Weekly Reports | Jun 02 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 May 26 to Friday May 30, 2025
Total Upgrades: 7
Total Downgrades: 9
Net Ratings Breakdown: Buy 61.55%; Hold 32.26%; Sell 6.19%
In the week ending Friday, May 30, 2025, FNArena tracked seven upgrades and nine downgrades for ASX-listed companies from brokers monitored daily.
Following four consecutive weeks in which top ten percentage declines in average target prices and earnings forecasts outweighed gains, the tables below show positive changes to targets materially beat falls across the board, while earnings upgrades were significantly larger for the top five entries.
Average targets for COG Financial Services, Australia's leading finance broker aggregator and equipment leasing business, and EVT Ltd, which operates across the entertainment, hospitality, and travel sectors, rose by around 17% and 13%, respectively.
COG experienced strong third quarter growth in its Novated Leasing business, helping lift profit by 9% compared to the prior year, slightly ahead of Morgans' forecast.
Recent divestments of stakes in Centrepoint Alliance and Earlypay ((EPY)) are good initial moves to streamline the business and reduce complexity, in the broker's view.
According to anecdotal commentary in the Australia Financial Review, the company's new Chairman wants to prioritise insurance broking operations going forward.
Suggesting EVT Ltd is both underappreciated and undervalued, Morgan Stanley highlighted the cinema business is experiencing early stages of a recovery in earnings which should deliver meaningful positive EPS revisions over the next three years.
The analysts also have increased conviction in EVT's hotel and property assets given a number of upcoming positive catalysts. According to the broker's Australian property team, these assets are trading in line with the market value of the property portfolio, implying zero value attribution for the cinema business.
Telstra Group was next with an around 12% lift in average target after management outlined a vision at the investor day for FY30 and beyond, including an aim for sustainable, growing dividends over the coming five years.
Targeting opportunities in enhancing network monetisation, the telco also aims to leverage artificial intelligence to drive efficiency, along with other cost-outs as explained at https://fnarena.com/index.php/2025/05/30/telstra-targets-sustainable-growing-dividends/
Web Travel follows Telstra on the positive target price ranking after all seven daily covered brokers in the FNArena database updated research last week following FY25 results. FNArena's consensus target rose to $6.28 from $5.61.
While results were broadly in line with expectations, both Citi and Macquarie upgraded their ratings to Buy (equivalent).
Citi cited a robust trading outlook against a challenging macroeconomic backdrop, while Macquarie is increasingly confident management will reach its $10bn FY30 target, noting greater visibility for medium-term revenue and earnings margins.
From the above changes to average targets, both Web Travel and COG Financial Services also appear in the upper reaches of positive change to average earnings forecasts. That table is headed up by Champion Iron, though that is the result of forecasts shifting into a new financial year. The previous year (ending in March) was not so great for the producer of iron ore.
Champion's FY25 result proved in line at the P&L and net-debt levels, according to Macquarie, with the flat dividend half-on-half a positive surprise for the analyst as the second half payout ratio was increased.
Bell Potter expects earnings will continue to support dividends as free cash flow should improve from 2026 with major capital programs completed. It's also felt government policy in the European Union and the growth in direct reduced iron (DRI) steel production will be supportive.
Appearing third and fourth on the earnings upgrade table, Fisher & Paykel Healthcare and ALS Ltd received respective FY25 upgrades of 18% and 15% on average.
Fisher & Paykel's FY25 result slightly beat forecasts by UBS and Morgan Stanley as higher margins offset slower hospital consumables growth in the second half and lower homecare revenues.
UBS noted FY25 benefited from a New Zealand dollar tailwind, but forecasts the company should also be able to maintain a significant P/E premium to A&NZ large-cap healthcare peers in reflection of superior EPS growth.
ALS Ltd's FY25 result met Morgans' expectations but the more important takeaway was the broker's optimistic view on both the Life Sciences division and Commodities.
A 15% rise in mineral volumes at the start of FY26 was not a one-off, according to the analyst, and prices will follow volume gains as the market tightens.
Over at Macquarie, their analyst predicted the environmental area within Life Sciences will outperform, contributing to 20-40bps margin improvement in FY26. In the case of the Commodities division, flat margins are expected to continue in the first half of FY26 before recovery in the second half.
On the flipside, Propel Funeral Partners received the largest fall (-10.55%) in average target price from brokers, with Healius not far behind at -9.55%.
Following lower guidance for FY25, Ord Minnett lowered its EPS forecasts for Propel Funeral Partners materially across FY25-27 due to lower-than-expected funeral volumes courtesy of a weaker death rate and falling excess mortality post-covid.
Management's guidance is for second half operating earnings to fall -17% short of market expectations, leading to near-term negative operating leverage, suggested the broker.
More positively, the analyst noted an ongoing opportunity for industry consolidation, with Propel holding $144m in funding capacity. Despite a lower target, Ord Minnett upgraded its rating to Buy from Accumulate on valuation grounds following a -16% share price decline over the past two months.
Morgans was the sole broker to update its earnings estimates for Healius last week, following early-May announcements of the Lumus Imaging divestment and a special dividend of approximately $300m.
The broker expressed caution given only 30% of flagged milestones have been completed to date and the analysts had previously estimated -$110m in cost savings/efficiencies required to deliver targeted high single digit operating margins by the end of 2027.
Leading agribusiness Elders is next on the list of negative earnings changes. As ever, the company remains subject to the vicissitudes of the Australian weather, and while the interim result showed an improvement, it still fell below broker expectations.
Offsetting the weakness in AgChem, the company experienced a higher-than-expected contribution from Real Estate, Agency (livestock, wool brokerage, and auctions) and Wholesale. For further details see https://fnarena.com/index.php/2025/05/28/elders-building-through-the-cycle-resilience/
In terms of negative change to average earnings forecasts, here WiseTech Global and Duratec were most prominent.
Wisetech's most ambitious acquisition of Texas-based E2open for -US$2.1bn enables the company to serve the entire supply chain, shifting from freight forwarding and warehousing to an end-to-end global trade platform.
While some brokers remain circumspect on the takeover given E2open's flagging financial performance over the last couple of years, others prefer to highlight the strategic and financial sense of the transaction as explained at https://fnarena.com/index.php/2025/05/29/wisetechs-big-bold-bet-on-e2open/
FY25 revenue guidance by Duratec has slipped by -7% at the midpoint, with earnings guidance also down by -5% due to unfavourable and unseasonal weather, as well as delays in several defence and mining contracts, Ord Minnett explained.
Duratec specialises in the assessment, protection, remediation, and refurbishment of steel and concrete structures.
Management did point to a pickup in May and June, indicating to the broker more robust performance, while Shaw and Partners noted gross margins remain stable and the order book robust.
Shaw and Bell Potter remain Buy-rated on Duratec and Ord Minnett kept its Accumulate rating, one peg below Buy in its ranking system.
Total Buy ratings in the database comprise 61.55% of the total, versus 32.26% on Neutral/Hold, while Sell ratings account for the remaining 6.19%.
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