Weekly Ratings, Targets, Forecast Changes – 16-08-24

Weekly Reports | Aug 19 2024

Weekly update on stockbroker recommendation, target price, and earnings forecast changes.

By Mark Woodruff

Guide:

The FNArena database tabulates the views of eight major Australian and international stockbrokers: Citi, Bell Potter, Macquarie, Morgan Stanley, Morgans, Ord Minnett, Shaw and Partners 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 August 12 to Friday August 16, 2024
Total Upgrades: 17
Total Downgrades: 10
Net Ratings Breakdown: Buy 59.51%; Hold 32.11%; Sell 8.38%

A quickening pace of August reporting during the week ending Friday August 16, 2024 saw FNArena record seventeen ratings upgrades and ten downgrades for ASX-listed companies by brokers monitored daily.

Positive and negative percentage changes to average earnings forecasts and average target prices were remarkably even, as can be seen in the tables below.

The positive change tables highlight some well-established reporting season outperformers such as JB Hi-Fi, Life360, Pro Medicus and Temple & Webster, which all beat brokers' earnings forecasts.

On the other hand, Nufarm experienced a -29% fall in average earnings forecast, and the average target prices for Beach Energy and Aurizon Holdings decreased by -13% and -10%, respectively.

Regarding Aurizon Holdings, brokers questioned the sustainability of Bulk earnings and a lower-than-expected interim dividend disappointed investors. For a more detailed account see https://fnarena.com/index.php/2024/08/14/aurizon-a-dividend-downer-for-investors/.

FNArena also compiled an article on JB Hi-Fi: https://fnarena.com/index.php/2024/08/13/jb-hi-fi-does-it-again/. This company not only exceeded FY24 expectations, but also trading for the first month of FY25 showed sales for JB Hi-Fi Australia, New Zealand, and the Good Guys rising year-on-year by 5.6%,12.2% and 2.7%, respectively.

An 80c special dividend was declared on top of the 261c ordinary dividend for FY24.

Reflecting contrasting FY24 reporting fortunes in the Utilities sector, AGL Energy and Origin Energy last week received two broker ratings upgrades and two downgrades, respectively. 

AGL Energy's performance was buoyed by improved electricity prices, greater thermal power plant reliability, and a nine-month contribution from the Torrens Island battery in South Australia, noted Ord Minnett. Guidance for FY25 underlying profit also surprised to the upside.

The broker upgraded its rating to Buy from Accumulate after noting improved quality of generation and a growing pipeline of renewable capacity and investments in retail platforms. It's felt the energy producer has laid the foundations for a stronger and more sustainable business.

Morgan Stanley upgraded to Overweight from Equal-weight noting past hard work on plant and the customer is paying off, and prospects for energy prices and demand are favourable.

By contrast, Origin Energy's FY25 earnings guidance surprised to the downside, and Morgan Stanley (downgrade to Underweight from Equal-weight) noted better leverage to data centre and renewables development could be gained via an exposure to AGL Energy. The analysts were at pains to explain this preference owed to respective timing of projects rather than any major difference in project quality.

Macquarie also downgraded Origin to Neutral from Outperform on the disappointing outlook for the Energy Markets division, which owns the Eraring coal fired power station (due to shut in FY26) and a portfolio of gas and hydro power plants.

In the Online Classifieds sector, Seek's FY24 result missed management's guidance and analysts' expectations and FY25 profit guidance fell -28% short of the consensus expectation as explained in https://fnarena.com/index.php/2024/08/15/the-seek-conundrum/.

Elsewhere in the sector, earnings for Domain Holdings Group proved broadly in line, while REA Group beat FY24 expectations and CAR Group's FY25 guidance surprised to the upside as explained in https://fnarena.com/index.php/2024/08/16/resilient-car-group-motors-on/.

Patriot Battery Metals headed up both the negative change to earnings and target price tables after Bell Potter initiated research coverage with one of the lower targets of five covering brokers in the FNArena database.

Macquarie also updated its forecasts for capital costs, operating costs, ramp-up profile, and production forecasts for the 100%-owned Shaakichiuwaanaan lithium project in northern Quebec on the back of an updated mineral resource estimate (MRE).

This updated estimate makes the project the largest hard rock lithium Resource in North America and the eighth largest globally, points out Bell Potter.

The average target price in the database is $1.05, suggesting 94% upside to the latest share price.

ARN Media stands second on the negative change to average target price table after Macquarie reviewed its coverage of Australian traditional media companies.

The broker noted ongoing softness for radio advertising markets and forecasts first half results due on August 22 will fall short of consensus expectations due to softer market share.

For a summary of strong earnings beats for Challenger and NRW Holdings and misses for Nufarm and Lifestyle Communities, along with other companies that reported last week, please refer to https://fnarena.com/index.php/reporting_season/ which also has FNArena's calendar of upcoming results.

Total Buy ratings in the database comprise 59.51% of the total, versus 32.11% on Neutral/Hold, while Sell ratings account for the remaining 8.38%.


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