Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features CSR LIMITED, and other companies. For more info SHARE ANALYSIS: CSR

By Chris Shaw

The past week has been balanced in terms of changes to ratings by brokers in the FNArena database. Total Buy ratings now stand at 50.12% following 13 ratings upgrades and 14 downgrades.

Citi upgraded both ANZ Banking Group ((ANZ)) and Commonwealth Bank ((CBA)) to Buy ratings from Neutral previously, in both cases attracted to the yields. Price targets have been increased for both stocks.

Beach Energy ((BPT)) enjoyed an upgrade to Buy from Sell by BA Merrill Lynch, as the broker took the view recent share price weakness has been excessive and the market is in fact overly pessimistic about the group's Cooper shale assets. BA-ML also upgraded Brambles ((BXB)) to Buy from Hold as part of a resumption of coverage given the combination of a defensive exposure, balance sheet flexibility and valuation support.

UBS continues to have a bias to leverage over safety with respect to Australian building material stocks and given this the broker has upgraded to a Buy rating on CSR ((CSR)) from Neutral previously. The change follows cuts to forecasts and price target to reflect soft housing numbers and a weak aluminium price.

Credit Suisse doesn't agree leverage is the key attribute for the sector and has downgraded CSR to Sell from Hold post the market update by the company. For Credit Suisse a positive rating simply does not seem justified given there remains downside earnings risk in the current environment.

Changes to commodity price forecasts have prompted Credit Suisse to upgrade Evolution Mining ((EVN)) to Buy from Hold. The upgrade is accompanied by adjustments to earnings estimates but the price target has remained unchanged.

It is a similar story for Western Areas ((WSA)), with Credit Suisse upgrading to a Buy recommendation from Hold previously following changes to commodity price and forex assumptions. Earnings estimates have also been revised, the result being a cut in price target.

As well, Credit Suisse has upgraded Incitec Pivot ((IPL)) to Buy from Hold given potential upside from the broker's view increased ammonium nitrate capacity should be absorbed by the market in coming years.

In contrast, Citi takes the view the earnings downgrade cycle for Incitec Pivot will continue as higher gas prices are increasing costs at the same time as ammonium nitrate volumes are falling. This is enough for Citi to cut its rating to Hold from Buy.

With Lend Lease ((LLC)) securing $2 billion in equity for the Barangaroo project, BA-ML sees far less risk with the project now than had been the case. Some changes to its model have resulted in an increase in price target and BA-ML has upgraded to Neutral from Sell on the stock.

Some contract wins by Matrix Composites and Engineering ((MCE)) have seen JP Morgan lift earnings forecasts and price target for the stock. With the shares now trading around the broker's estimate of fair value, the rating has been upgraded to Hold from Sell.

Factoring in acquisitions has seen UBS adjust its model for Stockland ((SGP)), as the deals should boost growth even without an improvement in market conditions. To reflect this, the rating has been upgraded to Buy from Neutral.

Tough operating conditions have caused RBS Australia to factor in lower growth assumptions for Ansell ((ANN)), which pushes down earnings assumptions and price target. The changes drive a change in rating to Hold from Buy.

RBS has similarly downgraded its rating on Ramsay Health Care ((RHC)) to Sell from Hold, this due to current earnings multiples being seen as unattractive and the stock trading above five-year averages. Changes to forecasts for Iluka ((ILU)) given lower sales forecasts and a deteriorating operating outlook have also prompted RBS to downgrade the stock to Neutral from Buy. Price target has been lowered on cuts to earnings estimates.

Credit Suisse has been active in downgrading ratings as well, cutting BHP Billiton ((BHP)) to Hold from Buy as changes to commodity price expectations have impacted on earnings assumptions. The price target for the stock went south as well. For a similar reason the broker has downgraded its rating on Caltex ((CTX)) to Hold from Buy, while moving to Sell from Hold on Sandfire ((SFR)) and to Hold from Buy on Santos ((STO)).

Domino's Pizza ((DMP)) continues to perform solidly and to reflect this Macquarie has lifted its earnings estimates and price target. At current levels valuation multiples are less attractive, leading the broker to cut its rating to Neutral from Outperform.

Ongoing weakness in European markets in particular and potential cuts to pathology fees may weigh on earnings for Sonic Healthcare ((SHL)) going forward in the view of RBS, which is enough for the broker to downgrade to a Hold rating from Buy. 

An increasingly competitive environment is enough for Deutsche Bank to cut its rating on Telecom New Zealand ((TEL)) to Hold from Buy. The change comes after the TelstraClear acquisition by Vodafone, which is seen as evidence of more aggressive action in the market.

Macquarie has cut earnings forecasts and price target for UGL ((UGL)), this reflecting a slowing domestic economy and an associated lag in resource related project work. The changes are enough for the broker to cut its rating to Neutral from Buy.

Changes to price targets have been relatively modest over the week, with the largest increase for Domino's Pizza at just over 4% and the largest cuts around 5% for both Western Areas and BHP.

Transurban ((TCL)) has enjoyed the largest increase in earnings estimates at a little more than 20% on the back of June quarter traffic numbers. Resource companies dominated the cuts to earnings forecasts, with the likes of Iluka, Panoramic ((PAN)), Paladin ((PDN)) and Mount Gibson ((MGX)) seeing forecasts fall by 10-40%.

Total Recommendations	Recommendation Changes
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