Weekly Reports | Feb 24 2025
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 February 17 to Friday February 21, 2025
Total Upgrades: 12
Total Downgrades: 20
Net Ratings Breakdown: Buy 59.62%; Hold 32.94%; Sell 7.44%
The third week of the February reporting season ended on Friday, February 21, 2025, with FNArena tracking twelve upgrades and twenty downgrades for ASX-listed companies from brokers it monitors daily.
Percentage increases in analysts' average earnings forecasts modestly outpaced declines, as shown in the tables below, while average target price rises were significantly larger than falls.
Separate to impacts from the flood of interim and final reports, Select Harvests features in the positive tables for both earnings and targets following a mixed AGM trading update, where a lower-than-expected FY25 crop volume estimate was outweighed by confirmation of further strength in almond prices.
While FY25 almond production guidance of 27,500-29,000t (at an average price of $9.2/kg) is below the previous estimate of around 29,500t, Bell Potter raised its FY25 and FY26 profit forecasts by 7% and 32%, respectively, driven by higher US dollar almond price assumptions and a weaker Australian dollar.
Highlighting the impact of price changes on forecasts, Ord Minnett only raised its price estimate to $9.0/kg, yet the broker's FY25 earnings forecast rose by 21% to $108m, with the net profit estimate rising sharply by 37% to $51m.
UBS raised its earnings forecasts but noted the stock has climbed 34% since the November result (September year-end), now trading at fair value relative to peers, leading to a downgrade to Neutral from Buy.
Elsewhere, UBS research resulted in De Grey Mining's average FY25 earnings forecast rising by 66%, while Syrah Resources' forecast declined by -12%.
This broker raised its gold price forecasts, increasing the year-end target by US$200/oz to US$3,100/oz and long-term by US$250/oz to US$2,200/oz. New price forecasts are well above consensus.
The updated view comes as expectations for US rate cuts are pushed out and is driven by ongoing official sector buying, haven buying, lack of positioning, and ongoing liquidity issues.
The analysts have Buy ratings for Northern Star Resources ((NST)), Perseus Mining ((PRU)), De Grey Mining ((DEG)), Gold Road Resources ((GOR)), SSR Mining ((SSR)), and Bellevue Gold ((BGL)).
Last week, the broker also upgraded Genesis Minerals ((GMD)) and Evolution Mining ((EVN)) respectively to Buy and Neutral, leaving Regis Resources ((RRL)) with the only Sell rating.
For Syrah Resources, UBS resumed research coverage after a long hiatus with a 30-cent target, down from 80 cents, and downgraded its rating to Neutral from Buy due to ongoing headwinds at both a company and industry level.
The company's primary asset, the Balama Graphite mine in Mozambique, remains under force majeure due to civil unrest in the country, triggering events of default with Syrah's creditors.
The broker's lower target was driven largely by cutting sales price and volume forecasts at Balama by up to -40% and -25%, respectively.
While graphite prices have likely bottomed, the analysts don't anticipate any near-term fundamental catalysts for a price re-rate, with Chinese synthetic capacity remaining an overhang.
Regarding impacts from the reporting season evident in the tables below, Ebos Group and Temple & Webster received two ratings downgrades apiece from brokers due to valuation, after respective misses and beats against consensus expectations.
A summary of broker views for these two companies and all the misses and beats from last week plus the full reporting season are available at https://fnarena.com/index.php/reporting_season/
Reading this Corporate Results Monitor helps explain the reasoning behind in-line results for both MA Financial and Coronado Global Resources, despite both companies registering the largest percentage moves in average target prices in the tables below.
While the earnings miss for Chrysos tallies in general with the largest earnings downgrade by brokers below, the Monitor explains the miss was marginal, highlighting the percentage decrease was magnified due to small numbers involved.
Apart from MA Financial, brokers awarded the largest rises in average target prices to Corporate Travel Management, Fletcher Building, Hub24, Judo Capital and a2 Milk co.
For a2 Milk Co, apart from posting a solid first half and gaining market share, the second half is set to enjoy several tailwinds https://fnarena.com/index.php/2025/02/18/a2-milks-it/
Total Buy ratings in the database comprise 59.62% of the total, versus 32.94% on Neutral/Hold, while Sell ratings account for the remaining 7.44%.
Upgrade
A2 MILK COMPANY LIMITED ((A2M)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 4/3/0
The first half results from a2 Milk Co beat expectations amid strong cash flow conversion. FY25 revenue guidance has been lifted and the EBITDA margin outlook is stronger.
Macquarie upgrades to Outperform from Neutral, noting the English label market remains positive for sales and margin. There are limited downside catalysts envisaged for the near term and the target is raised to $7.85 from $5.70.
ARB CORPORATION LIMITED ((ARB)) Upgrade to Outperform from Neutral by Macquarie .B/H/S: 4/1/1
Following a "solid" result in tough operating conditions, Macquarie raises its target for ARB Corp by 4% to $45.40 and upgrades to Outperform from Neutral.
The highlight, according to the analyst, was the Export segment with 1H sales growth of 15% year-on-year (US:Ex-US was 19%:14%), while Australian Aftermarket outperformed a soft market for new vehicle volumes.
Gross margins rose by 150bps year-on-year to a record 59.3% due to price rises and lower freight costs, explains the broker, and management expects a steady 2H gross margin percentage.
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