Weekly Recommendation, Target Price, Earnings Forecast Changes

This story features AMCOR PLC, and other companies. For more info SHARE ANALYSIS: AMC

By Rudi Filapek-Vandyck, Editor FNArena

Guide:

The FNArena database tabulates the views of eight major Australian and international stock brokers: CIMB, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie, Morgan Stanley and UBS.

For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio.

Ratings, consensus target price and forecast earnings tables are published at the bottom of this report.

Summary

Period: Monday February 16 to Friday February 20, 2015
Total Upgrades: 22
Total Downgrades: 41
Net Ratings Breakdown: Buy 41.99%; Hold 40.18%; Sell 17.83%

Rallying share prices and profit reports that mostly beat or meet expectations, with resources stocks having been relegated to the back row. This has been the picture for the Australian share market thus far in 2015 and it should therefore not come as a surprise stockbroking analysts have been united in reducing their ratings for ASX-listed stocks more than they have been prepared to lift them.

For the week ending Friday, 20 February 2015, FNArena recorded no less than 41 downgrades, with stocks including Independence Group, Iluka, Wesfarmers and AMP attracting multiple downgrades, while on the positive side, we still recorded 22 upgrades, including multiple for the likes of Tatts, Challenger, Evolution Mining and Pacific Brands.

Only three out of our regular eight stockbrokers still carry more Buy ratings than Hold ratings for their total research universe (Macquarie, Morgan Stanley and Morgans). Must be something about the letter M.

On the other hand, changes to price targets/valuations and to profit forecasts retain a positive skew and, following the real onslaught pre-reporting season, resources companies no longer feature prominently. Engineers and contractors, however, sometimes referred to as "mining services providers" still haven't lost their dominant position when it comes to issuing negative surprises, and forcing share prices lower alongside further (dramatic) cuts to valuations and profit forecasts.

Ignoring this seemingly endless pool for negative surprises, industrials and financials such as iiNet and Genworth Mortgage Insurance feature on the week's negative side. On the opposite side of the ledger, positive revisions continue to outweigh, with the likes of Webjet, Crown and Estia Health attracting attention.

Upgrades

Amcor ((AMC)) upgraded to Neutral from Underperform by Credit Suisse. B/H/S: 1/5/1

First half results were slightly below the broker's expectations. Credit Suisse observes, even after executing a US$500m share buy-back, Amcor will have US$1.3bn in acquisition capacity through debt. In the absence of acquisitions further buy-backs appear likely and the broker believes another US$500m could be bought back in FY17 without exceeding 2.5 times net debt to earnings. Rating is upgraded to Neutral from Underperform and the target is raised to $14.40 from $12.10.

Cardno ((CDD)) upgraded to Neutral from Underperform by Macquarie. B/H/S: 2/4/0

Cardno's 17% profit decline from the previous first half was roughly in line and in accordance with the recent warning. Management expects improvement in the US, aided by the A$, but ongoing tough conditions locally. The broker believes the full impact of commodity price falls is yet to flow through to customer demand. However Cardno's steep share price fall on the earlier profit warning puts the stock at a large discount to peers, hence an upgrade to Neutral. Target falls to $3.12 from $3.52.

Challenger ((CGF)) upgraded to Buy from Neutral by Citi and to Neutral from Underweight by JP Morgan. B/H/S: 4/3/1

First-half result was broadly in line with Citi, guidance for retail liability book growth improving along with the dividend, but earnings falling just shy of the mark after a capital dilution. The broker says the removal of some uncertainty was the main theme of the result. The broker notes margin compression in the life business and weakness in funds management. While capital consumption was up, Citi sheets this back to one-offs and says a Tier-2 raising could fund strong growth if need be. The broker says Challenger offers value, has strong sales potential and will be 100% franking in the second half. The stock is upgraded to Buy from Neutral. First-half net profit fell a tad short of JP Morgan due to margin pressure and capital surplus erosion. But JPMorgan notes strong annuity sales and a confidence-inspiring shift into less capital intensive products.The broker expects margin pressure to continue but pricing pressure to wane and says net book growth was strong in the first half. Rating upgraded to Neutral from Underweight.

See also CGF downgrade.

Charter Hall Retail ((CQR)) upgraded to Neutral from Sell by Citi. B/H/S: 0/2/5

The result beat the broker although it appears timing issues contributed. Management retained guidance, believing the stock will benefit from lower interest costs and higher property values over time. Last month the broker downgraded to Sell despite being bullish on shopping centres, believing CQR had run too far in hitting post-GFC highs. The share price has since pulled back so on the strength of the result, the broker upgrades back to Neutral.

Estia Health ((EHE)) upgraded to Neutral from Underperform by Macquarie. B/H/S: 3/1/0

First half results were in line with prospectus forecasts. Macquarie observes the company has made significant progress across key operating metrics which means earnings risk has diminished. While there remains some earnings risk, given the quantum of improvements required, Macquarie now believes a substantial miss on forecasts is unlikely. Rating is upgraded to Neutral from Underperform and the target to $5.40 from $4.50.

Evolution Mining ((EVN)) upgraded to Buy from Hold by Deutsche Bank. B/H/S: 3/0/2

First half results were in line with the broker. Deutsche Bank believes the company has further cost cutting potential and will not pay cash tax until 2020. Cash flow was 43% higher than the prior half and net debt continues to improve. As the company is benefitting from improved macro conditions as well as providing clean exposure to the AUD gold price the broker upgrades to Buy from Hold. Target is raised to $1.10 from 90c.

See also EVN downgrade.

Fletcher Building ((FBU)) upgraded to Neutral from Sell by Citi and to Equal-weight from Underweight by Morgan Stanley. B/H/S: 4/2/2

Citi has upgraded to Neutral in recognition of a higher PE multiple for the sector given strong demand for industrial cyclical companies. This is despite the broker believing Fletcher will miss the low end of second half guidance. Performance in Australia remains poor and 70% of NZ earnings came from construction, suggesting weak growth in products, the broker notes. Target falls to NZ$8.10 from NZ$8.40. Ongoing improvement in New Zealand and the outlook for earnings to stabilise in Australia in FY16 suggests to Morgan Stanley that an acceleration is likely over the next 12 months. The broker looks for stronger conviction before turning more positive but upgrades to Equal-weight from Underweight. Target is raised to A$7.52 from A$7.34. Sector view is Attractive.

GWA Group ((GWA)) upgraded to Buy from Hold by Deutsche Bank. B/H/S: 1/4/1

First half results were in line with expectations. Deutsche Bank believes there is solid growth potential in FY16 because of volume and price growth, a capital return (potentially) and removal of the Wetherill Park inventory overhang. Accordingly, Deutsche Bank upgrades to Buy from Hold. Target is reduced to $2.61 from $2.69.

See also GWA downgrade.

Insurance Australia Group ((IAG)) upgraded to Neutral from Underperform by Credit Suisse. B/H/S: 0/8/0

First half results missed the broker's forecasts. The company delivered minimal underlying GWP growth while the broker observes the Wesfarmers' ((WES)) acquisition attrition rate was at the top end of expectations. Difficult market conditions are expected to continue but the earnings risk is now more balanced in the broker's view and the share price is now back to fair value. Credit Suisse upgrades to Neutral from Underperform and leaves the target at $6.10.

Investa Office ((IOF)) upgraded to Neutral from Underweight by JP Morgan. B/H/S: 0/4/1

Investa Office Fund's first-half result romped in 4% ahead of the broker's forecast as earnings unexpectedly skewed into the first half. The company slightly upgraded earnings and dividend guidance. But JPMorgan says Investa's exclusion from Morgan Stanley's asset sale, and management's comment that a third-party bid would be unlikely to trigger pre-emptive agreements, increase the chances of a third-party bid for IOF. Given Investa is trading 18% above net tangible assets, the broker says a competing bid would be hard work, but still lifts the rating to Neutral from Underweight, believing the possibility is likely to support the share price in the near term.

See also IOF downgrade.

Pacific Brands ((PBG)) upgraded to Neutral from Underperform by Credit Suisse. B/H/S: 0/4/2

First half results were below the broker's expectations. The company expects challenging market conditions to continue and FX remains a headwind. While Credit Suisse expects FY15 to be the low point in earnings, it upgrades the stock to Neutral from Underperform and retains the 50c price target.

See also PBG downgrade.

Paladin Energy ((PDN)) upgraded to Neutral from Sell by Citi. B/H/S: 2/3/0

The new convertible note issue significantly reduces Paladin's refinance risk and leads the broker to upgrade to Neutral from Sell. Target rises to 40c from 35c. However, while the broker is bullish on uranium it does not believe prices will rise fast enough for Paladin to avoid additional debt or asset sales in order to repay the issue due on 2017.

SMS Management ((SMX)) upgraded to Neutral from Underperform by Macquarie. B/H/S: 0/3/1

First half earnings beat Macquarie's forecasts. The broker is buoyed by the shift towards managed services which provides a degree of resilience to earnings. Project margins remain under pressure but revenue growth appears to be stabilising. Macquarie upgrades to Neutral from Underperform and raises the target to $4.17 from $3.90.

Steadfast Group ((SDF)) upgraded to Outperform from Neutral by Credit Suisse. B/H/S: 2/0/0

The interim report proved quite an event with Steadfast also announcing a number of acquisitions, plus an equity raising and an increase in debt. The interim results were weak, reflective of a turn in the insurance cycle, comment the analysts. CS is supportive of the acquisition strategy and sees potential from cost cutting too. On this basis the rating has been lifted to Outperform from Neutral. Target price lifts to $1.70 from $1.66 on slightly higher estimates.

Tatts Group ((TTS)) upgraded to Buy from Neutral by Citi and to Overweight from Neutral by JP Morgan. B/H/S: 4/1/3

The stock has been viewed as a predictable defensive investment given stable lottery earnings but Citi believes the company has several strategic options which could drive significant value. The broker incorporates a new risk-weighted methodology that better captures these options. Citi notes, following the successful legal claims in Victoria, the company has extra cash for licence renewals and acquisitions. Citi upgrades to Buy from Neutral. First half marginally outpaced JP Morgan's estimates, turning in a fairly predictable result. Earnings per share forecasts rise 3.3% in FY15 and 6.7% in FY16 thanks to margin expansion in lotteries and rising wagering revenue. JP Morgan upgrades the company to Overweight from Neutral and bumps up the target price to $4.38 and notes the balance sheet has room for acquisitions and a 16c fully franked special dividend.

Toll Holdings ((TOL)) upgraded to Neutral from Underperform by Macquarie. B/H/S: 0/5/3

The board has received a bid from Japan Post that appears to be "very favourable" for the shareholders, comment Macquarie analysts. They do not see a competing bid or FIRB causing obstruction to the bid proceeding.Target has been bumped up to $9.04, in line with the offer. Rating has been upgraded to Neutral from Underperform.

Trade Me ((TME)) upgraded to Neutral from Underperform by Credit Suisse. B/H/S: 1/4/1

Trade Me Group's first half result was in line with expectations. FY15 guidance has been maintained and Credit Suisse believes the company is on track to deliver low double-digit revenue growth. The broker has increased longer term forecasts by 5% to include higher motor revenue and a recovery in property. Rating is upgraded to Neutral from Underperform and the price target is raised to NZ$3.70 from NZ$3.24.

Webjet ((WEB)) upgraded to Outperform from Neutral by Credit Suisse. B/H/S: 3/2/0

The interim report showed continued disappointment from Zuji, but also resumption of growth for the Webjet core operations, as well as in B2B. This has provided CS analysts with enough confidence the Webjet business and B2B will keep the group on a solid growth path, notwithstanding Zuji. CS has thus upgraded to Outperform from Neutral. The broker has removed the discount to valuation that was put in place on earlier growth concerns and this sees the price target improve to $3.90 from $3.12.

Wesfarmers ((WES)) upgraded to Hold from Sell by Deutsche Bank. B/H/S: 1/4/3

Wesfarmer's first half results were just ahead of the broker's estimates. Coles was broadly in line, but Target fell below expectations, while office supplies and Kmart's earnings were better than expected. Deutsche Bank expects group earnings to increase by 7% to 8% over the next few years. The broker has upgraded the stock to Hold from Sell and raised the price target to $41 from $40.

See also WES downgrade.

Downgrades

Abacus Property ((ABP)) downgraded to Sell from Neutral by Citi and to Underweight from Neutral by JP Morgan. B/H/S: 0/0/2

Abacus' result beat the broker's forecast on better than expected profits on asset sales. The broker has raised its valuation of the fund's portfolio. Citi is positive on Abacus' private equity style operating model and has great faith in management's property market experience, thus has taken note that management believes prices are nearing a peak. The broker has raised its target price to $2.73 from $2.63 but this is still well below the trading price, hence no choice but to downgrade to Sell. Abacus Property's first half fell a tad shy of JP Morgan, which notes the metrics are good with gearing of 23.4% and the company has outperformed the market by 15% and the ASX by 35% over the past year. This has led to the stock trading at a 41% premium to net tangible asset backing, prompting the broker to downgrade to Underweight from Neutral.

ANZ Banking ((ANZ)) downgraded to Sell from Neutral by Citi. B/H/S: 2/2/4

ANZ's first-quarter result fell shy of Citi's forecast as revenue flattened in global markets. Citi notes the bank's organic capital generation is struggling and the pay-out ratio is under threat. The broker says the bank is looking pricey and shaves 2% off earnings estimates. ANZ is downgraded to Sell from Neutral, joining its peers as Citi sours on the sector. Target price steady at $32.

AMP ((AMP)) downgraded to Neutral from Buy by Citi and to Neutral from Outperform by Credit Suisse. B/H/S: 1/6/1

Citi has lifted forecasts in the wake of AMP's result on a mark-to-market basis, but only slightly given the offset of lower interest rates against rising stocks. With robust flows continuing, AMP offers a scarce combination of growth and yield but can the PE keep rising? The broker thinks not and has downgraded to Neutral, after lifting its target to $6.90 from $6.10. Results missed Credit Suisse's forecasts but the broker is not worried as it was a solid result, with all divisions delivering. Price target goes up to $7.00 from $6.15. Rating downgraded to Neutral from Outperform as share price has rallied hard. Also, growth will slow down from here onwards, say the analysts.

Ardent Leisure ((AAD)) downgraded to Hold from Buy by Deutsche Bank. B/H/S: 0/5/0

Operating results in the first half disappointed the broker. Deutsche Bank envisages upside potential from Main Event as that segment continues to outperform but the gyms division has now become a turnaround story. Near-term earnings forecasts are materially reduced and the rating is downgraded to Hold from Buy. Target is reduced to $2.45 from $3.20.

Aurizon Holdings ((AZJ)) downgraded to Neutral from Buy by Citi. B/H/S: 4/3/0

First half earnings were below the broker's forecasts. Management has identified additional savings and opportunities to increase efficiencies. Nevertheless, Citi considers pending industrial action and challenging markets in coal and iron ore make the drivers of a return to strong growth difficult to identify. The broker also believes the re-pricing of contracts is slowing.Rating is downgraded to Neutral from Buy and the target is reduced to $5.10 from $5.40.

Bendigo & Adelaide ((BEN)) downgraded to Sell from Neutral by UBS. B/H/S: 1/5/2

First half results were ahead of UBS but the composition of the result disappointed. UBS downgrades earnings forecasts by 4.0% for FY16. While further interest rate cuts may support the share price, UBS believes capitalising mark-to-market house price gains is dangerous and that the share price has rallied too far, too fast. Rating is downgraded to Sell from Neutral. Target is raised to $12.75 from $12.10 because of lower bond yields.

Challenger ((CGF)) downgraded to Sell from Hold by Deutsche Bank. B/H/S: 4/3/1

First half results were well below the broker's forecasts. The challenges of a lower interest rate backdrop for the life business are starting to show, in Deutsche Bank's view. While profit growth will remain supported by recent capital raisings the broker believes new business margin pressure will emerge more clearly in FY16. Hence, while the company is upbeat on annuity growth prospects, lower margins/returns on equity reduce the appeal. Rating is downgraded to Sell from Hold and the target to $6.05 from $6.25.

See also CGF upgrade.

Crown Resorts ((CWN)) downgraded to Neutral from Overweight by JP Morgan. B/H/S: 5/2/1

Crown romped in with its first-half result, outpacing the broker by 18.5%, courtesy VIP with Melbourne revenue soaring 86%. Melbourne margins rose 290 basis points to 30.2%, a record, despite a potentially negative shift in the margin mix. Earnings per share forecasts rise 9.8% in FY15, 3.7% in FY16 and 4.0% in FY17 accordingly. The valuation rises to $17.62 but the target price only rises to $16.99 and the broker downgrades the rating to Neutral from Overweight, believing Macau expectations peaked in February.

Dexus Property ((DXS)) downgraded to Sell from Neutral by Citi. B/H/S: 2/3/2

Lower than expected profits on asset sales, a higher tax bill and flat income growth led Dexus to miss the broker's forecast. Flat income reflects a tough leasing environment, the broker suggests. The broker is not negative on earnings but notes that while the office market is improving, the cost of securing tenants is high. Target rises to $7.39 from $7.11 but downgrade to Sell.

Drillsearch Energy ((DLS)) downgraded to Neutral from Buy by UBS. B/H/S: 4/2/0

The result was impacted by impairments in the first half, with reported profit well above the broker's forecasts and underlying profit below. UBS observes future capex has been materially reined in and unconventional evaluation has been put on the back burner. The broker considers the stock is fairly valued at current oil prices and downgrades to Neutral from Buy. Target is steady at 95c.

Evolution Mining ((EVN)) downgraded to Underweight from Equal-weight by Morgan Stanley. B/H/S: 3/0/2

First half results were better than expected. The company's diverse asset base provides for a stable operating outlook while cost control has been strong and the balance sheet is in good shape, in Morgan Stanley's view. Still, the broker considers the stock has had a solid run and moves to Underweight from Equal-weight. Sector view is In-Line and target is steady at  65c.

See also EVN upgrade.

Fairfax Media ((FXJ)) downgraded to Neutral from Buy. B/H/S: 1/5/1

Fairfax Media's first-half result fell 10% shy of UBS' estimates, thanks to post-tax impairments and redundancy charges. Revenue and earnings fell and the company announced a 5% one-year buyback starting March 23. UBS downgrades from Buy to Neutral, on valuation grounds, believing all positives are now factored in. Earnings per share forecast are cut 3% in FY15 and rise 1% in FY16 and 4% in FY17. Target price is steady at 90c.

Fortescue Metals ((FMG)) downgraded to Sell from Neutral by Citi. B/H/S: 3/4/1

Fortescue's interim slightly outpaced consensus and the broker on most metrics save net profit after tax, which fell 16% shy of the broker thanks to higher depreciation and amortisation and interest costs. Citi cuts its target price to $2.20 from $2.40 accordingly. Citi is bearish on iron-ore prices and, given the company's increase in net debt over the period, downgrades the stock to a Sell from Neutral.

G8 Education ((GEM)) downgraded to Neutral from Outperform by Macquarie. B/H/S: 3/1/1

After a sustained period of acquisitions, and another 12 child care centres added along with the result, G8's revenue and earnings missed the broker's forecast and guidance. The industry remains rife for consolidation but G8 is starting to pay full price, Macquarie notes. Further acquisitions may require additional capital, the broker warns, while competition is increasing and a Productivity Commission investigation into child care promotes uncertainty. Downgrade to Neutral. Target falls to $4.93 from $5.35.

GWA Group ((GWA)) downgraded to Neutral from Buy by Citi. B/H/S: 1/4/1

GWA Group's result failed to impress Citi, which has downgraded the stock to Neutral from Buy and cut the target price to $2.67 from $3.30, due to financial and operational issues. The broker says strategy execution has been underwhelming, that the group has failed to stabilise Gliderol's profitability and that a recovery from Gainsborough will take longer than expected. The broker believes a shift to medium to high density dwelling will also take its toll. Core earnings per share forecasts fall 13% to 16%. There were plenty of positives, including the second-half capital raising, but the deciding factor was the high price/earnings ratio.

See also GWA upgrade.

Iluka Resources ((ILU)) downgraded to Hold from Buy by Deutsche Bank and to Underperform from Neutral by Credit Suisse. B/H/S: 5/2/1

The 2014 loss was more than Deutsche Bank expected. The dividend improved with a 40% free cash flow pay-out, while net debt is at $59m. The focus has returned to a decision on replacement projects. The broker observes some encouraging early signs for zircon sales in 2015. Target is unchanged at $7.50 but the broker downgrades to Hold from Buy following the recent strong share price performance. Credit Suisse's downgrade to Underperform follows a rally in the share price. CS analysts remain non-believers in the zircon recovery story, having just reduced price forecasts again, and they remain even more negative on the outlook for titanium dioxide. The analysts do concede Iluka's earnings are set to rise in FY15-16, but by far not enough to justify the current share price. Target price remains at $6.00. Forecasts have been slashed.

Independence Group ((IGO)) downgraded to Neutral from Buy by Citi, to Neutral from Outperform by Credit Suisse, to Hold from Buy by Deutsche Bank and to Neutral from Buy by UBS. B/H/S: 1/5/1

Independence had pre-released the numbers so no surprises in what Citi describes as a great result. FY15 guidance was increased at all three operations although the broker conservatively expects a less spectacular second half. Improving base metal prices and the falling AUD play into Independence' earnings and the broker has raised its target to $6.00 from $5.70, but downgrades to Neutral on a full valuation. Credit Suisse observes marginally higher production and lower costs are offset by assumptions for higher exploration/development expenditure. FY15 estimates are reduced by 6.0% and the dividend forecast for 2016 to 17c a share on the back of an assumed pay-out of 35%.  Rating is downgraded to Neutral from Outperform. Deutsche Bank has marginally increased production assumptions at Jaguar. The stock is ex growth capex and diversified, with leverage to top commodities nickel and zinc. It also has strong diesel and AUD exposure which should improve margins. Still, Deutsche Bank downgrades to Hold from Buy on valuation. Independence Group's first half results were in line with UBS' expectations. Profit doubled over the previous corresponding period, with strong contributions from the Tropicana gold mine and the Jaguar zinc and copper mine. UBS has downgraded the stock to Neutral from Buy, due to the recent strong share price performance.

Investa Office ((IOF)) downgraded to Underperform from Neutral by Credit Suisse. B/H/S: 0/4/1

Credit Suisse saw a result of low quality, indicative of tough market dynamics and driven by non-cash incentive amortisation. Among office space landlords, they prefer Mirvac ((MGR)) instead. Rolling forward the valuation model has delivered a small increase in the price target; $3.95 versus $3.74 prior. Opportunities may arise, say the analysts, but they are not incorporating anything just yet. No changes made to forecasts.

See also IOF upgrade.

Macquarie Group ((MQG)) downgraded to Neutral from Buy by Deutsche Bank and to Hold from Add by Morgans. B/H/S: 3/4/0

It's all go at Macquarie, the group reporting in line with January guidance, and tipping earnings growth at the top end of its 10-20% guidance. Citi notes the tax rate has peaked, operations are upbeat, and most businesses improved over the period. The broker bumps up the target price to $70 from $66 but downgrades the stock to Neutral from Buy given recent share price strength. Macquarie's quarterly update highlighted ongoing momentum as capital markets benefit from improved trading conditions. Morgans envisages upside risks to FY15 growth guidance of 10-20%. The broker downgrades to a Hold rating from Add, given recent share price gains and believing the upside is largely priced in. Target is raised to $73.50 from $62.00.

Origin Energy ((ORG)) downgraded to Neutral from Outperform by Macquarie. B/H/S: 5/2/1

Interim earnings were below the broker's forecasts and cash flow is considered a challenge. Macquarie downgrades to Neutral from Outperform and reduces the target to $13.05 from $13.51 to reflect higher debt as a result of a higher APLNG contribution. The broker observes the company is nearing the time when APLNG investment will crystallise and, while attractive, this is offset by the lack of growth in Contact Energy, structural challenges in the energy market and slowing investment.

Pacific Brands ((PBG)) downgraded to Sell from Neutral by UBS. B/H/S: 0/4/2

First half results were poor but ahead of the broker's forecasts based on a recovery in Sheridan margins. However, underwear gross margins fell significantly and UBS believes the currency headwinds will cause FY16 earnings to fall. The broker downgrades to Sell from Neutral. A key risk to the broker's view would be a takeover offer, or further break up of the company, but a low probability is applied to a potential take over in the near term. Target is reduced to 42c from 52c.

See also PBG upgrade.

Platinum Asset ((PTM)) downgraded to Neutral from Outperform by Macquarie. B/H/S: 1/2/1

First half results were in line with forecasts but management fees were a key miss on expectations. Macquarie transfers coverage to a new analyst. While fundamentals are solid the current valuation metrics appear full and the broker downgrades to Neutral from Outperform. Target is lifted to $8.21 from $7.27.

Seven West Media ((SWM)) downgraded to Neutral from Outperform by Credit Suisse. B/H/S: 5/2/1

First half results were mixed and in line with forecasts, with TV earnings better and newspapers and magazines worse than expected. The broker expects the TV ad market to decline slightly with newspapers to continue the current trend. Credit Suisse cannot envisage a major catalyst for the stock over the next 6-12 months and expects the market to stay subdued. Target is reduced to $1.50 from $2.00 and rating is downgraded to Neutral from Outperform.

Seymour Whyte ((SWL)) downgraded to Hold from Add by Morgans. B/H/S: 1/1/0

Morgans notes the good guidance for the results and believes, with the current order book, the company can achieve reasonable growth given its NSW exposure and Rob Carr business. That said, until the new government in Queensland unveils its infrastructure plans, the broker downgrades to Hold from Add. The company is still considered one of the better placed infrastructure services businesses, with strong balance sheet and dividend support. Target is lowered to $1.50 from $2.03.

Sims Metal ((SGM)) downgraded to Sell from Neutral by Citi. B/H/S: 3/1/3

The benefits of the review to focus on earnings per tonne were clearly evident in Sims' first half result but on the 11% share price rally, the broker has downgraded to Sell. The review has drawn focus away from the key driver of volume, the broker suggests. While the broker has lifted margin expectations its earnings forecast rise modestly after lowering volume expectations in a deteriorating scrap market. Target falls to $10.40 from $10.50.

Super Retail ((SUL)) downgraded to Underperform from Outperform by Credit Suisse and to Underweight from Neutral by JP Morgan. B/H/S: 5/1/2

Underlying interim result fell short of Credit Suisse's expectations. Moreover, the timeframe for benefits from supply chain changes is going to be pushed out. Credit Suisse has implemented a double downgrade following a share price rally. Costs are likely to rise and there is wide scope for the various stores that operate under the group's supervision. First-half result met consensus and the company announced a fully franked interim dividend of 18.5c which was 3.5c ahead of JP Morgan's estimate. The broker's earnings per share forecasts rise 11.8% and 10.1% for FY15 and FY16 respectively and the target price rises to $8.95 from $8.40. Nevertheless a downgrade to Underweight from Neutral is in order as the broker believes the leisure division restructure is insufficient and a lack of valuation support means downside risk is accentuated.

Toll Holdings ((TOL)) downgraded to Neutral from Buy by Citi, to Neutral from Outperform by Credit Suisse and to Hold from Buy by Deutsche Bank. B/H/S: 0/5/3

Japan Post's $9.04 plus dividend offer for Toll is beyond a fair price, Citi, and a great opportunity for shareholders in a company facing structural challenges that continue to pressure earnings.Toll's result fell short and the broker does not see another bidder emerging nor any FIRB issues that cannot be addressed. The broker has lifted its target price to the bid price, to $9.04 from $5.40, and downgraded to Neutral. Toll's first half results were below Credit Suisse's forecasts, with parcel and trucking operations within Australia much weaker than the broker expected. Credit Suisse has lowered its FY15 forecast by 2% and FY16 forecast by 4%. The broker sees no reason why the bid by Japan Post will not succeed. Price target is raised to $9.04 in line with the bid price and the rating is downgraded to Neutral from Outperform. Toll's first half results were weaker than Deutsche Bank expected, with the broker identifying weakness in domestic forwarding as a key factor. Deutsche Bank believes this makes the bid by Japan Post as all the more compelling. The broker has downgraded the stock to Hold from Buy and the price target is raised to $9.04 in line with the bid as the broker does not expect a rival bid to emerge.

Wesfarmers ((WES)) downgraded to Underperform from Neutral by Credit Suisse and to Underperform from Neutral by Macquarie. B/H/S: 1/4/3

CS analysts saw an in-line interim result. Small changes to the Coles outlook have affected valuation and this has reduced the target to $43.71 from $44.00. In the absence of a fundamental change to the industrial outlook, mid-single digit growth in group earnings is considered likely. Downgrade to Underperform from Neutral following share price appreciation. Wesfarmer's first half earnings were just shy of Macquarie's expectations. Coles continues to perform well, with nine new supermarkets opened in the period, and Bunnings recorded an 11.8% growth in sales. Despite Wesfarmers delivering top line growth, the broker downgrades to Underperform from Neutral, as it sees little chance of the share price outperforming in the current challenging environment. Price target is raised to $44.34 from $43.90.

See also WES upgrade.

Woodside Petroleum ((WPL)) downgraded to Underperform from Neutral by Macquarie. B/H/S: 1/4/1

Macquarie analysts saw a solid result, though slightly short of their own expectation, with one last gigantic final dividend. Yield for the year ahead will now drop to some 2% on Macquarie's calculation. The price target has gained $1 to $36, but Macquarie downgrades to Underperform from Neutral as the company is still struggling with fixing its growth profile, while dividend yield support is about to evaporate.

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