Weekly Reports | Feb 16 2024
Broker Rating Changes (Post Thursday Last Week)
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BREVILLE GROUP LIMITED ((BRG)) Upgrade to Overweight from Market Weight by Wilsons.B/H/S: 0/0/0
Wilsons were positive on the expansion in gross margins to 37.6% announced in Breville Group's 1H24 earnings report.
The analyst views the -8.5% sell-off in the share price as a reaction to the -5% miss on revenue as the company retained pricing and profit growth, ahead of discounting and volume growth.
Wilsons views the price fall as a good entry point with Breville Group well positioned for sales growth as new country launches and the tailwind of lower interest rates in the future boost consumer sentiment.
The target price is raised to $27.60 from $24.90 and the rating upgraded to Overweight from Market Weight.
JAMES HARDIE INDUSTRIES PLC ((JHX)) Upgrade to Overweight from Neutral by Jarden.B/H/S: 0/0/0
Jarden believes there was short term noise around management retaining 4Q24 guidance, rather than the market focusing on better than forecast 3Q24 results which revealed both US volumes and EBIT ahead of expectations.
The strength in US earnings and leverage is highlighted by the analyst as the US market offers scope to recover.
Jarden raises FY24 EPS forecasts by 6.2% and 11.4% for FY25.
The pullback in the share price was seen as a great opportunity to upgrade to Overweight from Neutral and the target lifted to $57 from $48.
NICK SCALI LIMITED ((NCK)) Upgrade to Overweight from Underweight by Jarden.B/H/S: 0/0/0
Jarden is very upbeat on Nick Scali's latest 1H24 results which came in much better than expected. Net profit was 7% above the broker's forecast and 5% above consensus.
Gross margins were also better than anticipated which came as a relief with concerns over the impact of higher freight rates.
Jarden assesses Nick Scali as a very high quality retailer and raises the profit after tax forecasts by 11% to 15% for FY24 to FY26.
Accordingly, the stock is upgraded to Overweight from Underweight and the target price is raised to $13.87 from $10.40.
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ANZ GROUP HOLDINGS LIMITED ((ANZ)) Neutral by Jarden.B/H/S: 0/0/0
Jarden assessed ANZ Bank's 1Q24 trading update as a "solid beat". Revenues came in better than forecast with bad and doubtful debts (BDD) well below both consensus and the broker's 1H24 expectations.
Regarding net interest margins (NIM), no details were offered, but Jarden considers there is currently no downside risk to the market's NIM forecasts.
At this stage, the analyst makes minor earnings upgrades of 2.6% and 0.5% for FY24 and FY25, respectively, with Jarden awaiting further confirmation of the 1Q24 trends before lifting earnings higher.
The target price is raised to $26.70 from $26.30 and a Neutral rating retained.
BORAL LIMITED ((BLD)) Downgrade to Sell from Neutral by Goldman Sachs.B/H/S: 0/0/0
Prior to reporting season results, Goldman Sachs notes building starts in Australia have been weaker-than-expected, but it's now thought the elevated backlog will take longer to unwind than previously forecast.
In the US, the broker has a more robust forecast for housing starts due to growing single-family 2024/25 starts. Multi-family starts in 2024 are expected to decline, but growth is anticipated in 2025.
From among Goldman's coverage, James Hardie Industries is considered best placed, with operating leverage under-appreciated by the wider market. The company has also been a beneficiary of normalising input costs in the 4Q.
As Boral has successfully executed a margin turnaround, the share price has significantly outperformed, and the broker downgrades its rating to Sell from Neutral.
The analyst feels recent margin expansion may be hard to sustain as residential starts in Australia wane, and infrastructure may have limited capacity for incremental growth.
The target rises to $4.90 from $4.70.
CSL LIMITED ((CSL)) Downgrade to Market Weight from Overweight by Wilsons.B/H/S: 0/0/0
Wilsons' takes a scalpel to CSL's earnings forecasts as the broker removes a $91 per share valuation for the cardiac drug CSL112, post the Phase 3 missing endpoint.
The broker notes to a strong 1H24 earnings report with a beat on both revenue and net profit, but considers the company is "over reliant" on IG.
Management retained FY24 net profit guidance of between US$2.9bn and US$3bn and re-affirmed double digit EPS growth over the medium term.
Wilsons is also downbeat on the Vifor acquisition and described the operation as a "starless division".
The stock is downgraded to Market Weight from Overweight and the target price lowered to $253.
ELDERS LIMITED ((ELD)) Hold by Moelis.B/H/S: 0/0/0
Moelis assesses more favourable weather conditions since October 2023. Above average rainfall for the east coast of Australia, Northern Territory and South Australia has boosted non-irrigated crops and livestock prices.
Also: imported agricultural chemical prices have remained steady for the last six months, providing a further boost to Elders.
Earnings per share forecasts are lifted by 7%, 6% and 4% for FY24 through to FY26, respectively, after the broker accounts for better livestock volumes, prices and cropping outcomes.
A Hold rating is maintained and the price target is raised to $9.44 from $7.92.
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