Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features WOOLWORTHS GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: WOW

By Chris Shaw

Changes to broker stock ratings have slowed down significantly post the recent interim profit season, the eight brokers in the FNArena database delivering just six downgrades and nine upgrades over the past week. Note that this week marks a reversal in trend as upgrades outnumbered downgrades. Total Buy recommendations now stand at 51.83%.

Among the upgrades airline stocks feature, as Macquarie lifted its ratings on both Air New Zealand ((AIZ)) and Qantas ((QAN) to Buy. The former was an upgrade from Sell and the latter from Neutral, the changes stemming from adjustments to forex assumptions that boosted earnings estimates and price targets.

Building material stocks also featured, with Credit Suisse upgrading both Boral ((BLD)) and James Hardie ((JHX)) to Buy from Neutral recommendations previously. For Boral the broker is attracted to cyclical leverage and has lifted estimates and price target, while for James Hardie the attractions include additional capital management initiatives, strong free cash flow and a net cash position.

Elsewhere, Macquarie has upgraded Dexus ((DXS)) to Buy from Neutral given recent share price weakness, while Citi has lifted its rating on FKP Property ((FKP)) to Neutral from Sell for similar reasons as the stock has lost more than 19% over the past month.

Deutsche Bank sees enough value in Tatts Group ((TTS)) to upgrade its rating to Buy from Neutral. Along with a positive valuation, Deutsche sees potential for some upside from the recent Tote Tasmania and Lottery acquisitions.

For United Group ((UGL)) Credit Suisse has turned more positive following increases to earnings estimates across the Engineering and Construction sector. An improved earnings outlook is enough for the broker to lift United to its top pick in the sector.

Citi has reviewed the supermarket plays and lifted forecasts and price target for Woolworths ((WOW)) as a result. Scale benefits relative to Coles should provide Woolworths with an ongoing advantage in the broker's view, enough for Citi to upgrade to a Buy rating.

Among the downgrades, Macquarie has moved to a Neutral recommendation from Buy on Ampella Mining ((AMX)) citing valuation grounds, this given a cut to forecasts and price target from factoring in revised forex and commodity price assumptions.

Similarly, Macquarie has moved to a Sell rating on St Barbara ((SBM)) from Neutral previously post revisions to its model assumptions. The downgrade has been supported by a cut to the broker's price target.

Beach Energy ((BPT)) has more risks associated with the Nappamerri shale project than the market is pricing in according to BA Merrill Lynch. These risks include costs, competition and technology and see BA-ML's rating downgraded to Sell from Neutral.

BA-ML has also downgraded Carsales.com ((CRZ)) to a Neutral rating from Buy previously, largely due to valuation issues given recent share price strength. As well, the broker has some minor concerns about the recent Torpedo7 investment as it is outside the traditional focus on classifieds businesses.

Relative valuation has prompted JP Morgan to downgrade Centro Retail ((CRF)) to Neutral from Buy, this following 9% outperformance since last December. Value is also the catalyst for Macquarie's downgrade of Qube Logistics ((QUB)) to Sell from Neutral, as on the broker's numbers the stock is trading at twice the earnings multiple of the small cap index at present.

Aside from the cut to St Barbara's price target by Macquarie the major target price change during the week was for Beadell Resources ((BDR)), UBS cutting its target to $1.40 from $1.50 largely to reflect a recent equity raising.

While earnings forecasts for Sandfire Resources ((SFR)) were adjusted significantly post the recent interim result this needs be kept in perspective, JP Morgan pointing out the company remains in the development phase for its key DeGrussa project.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

 

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