Weekly Recommendation, Target Price, Earnings Forecast Changes

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This story features FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED, and other companies.
For more info SHARE ANALYSIS: FPH
The company is included in ASX100, ASX200, ASX300 and ALL-ORDS

By Rudi Filapek-Vandyck, Editor FNArena

Guide:

The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie, Morgan Stanley, Morgans 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 November 30 to Friday December 4, 2015
Total Upgrades: 5
Total Downgrades: 23
Net Ratings Breakdown: Buy 43.67%; Hold 43.67%; Sell 12.66%

It's tough to receive a recommendation upgrade from an Australian based stockbroker these days. In the week ending Friday, 4 December 2015, only four stocks received an upgrade. New Zealand-headquartered Fisher & Paykel Healthcare stole the show with two upgrades, but only one went as far as Buy. The other three "lucky" ones were Metcash, Santos and Treasury Wines.

On the other side of the ledger, FNArena counted no less than 23 downgrades in ratings for individual stocks. The list includes Cardno (twice, on profit warning and capital raising) and numerous stocks whose share price has felt a strong wind blowing from behind recently, such as Aconex, Collins Foods, Mantra Group and Ramsay Healthcare. In the smaller cap space, all three specialised aged care providers -Regis Healthcare, Estia Health and Japara- received downgrades and extra analysts' scrutiny as the federal government is believed to be looking into a temporarily spending freeze.

There are still plenty of downgrades flowing for energy and mining stocks with analysts going through yet another round of forecasts re-appraisal.

A better-than-expected financial performance by Metcash has allowed this stock to top the table for positive revisions to price targets this week. At considerable distance we find Mantra Group and TechnologyOne. The negative side features members of the Dogs of 2015 assembly, including Slater & Gordon, ALS Ltd, Spotless Group, Whitehaven Coal and, yes, BHP Billiton.

Metcash and Fisher & Paykel Healthcare also sit on top of the table for positive revisions to earnings estimates, followed by, I kid you not, resources stocks Caltex, Whitehaven Coal and Fortescue Metals. Receiving downgrades to earnings forecasts are gold miner Perseus Mining, ALS Ltd, Spotless Group, Iluka Resources and Dick Smith. None of these would come as a surprise.

Upgrade

FISHER & PAYKEL HEALTHCARE CORPORATION LIMITED ((FPH)) Upgrade to Buy from Sell by Citi and Upgrade to Neutral from Underperform by Credit Suisse .B/H/S: 3/1/1

Citi analysts had another look post H1 release and they obviously liked what they discovered. Amongst the conclusions drawn is the company continues to grab market share from ResMed ((RMD)).

Citi is forecasting EPS growth of 30% in FY16, 30% in FY17 and 21% in FY18. Upgrade to Buy from Sell.

First half earnings were up 31.1% amid a favourable FX translation. Following a transfer of coverage to another analyst Credit Suisse revises forecast operating earnings up 11% for FY16 and 17% for FY17.

This captures a strong underlying growth profile in key markets and expansion in penetrating the patient population with its products.

Rating is upgraded to Neutral from Underperform. Target is lifted to NZ$8.60 from NZ$6.25.

METCASH LIMITED ((MTS)) Upgrade to Overweight from Equal-weight by Morgan Stanley .B/H/S: 3/2/2

In the wake of the first half results, Morgan Stanley has become more bullish on the stock, upgrading to Overweight from Equal-weight as the valuations appears more attractive. The broker cites evidence the food & grocery transformation is working.

The results were far better than envisaged and the broker believes the liquor and hardware businesses are well placed for growth. Target is raised to $2.00 from $1.20. In-Line sector view.

SANTOS LIMITED ((STO)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 7/1/0

Credit Suisse now believes the time has come when Santos appears too cheap. Hence, the rating is upgraded to Outperform from Neutral.

The broker hastens to add this is not a revision of its view of the assets rather than the risk/reward is now more skewed in investor favour.

Credit Suisse now believes the micro factors in 2016 are likely to be less negative. Still, Santos remains a leveraged call on oil prices.Target is $5.00.

TREASURY WINE ESTATES LIMITED ((TWE)) Upgrade to Outperform from Neutral by Credit Suisse .B/H/S: 1/6/0

Credit Suisse observes the Chinese wine market is growing rapidly with retail prices for imported wines falling, and spurring strong demand.

The broker's checks suggest Treasury Wine's brands are participating in this evolution but its share of Australian wine exports to China is only 10%. The broker intends to visit China this month to assess the potential.

Credit Suisse upgrades to Outperform from Neutral and stretches its target to $9.20 from $6.60, while acknowledging this requires a leap of faith for investors over the next 12 months.

Downgrade

ACONEX LIMITED ((ACX)) Downgrade to Neutral from Buy by UBS .B/H/S: 3/2/0

The share price has risen 30% since August with UBS observing no new catalysts. The broker continues to believe the company is well positioned for the short term but this is factored into the price.

Hence, rating is downgraded to Neutral from Buy. Target is raised to $5.05 from $4.30.

AMCOR LIMITED ((AMC)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 3/4/1

As the share price has increased over recent months the gap to valuation has closed and Credit Suisse downgrades to Neutral from Outperform.

The broker has also applied a slight downgrade on the back of the US dollar appreciation against the euro. Target slips to $14.50 from $14.60.

AURIZON HOLDINGS LIMITED ((AZJ)) Downgrade to Reduce from Hold by Morgans .B/H/S: 4/3/1

Morgans believes the market is too bullish regarding Aurizon and revises down forecasts by 2-10% across FY16-19, given challenging end markets.

Coal and iron ore export prices continue to trend downwards and with the expiry of coal haulage contracts early in the next decade the broker is conscious that weak prices may result in early termination or non renewal.

Morgans suspects the share price has surged recently as a result of speculation about capital management but believes the company is already devouring all its cash flow with dividend payments in FY16-17.

The broker downgrades to Reduce from Hold. Target is revised down to $5.11 from $5.41.

BEADELL RESOURCES LIMITED ((BDR)) Downgrade to Sell from Neutral by Citi .B/H/S: 1/0/2

Commodity analysts at Citi have once again reduced prices forecasts across the board, including for energy. They do, however, anticipate better times ahead as 2016 should further re-balance markets. Having said so, the report is probably best summarised with moderate optimism. Citi's anticipation of better prices concerns more 2017.

Forecasts remain bearish for oil and gas on a six months horizon, as well as for bulk commodities and gold and silver. The exceptions are copper and nickel.

Earnings forecasts have been cut. Beadell's rating drops to Sell from Neutral.

CARDNO LIMITED ((CDD)) Downgrade to Sell from Hold by Deutsche Bank and Downgrade to Underperform from Neutral by Macquarie .B/H/S: 1/2/3

The company has downgraded guidance, highlighting that the business is under pressure from both macro factors as well as internal issues, Deutsche Bank observes.

The company expects first half earnings in the range of $23-25m and has launched a $78m non-renounceable rights issue.

The limited visibility over execution on the backlog and profitability is of major concern to the broker while the equity raising is considered a much needed step to avoid a breach of covenants.

Deutsche Bank downgrades FY16 estimates by 30% and FY17 by 27%. The broker downgrades to Sell from Hold. Target is reduced to $1.15 from $2.70.

Cardno has issued another profit warning, downgrading full year guidance to substantially below Macquarie's forecast. A capital raising of $78m has also been announced at $1.00. The capital raising, and the recent sale of Cardno ATC, will alleviate the pressure on debt covenants, the broker notes.

Eventually Cardno will be judged on how its new strategy is working, but in the meantime Macquarie suggests market confidence will be sorely tested by the magnitude and timing of such a warning. Downgrade to Underperform. Target falls to $1.04 from $2.81.

COLLINS FOODS LIMITED ((CKF)) Downgrade to Neutral from Buy by UBS .B/H/S: 1/1/0

First half results were stronger than UBS expected, driven by 5.2% growth in KFC sales. The broker believes there is potential for materially accretive acquisitions with management open to extending its national footprint in KFC.

UBS upgrades forecasts. Rating is downgraded to Neutral from Buy on valuation grounds. Target is raised to $4.65 from $3.50.

DUET GROUP ((DUE)) Downgrade to Underweight from Equal-weight by Morgan Stanley .B/H/S: 2/4/2

Morgan Stanley has updated its numbers now the company has absorbed Energy Developments, noting moderate earnings certainty and low long-term visibility. Hence, the broker downgrades to Underweight from an Equal-weight rating.

Morgan Stanley expects 2.8% growth in FY16-18 distributions is achievable. Target is raised to $2.23 from $2.21. Cautious industry view.

ESTIA HEALTH LIMITED ((EHE)) Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 2/2/0

While demographics and the property market around aged care remain sound, Deutsche Bank observes the sector is clouded by funding reform issues and this is a reminder of the dependency on government funding.

A diminished save-haven status may lead to a compression of multiples, the broker warns, despite the attractive elements remaining intact. Deutsche Bank downgrades its rating to Hold from Buy, given limited upside to new price targets.

These targets have been revised to reflect slightly downgraded earnings estimates, to allow for the impact of a freeze on aged-care funding indexation in 2016. Estia Health's target is lowered to $7.30 from $7.50.

HEALTHSCOPE LIMITED ((HSO)) Downgrade to Underperform from Neutral by Credit Suisse .B/H/S: 3/4/1

Credit Suisse analysts have lowered their private hospital revenues forecasts for the years ahead following the latest industry data which showed slower growth. As a direct result, earnings estimates have been lowered for both Ramsay Health Care ((RHC)) and its main ASX-listed competitor Healthscope.

The analysts retain their preference for Ramsay because of its ongoing superior growth profile. Note estimates were cut by less for Ramsay this time too. Target price drops to $2.68 from $2.85 and this triggers a rating downgrade to Underperform from Neutral.

INDEPENDENCE GROUP NL ((IGO)) Downgrade to Neutral from Buy by Citi .B/H/S: 4/3/0

Commodity analysts at Citi have once again reduced prices forecasts across the board, including for energy. They do, however, anticipate better times ahead as 2016 should further re-balance markets. Having said so, the report is probably best summarised with moderate optimism. Citi's anticipation of better prices concerns more 2017.

Forecasts remain bearish for oil and gas on a six months horizon, as well as for bulk commodities and gold and silver. The exceptions are copper and nickel.

On the back of earnings estimates cuts, Independence Group has been downgraded to Neutral from Buy.

ILUKA RESOURCES LIMITED ((ILU)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 3/3/1

Credit Suisse has updated its mineral sands price forecasts, expecting depressed prices will continue to the end of the decade.

Iluka's 2015 earning forecasts are downgraded by 16%. The broker expects lower zircon and rutile production in 2016 but, given improved cash flow, the company is expected to be in a net cash position by the end of the year.

Given earnings revisions and reduction in forecast prices the broker downgrades to neutral from Outperform rating. Target is lowered to $6.50 from $7.50.

JAPARA HEALTHCARE LIMITED ((JHC)) Downgrade to Sell from Hold by Deutsche Bank .B/H/S: 4/0/1

While demographics and the property market around aged care remain sound, Deutsche Bank observes the sector is clouded by funding reform issues and this is a reminder of the dependency on government funding.

A diminished save-haven status may lead to a compression of multiples, the broker warns, despite the attractive elements remaining intact. Deutsche Bank downgrades its rating to Sell from Hold, given limited upside to new price targets.

These targets have been revised to reflect slightly downgraded earnings estimates, to allow for the impact of a freeze on aged-care funding indexation in 2016. Japara Healthcare's target is lowered to $2.80 from $2.90.

MANTRA GROUP LIMITED ((MTR)) Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 3/3/0

As the stock has recently experienced a re-rating amid some rising risk factors such as supply, less M&A upside and increased competition, Deutsche Bank downgrades to Hold from Buy.

 The broker acknowledges the strong leverage to robust leisure demand but considers the risks are inappropriately priced. Target is raised to $4.50 from $4.10.

OIL SEARCH LIMITED ((OSH)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 3/4/1

Credit Suisse has made a hard call and decided to downgrade to Neutral from Outperform. The broker believes the stock is the highest quality offering in the sector in the Australian market in terms of management, producing assets and growth assets.

Yet, the valuation no longer stacks up for the broker. Credit Suisse will watch for another entry point as it considers the stock desirable and, while Woodside's ((WPL)) intentions remain uncertain, the stock is not expected to fall far. Target is lowered to $8.00 from $8.80.

PERSEUS MINING LIMITED ((PRU)) Downgrade to Sell from Neutral by Citi .B/H/S: 2/3/1

Commodity analysts at Citi have once again reduced prices forecasts across the board, including for energy. They do, however, anticipate better times ahead as 2016 should further re-balance markets. Having said so, the report is probably best summarised with moderate optimism. Citi's anticipation of better prices concerns more 2017.

Forecasts remain bearish for oil and gas on a six months horizon, as well as for bulk commodities and gold and silver. The exceptions are copper and nickel.

On the back of lowered earnings estimates, the rating for Perseus Mining has been pulled back to Sell from Neutral.

REGIS HEALTHCARE LIMITED ((REG)) Downgrade to Hold from Buy by Deutsche Bank .B/H/S: 0/4/0

While demographics and the property market around aged care remain sound, Deutsche Bank observes the sector is clouded by funding reform issues and this is a reminder of the dependency on government funding.

A diminished save-haven status may lead to a compression of multiples, the broker warns, despite the attractive elements remaining intact. Deutsche Bank downgrades its rating to Hold from Buy, given limited upside to new price targets.

These targets have been revised to reflect slightly downgraded earnings estimates, to allow for the impact of a freeze on aged-care funding indexation in 2016. Regis Healthcare's target is lowered to $6.20 from $6.40.

RAMSAY HEALTH CARE LIMITED ((RHC)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 3/3/2

Credit Suisse analysts have lowered their private hospital revenues forecasts for the years ahead following the latest industry data which showed slower growth. As a direct result, earnings estimates have been lowered for both Ramsay Health Care and its main ASX-listed competitor Healthscope ((HSO)).

The analysts retain their preference for Ramsay because of its ongoing superior growth profile. Note estimates were cut by less for Ramsay this time too. Target price drops to $70.15 from $72.15 and this triggers a rating downgrade to Neutral from Outperform.

REGIS RESOURCES LIMITED ((RRL)) Downgrade to Underweight from Neutral by JP Morgan .B/H/S: 2/2/4

JP Morgan envisages few positive catalysts on the horizon for resources.

The broker downgrades Regis Resources to Underweight from Neutral because of a lack of valuation support in the wake of the recent rally.

The price target rises to $1.60 from $1.40.

SOUTH32 LIMITED ((S32)) Downgrade to Neutral from Buy by Citi .B/H/S: 4/3/0

Commodity analysts at Citi have once again reduced prices forecasts across the board, including for energy. They do, however, anticipate better times ahead as 2016 should further re-balance markets. Having said so, the report is probably best summarised with moderate optimism. Citi's anticipation of better prices concerns more 2017.

Forecasts remain bearish for oil and gas on a six months horizon, as well as for bulk commodities and gold and silver. The exceptions are copper and nickel.

South32's rating goes to Neutral from Buy.

SPOTLESS GROUP HOLDINGS LIMITED ((SPO)) Downgrade to Neutral from Outperform by Macquarie .B/H/S: 3/1/0

Macquarie is disappointed that only six weeks after reiterating guidance at its AGM, Spotless has now downgraded to flat FY16 earnings growth when the broker had forecast 12%. Credibility has been impacted, the broker suggests.

The downgrade reflects delays in new contract awards and a write-down of the cost of unsuccessful contract bids. Macquarie has cut forecast earnings by 19% as a result and downgraded to Neutral. The broker acknowledges the 40% share price plunge response but suggests that expectations for growth are now gone, as is the assumption of a contract win from Rio Tinto ((RIO)).

Target falls to $1.42 from $2.25.

WHITEHAVEN COAL LIMITED ((WHC)) Downgrade to Neutral from Buy by Citi .B/H/S: 4/4/0

Commodity analysts at Citi have once again reduced prices forecasts across the board, including for energy. They do, however, anticipate better times ahead as 2016 should further re-balance markets. Having said so, the report is probably best summarised with moderate optimism. Citi's anticipation of better prices concerns more 2017.

Forecasts remain bearish for oil and gas on a six months horizon, as well as for bulk commodities and gold and silver. The exceptions are copper and nickel.

Whitehaven's rating is downgraded to Neutral from Buy.

WOODSIDE PETROLEUM LIMITED ((WPL)) Downgrade to Neutral from Outperform by Credit Suisse .B/H/S: 0/6/2

With confusion over its plans for the Oil Search ((OSH)) bid and few positive catalysts likely soon from any growth assets, Woodside's risk/reward no longer looks so attractive to Credit Suisse and the rating is now downgraded to Neutral from Outperform.

The broker continues to believe any increased bid for Oil Search is value destructive and, for now, decides to sit on the sidelines. Target is lowered to $32.00 from $34.00.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

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