Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

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By Chris Shaw

The number of changes in broker ratings picked up over the past week, with the eight brokers in the FNArena database upgrading 12 recommendations and downgrading seven. This leaves total Buy ratings at 49.85%.

On the upgrade side is Ansell ((ANN)), where Citi has moved to a Buy rating from Neutral given improved value following recent share price weakness. The broker also made modest changes to earnings estimates and price target to reflect updated forex assumptions.

Aurora Oil and Gas ((AUT)) similarly enjoyed an upgrade to a Buy rating from Hold previously, this courtesy of UBS. While an increased stake in the Sugarloaf project is a positive for earnings the production growth profile remains a major attraction for the broker. As with Ansell, Aurora's rating upgrade also reflects improved valuation following recent share price falls.

Better than expected interim earnings guidance from Caltex ((CTX)) helped prompt Credit Suisse to upgrade to a Buy rating on the stock from Neutral previously. A decision to close the refineries operations offers long-term upside in the view of Credit Suisse and supports the upgrade in rating. Across the market brokers revised earnings forecasts and price targets to reflect the new guidance from management.

Credit Suisse went further on Energy Resources of Australia ((ERA)) and upgraded to a Buy rating from Sell previously. The change follows a site visit and some positive signals from traditional landowners, which leaves the broker more positive the company can extract full value from the Ranger 3 Deeps resource.

For Orica ((ORI)), RBS Australia is attracted to the long-term dynamics of the explosives business to upgrade to a Buy rating from Hold. The company is a quality business and in the broker's view now is a good time for longer-term investors to be looking at buying into the stock.

Citi has revised its model for QBE Insurance ((QBE)) to reflect a marking to market of investments and changes to forex assumptions and the end result is an upgrade to a Buy from Neutral previously. The call is largely a valuation one as Citi is now seeing some upside to its price target.

Changed production expectations for Sandfire ((SFR)) have prompted some adjustments to UBS's model, the result being a trimming of price target. At the same time the broker has upgraded to Buy from Neutral on the stock to reflect both recent share price falls and the attraction of high grade copper exposure.

Santos ((STO)) announced some increased capex for its GLNG plant this week but the news has not deterred Credit Suisse, the broker moving to a Buy rating from Hold as the share price fall in reaction to the news was viewed as an overreaction. Credit Suisse and others have adjusted earnings estimates and price targets for Santos to reflect the increase in capex.

Macquarie has moved to an Outperform rating from Neutral on SP Ausnet ((SPN)) as part of a reinstatement of coverage. The attraction is a better yield and asset base than peers and stronger expected investment returns.

Post a tour of Toll's ((TOL)) Asian assets Credit Suisse has upgraded to a Buy rating on the stock from Neutral, reflecting the view the company is well placed for when the cycle eventually turns more favourable. At the same time Credit Suisse trimmed earnings estimates and price target for the stock.

UBS expects operational improvements and cost cutting measures implemented by Transpacific Industries ((TPI)) will start to feed through to earnings, while the sale of some non-core assets is also a positive.

This has TPI well placed for a re-rating once the market better understands the outlook for the company in UBS's view and sees the broker upgrade its rating to Buy from Neutral.

UBS also upgraded Western Areas ((WSA)) to a Buy from Neutral post the company announcing an increase in reserves at the Spotted Quoll project. Adding weight to the upgrade is improved valuation following recent share price weakness.

On the downgrade side of the market the only stock to receive multiple rating changes was Billabong ((BBG)), where both Citi and UBS downgraded ratings. Citi cut its rating to Sell from Hold, while UBS went further and downgraded to a Sell from Buy previously.

Both changes were in response to the equity raising announced by the company as it attempts to address balance sheet issues. In both cases, the brokers question whether there is value at current levels given future strategy has not been fully outlined and earnings issues are yet to be addressed. Others in the market also adjusted targets and earnings estimates to account for the raising and revised earnings guidance from management.

A cut to earnings guidance from management at Boral ((BLD)) was enough for Macquarie to downgrade to a Sell rating from Neutral as earnings estimates were cut to reflect bad weather, weak trading and project delays. Macquarie and others cut price targets for Boral post the update.

Macquarie also downgraded Cochlear ((COH)) to Hold from Buy but for valuation reasons given recent share price strength. Minor changes to its model for the stock saw the broker revised earnings estimates at the same time.

For exactly the same reason of recent share price strength, Citi cut its rating on CSL ((CSL)) to Hold from Buy, while also making minor changes to earnings estimates to account for changes to foreign exchange assumptions.

BA Merrill Lynch downgraded NIB Holdings ((NHF)) post a strategy day as the broker now sees organic growth for the company as becoming tougher to achieve. At the same time a capital management program appears to have largely run its course, which reduces one investment attraction in the broker's view.

RBS has downgraded QRXPharma ((QRX)) on news the US FDA has not granted approval for MoxDuo IR as had been expected. This implies delays and has forced the broker to factor this into its model, which also impacts on earnings estimates and price target.

While not seeing any changes in broker ratings, Consolidated Media ((CMJ)) enjoyed a increase in consensus price target over the week of just over 6%, while outside of QRX Pharma the largest cuts in targets were experienced by Aquarius ((AQP)) and Evolution Mining ((EVN)).

Other reasonable increases to earnings estimates were enjoyed by BC Iron ((BCI)) and Bank of Queensland ((BOQ)), while cuts to forecasts were most significant for Transpacific, Ten Network ((TEN)), Transurban and Horizon Oil ((HZN)).

Total Recommendations	Recommendation Changes
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