57.4%, little changed from last week.

Among those upgraded were Metcash ((MTS)) post the group's interim profit result. While the result was slightly weaker than the market had expected the medium-term earnings outlook is improved by the fact the legal uncertainty of the proposed Franklins acquisition has now mostly passed. 

This was enough for JP Morgan to upgrade to a Neutral rating, while Credit Suisse went one better and upgraded Metcash to Outperform from Neutral to reflect both the Franklins purchase and improved valuation post recent share price weakness. Targets and earnings estimates were adjusted across the market.

Seven West Media ((SWM)) was the other upgrade for the week, Citi lifting its rating to Buy from Neutral. While ad market conditions remain difficult, the broker suggests lead indicators are turning a little more positive. 

The still tough conditions mean stock selection will be important in the sector and here Citi also sees reasons to like Seven West relative to peers. Citi's upgrade was accompanied by changes to earnings estimates and price target. On the same basis Citi has downgraded APN News and Media ((APN)) to Neutral from Buy, while also cutting its price target for the stock. 

An in-line interim result from Campbell Brothers ((CPB)) wasn't enough to stop Deutsche Bank downgrading the stock to Hold from Buy, though the change is a valuation call rather than one indicating any concerns over the growth outlook for the company. Forecasts and price targets for Campbell Brothers across the market rose on the back of the result.

Weak end markets continue to impact on earnings for GUD ((GUD)) and RBS Australia has lowered its estimates and price target accordingly. The changes have caused the broker to downgrade to a Hold rating on the stock.

Recent share price outperformance and the fact the company will be cycling tough comparable numbers in coming months has prompted RBS to downgrade Nufarm ((NUF)) to a Hold rating. There are only minor associated changes in forecasts and price target from brokers covering the stock post a trading update from management.

Primary Health Care ((PRY)) has offered fresh earnings guidance to the market in the past week but the issue for BA Merrill Lynch is the guidance doesn't appear to be conservative. This suggests limited scope for outperformance, which is enough for the broker to downgrade to a Neutral rating. The update from management has seen only minor changes to estimates and targets across the market.

A more disappointing trading update from management at Symex ((SYM)) has seen RBS take the axe to its numbers, the broker more than halving its price target. Given a debt/cost restructuring now looks more critical, the broker has downgraded to a Neutral rating.

RBS has also downgraded TPG Telecom ((TPM)) to a Hold rating, as while the company has lifted its stake in iiNet ((IIN)) the broker sees any deal between the two as difficult given cultural differences. The change in shareholding in iiNet also sees the broker adjust its price target and earnings assumptions.

Disappointing production guidance was enough for both BA-ML and UBS to downgrade ratings for Woodside, the former to Underperform and the latter to Neutral. Brokers across the market have cut earnings forecasts and price targets post the update, with a couple of mentions for Santos (STO)) as a preferred play in the sector at present.

Concerns over the growth profile for Wotif.com ((WTF)) have seen Citi downgrade to a Sell rating, this given concerns over too much leverage to domestic tourism. A cut in price target follows from changes to earnings estimates.

With UBS initiating coverage of Regis Resources ((RRL)) with a price target above others in the market there has been a lift in the consensus target for the stock, while the broker also sees some upside potential in Cardno ((CDD)) and has lifted its target there as well. The consensus target for Bathurst Resources ((BTU)) has also come down slightly on the back of Citi initiating coverage.

In terms of changes to earnings estimates, forecasts for Air New Zealand ((AIZ)) have come down to reflect high fuel costs, while weak guidance from management at Qantas ((QAN)) has also resulted in some cuts to expectations.

The potential for spending cuts in the IT sector have impacted on BA-ML's model for Technology One ((TNE)), while some adjustments to commodity price forecasts saw earnings estimates trimmed for Rio Tinto ((RIO)).

Higher costs have seen minor changes to models for Santos ((STO)), while the potential for Alacer Gold ((AQG)) to lose part of its stake in the Copler project proved enough for UBS to cut its numbers and price target.

On the positive revision side, higher than expected guidance from Miclyn Offshore ((MIO)) saw Macquarie lift its estimates and price target, while the broker also made some changes to its model for Macquarie Atlas ((MQA)).

 

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

 

Click to view our Glossary of Financial Terms