Tag Archives: Consumer Discretionary

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The past week has been a relatively balanced one in terms of changes to ratings on stocks covered by the eight brokers in the FNArena database. A total of seven upgrades and eight ratings downgrades brought total Buy recommendations to 57.4%, down a little from nearly 57.7% last week.

Centro Retail ((CER)) was one to enjoy an upgrade, Deutche Bank moving to a Buy rating from Hold previously in response to revised aggregation terms. For Deutsche, the new terms significantly reduce the risk profile going forward, while offering additional incentives for unitholders to approve the proposal.

Following a review Deutsche also made minor changes to earnings estimates and lifted its price target for the stock. Elsewhere in the property sector, plans for a buyback of shares by Commonwealth Property Office ((CPA)) were enough for JP Morgan to upgrade to Overweight from Underweight. The buyback should act as a catalyst for the share price, while the broker is also attracted to low gearing levels and a conservative balance sheet as this offers scope for expansion opportunities.

In the resources sector, RBS Australia upgraded to Buy from Hold on Discovery Metals ((DML)), reflecting both upside from ongoing exploration success and to reflect improved valuation following recent share price weakness.

RBS also upgraded Kingsgate ((KCN)) to Buy from Hold on the expectation the ending of the wet season in northern Thailand will deliver improved quarterly production results from the Chatree project. The upgrade in rating comes despite a lowering of the broker's price target.

Murchison Metals ((MMX)) was upgraded to Neutral from Underweight by JP Morgan on news the company has entered an agreement to sell its interests in Crosslands and OPR. The funds to be received imply a value of $0.47 per share and improve both the valuation and financial position of Murchison. JP Morgan's price target has been adjusted to reflect the valuation impact.

While Northern Iron ((NFE)) remains on track to meet production targets for the full year, the move by the company to raise a further $9 million from its debt facility to alleviate a tight cash position has also been viewed favourably by Macquarie. This is enough for an upgrade to an Outperform rating from Neutral previously.

Among industrials, Programmed Maintenance ((PRG)) enjoyed an upgrade from RBS Australia, the broker moving to Buy from Hold post a solid interim result. The result increases confidence in the outlook for Programmed and should also help restore some credibility in the market according to RBS.

BlueScope ((BSL)) was downgraded to Hold from Buy this week by RBS, the broker arguing while an equity raising will improve the group's balance sheet there remains a significant amount of earnings uncertainty. This uncertainty means a Buy rating is no longer appropriate in the broker's view.

Targets and earnings estimates for BlueScope have been adjusted across the market to account for the impact of the equity raising. OneSteel ((OST)) also saw cuts to earnings estimates and price targets post weak outlook commentary at its AGM during the week.

Cuts to iron ore prices by JP Morgan resulted in Gindalbie ((GBG)) being downgraded to Neutral from Overweight, while price target and earnings estimates were also reduced. It was a similar story for Mount Gibson ((MGX)), though in this case it was Citi lowering its numbers and downgrading to a Neutral rating from Buy previously.

In a tough week for IT stocks both Oakton ((OKN)) and SMS Management and Technology ((SMX)) were downgraded by RBS to Hold ratings from Buy. The changes reflect still difficult operating conditions in key markets. In both cases earnings estimates and price targets were also reduced.

Things are no easier for wealth managers as evidenced by weak guidance from IOOF ((IFL)), the update causing brokers to lower earnings forecasts and price targets. UBS also downgraded to a Neutral rating from Buy previously.

In contrast, Kathmandu ((KMD)) delivered a solid trading update but it only triggered minor changes to estimates. RBS has still downgraded to a Hold rating on valuation grounds post recent share price gains.

This week Telecom New Zealand ((TEL)) de-merged its network division and this has prompted brokers across the market to update their earnings models. Price targets have fallen across the board and Credit Suisse has downgraded to an Underperform rating from Neutral previously.

A solid second quarter result from James Hardie ((JHX)) has been enough to prompt some increases to earnings estimates and price targets, while brokers have gone the other way on David Jones ((DJS)) and trimmed forecasts and targets post yet another disappointing quarterly sales update from the department store owner.

NRW Holdings ((NWH)) delivered strong AGM earnings guidance and was being rewarded through increases to earnings estimates across the market, with all three brokers covering the stock also lifting price targets.

Forecasts for Virgin Blue ((VBA)) have also sneaked higher following solid AGM commentary, while a solid full year result from Graincorp ((GNC)) and expectations of another strong year to come have been enough for some minor revisions to estimates and price targets.

Following the acquisition of TransACT brokers have lifted forecasts for iiNet ((IIN)), the result being modest increases to price targets as well. Monadelphous ((MND)) has seen forecasts and price targets increase thanks again to positive outlook commentary at the group's AGM. Monadelphous is facing a different kind of problem than most other stocks in the Australian share market: ongoing popularity among buyers of equities. One recurring theme in stockbroker research on the company is thus, unsurprisingly, whether the shares are getting a bit expensive?

A slightly better than expected interim result has seen minor increases to forecasts for Thorn Group ((TGA)).

Shale gas developer and oil producer Beach ((BPT)) received some good news during the week with the Tantanna to Gidgealpa oil pipeline coming back on stream and this was enough for UBS to lift forecasts, while Credit Suisse revised some volume assumptions for Fortescue ((FMG)) that resulted in lower earnings estimates and a cut in price target.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	Centro Retail Group	Neutral	Buy	Deutsche Bank
2	COMMONWEALTH PROPERTY OFFICE FUND	Neutral	Buy	JP Morgan
3	DISCOVERY METALS LIMITED	Neutral	Buy	RBS Australia
4	KINGSGATE CONSOLIDATED LIMITED	Neutral	Buy	RBS Australia
5	MURCHISON METALS LTD	Sell	Neutral	JP Morgan
6	NORTHERN IRON LIMITED	Neutral	Buy	Macquarie
7	PROGRAMMED MAINTENANCE SERVICES LIMITED	Neutral	Buy	RBS Australia
Downgrade
8	BLUESCOPE STEEL LIMITED	Buy	Neutral	RBS Australia
9	GINDALBIE METALS LTD	Buy	Neutral	JP Morgan
10	IOOF HOLDINGS LIMITED	Buy	Neutral	UBS
11	KATHMANDU HOLDINGS LIMITED	Buy	Neutral	RBS Australia
12	Mount Gibson Iron Limited	Buy	Neutral	Citi
13	OAKTON LIMITED	Buy	Neutral	RBS Australia
14	SMS MANAGEMENT & TECHNOLOGY LIMITED	Buy	Neutral	RBS Australia
15	TELECOM CORPORATION OF NEW ZEALAND LIMITED	Buy	Sell	Credit Suisse

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	MMX	- 67.0%	- 33.0%	34.0%	3
2	DML	25.0%	50.0%	25.0%	4
3	KCN	20.0%	40.0%	20.0%	5
4	CER	33.0%	50.0%	17.0%	4
5	PRG	86.0%	100.0%	14.0%	7
6	STO	75.0%	88.0%	13.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	MGX	75.0%	25.0%	- 50.0%	8
2	KMD	80.0%	60.0%	- 20.0%	5
3	AZT	80.0%	60.0%	- 20.0%	5
4	OKN	80.0%	60.0%	- 20.0%	5
5	SMX	100.0%	80.0%	- 20.0%	5
6	CHC	100.0%	83.0%	- 17.0%	6
7	GBG	100.0%	83.0%	- 17.0%	6
8	BSL	57.0%	43.0%	- 14.0%	7
9	IFL	71.0%	57.0%	- 14.0%	7
10	ORG	88.0%	75.0%	- 13.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	MMX	0.220	0.390	77.27%	3
2	JHX	6.391	6.706	4.93%	8
3	PRG	2.357	2.437	3.39%	7
4	DML	1.608	1.640	1.99%	4
5	CER	0.350	0.355	1.43%	4
6	ILU	19.938	20.219	1.41%	8
7	KMD	2.083	2.103	0.96%	5
8	CHC	2.482	2.500	0.73%	6
9	ORG	17.455	17.456	0.01%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	BSL	1.356	0.851	- 37.24%	7
2	MGX	1.946	1.659	- 14.75%	8
3	AZT	12.870	11.540	- 10.33%	5
4	OKN	2.152	1.970	- 8.46%	5
5	GBG	1.078	0.995	- 7.70%	6
6	IFL	6.637	6.329	- 4.64%	7
7	SMX	6.790	6.478	- 4.59%	5
8	DJS	2.796	2.745	- 1.82%	8
9	KCN	8.744	8.664	- 0.91%	5

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	NWH	25.133	30.300	20.56%	3
2	VBA	2.871	3.014	4.98%	7
3	GNC	79.377	82.550	4.00%	6
4	JHX	29.699	30.791	3.68%	8
5	IIN	29.067	29.950	3.04%	5
6	PRU	22.517	23.183	2.96%	6
7	MND	119.183	122.583	2.85%	5
8	PRG	25.414	26.086	2.64%	7
9	TGA	19.467	19.967	2.57%	3
10	BPT	4.040	4.140	2.48%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	AZT	39.460	17.980	- 54.43%	5
2	TEL	18.523	14.700	- 20.64%	8
3	GBG	0.771	0.671	- 12.97%	6
4	PPC	7.833	7.108	- 9.26%	6
5	OST	15.114	13.986	- 7.46%	7
6	MGX	40.863	38.088	- 6.79%	8
7	IFL	46.100	43.900	- 4.77%	7
8	CER	3.633	3.475	- 4.35%	4
9	FMG	66.072	63.294	- 4.20%	8
10	OKN	19.420	18.620	- 4.12%	5

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

In another week where downgrades have dominated, brokers in the FNArena database have lowered ratings on 12 stocks while upgrading just four. This brings total Buy ratings to just a touch under last week's 57.7%.

Among the upgrades was BlueScope Steel ((BSL)), Macquarie moving to an Outperform rating from Neutral on expectations the “new” BlueScope will be a closer play on the domestic economic cycle. This reflects a reduction in some loss making export operations as part of an operational restructuring.

Macquarie expects the market's confidence in BlueScope will lift as the proposed cost out story and earnings improve, which should be enough to drive a re-rating of the stock in time. Earnings and price target have been adjusted not only by Macquarie but also by the likes of JP Morgan.

A strategic review by Goodman Fielder ((GFF)) has also prompted an upgrade by Macquarie to Neutral from Underperform, the broker taking a slightly more optimistic approach to new management's proposed cost out story. Improved valuation also supports the upgrade in rating, as do increases to earnings estimates. At the same time Macquarie has trimmed its price target for the stock.

JP Morgan meanwhile has upgraded to Overweight from Neutral on Lend Lease ((LLC)), driven by what it sees as a solid medium-term earnings growth outlook and an attractive valuation at current levels. The broker has also identified some positive near-term catalysts such as new work for Valemus and good mixed-use and residential development pipelines. Forecasts and price target have also been adjusted.

Sonic Healthcare ((SHL)) enjoyed an upgrade to Neutral from Sell by UBS, the broker now adopting a more positive stance on opportunities in the UK pathology sector as outsourcing momentum increases. Factoring in the potential also saw UBS adjust its price target higher for the stock.

On the downgrade side, Aston Resources ((AZT)) has been downgraded to Neutral from Outperform by Macquarie to reflect uncertainty from board changes arising from a difference of opinion in relation to corporate strategy.

While the Maules Creek project continues to offer promise, the board issues have seen Macquarie remove a previous takeover premium, which also means a cut in price target. A similar boardroom issue at Mount Gibson ((MGX)) has also seen Macquarie downgrade to an Underperform rating from Neutral previously.

Both UBS and BA Merrill Lynch downgraded Campbell Brothers ((CPB)) during the week, both on valuation grounds to reflect recent share price gains. In both cases the brokers moved to Neutral ratings from Buy recommendations previously, though BA-ML did lift its price target slightly.

Recent outperformance was also enough for JP Morgan to downgrade Coca-Cola Amatil ((CCL)) to Neutral from Overweight, while earnings estimates have been trimmed in anticipation of another wet summer impacting on demand.

Citi's downgrade on Commonwealth Bank ((CBA)) to Sell from Neutral is based on the view a new CEO will be looking for growth avenues, so potentially putting some downward pressure on the share price. As well, Citi's view is the recent trading update by the bank implies a slow start to the new fiscal year.

A strategy day was enough to prompt RBS Australia into making minor changes to its model for Iluka ((ILU)), with earnings and price target both adjusted. While the stock now offers an attractive yield there is potentially less growth on offer, which supports the broker's move to a Hold rating. Other brokers have also adjusted earnings forecasts and targets for the stock post the update.

While Incitec Pivot's ((IPL)) full year earnings broadly met expectations Credit Suisse downgraded to a Neutral rating from Outperform, this reflecting a tempering of expectations in coming years. Price target was unchanged, so the downgrade was a valuation call by the broker. Others in the market have made modest changes to earnings forecasts and price targets.

Valuation also explains Citi's downgrade of James Hardie ((JHX)), as the company delivered a solid 2Q update with some signs of volume and margin improvement. Price targets and earnings estimates have been adjusted modestly across the market on the back of the quarterly result.

For MAp Group ((MAP)) valuation is also an issue in the view of JP Morgan, who has downgraded to Underweight from Neutral given the share price is now in line with its estimate of value. Also supportive of the downgrade is the stock is trading at a premium to the market, this despite the possibility of softer passenger numbers in coming months.

Peet ((PPC)) delivered a weak update and a lowering of earnings guidance for the full year caused brokers to quickly adjust forecasts and price targets. Both UBS and Macquarie downgraded to Neutral ratings from Outperform previously, as weak operating conditions and capital levels suggest outperformance is unlikely in the shorter-term.

In terms of other changes to broker models, earnings expectations for Lynas Corporation ((LYC)) have seen minor changes following a site visit to the LAMP facility in Malaysia, while a solid quarterly for associate companies has prompted some minor increases to earnings estimates and price target for Cabcharge ((CAB)).

A revaluation of projects has seen BA-ML make a minor increase to its price target for Santos ((STO)), while earnings forecasts for Crown ((CWN)) have also seen minor changes following a solid quarterly result from the MPEL venture in Macau.

Changes in depreciation and amortisation charges have caused Credit Suisse to lower earnings forecasts for Alacer Gold ((AQG)), while Sims Group ((SGM)) selling Australian Refined Alloys has prompted some minor model changes on the part of brokers covering the stock.

While Elders ((ELD)) delivered an improvement in full year earnings, the result still falls short of acceptable according to RBS Australia, with both RBS and Citi adjusting forecasts and price targets as a result.

A disappointing AGM update has seen Macquarie lower earnings forecasts and price target for Salmat ((SLM)), with JP Morgan and Credit Suisse also reducing their estimates. For BHP Billiton ((BHP)) a fall in price target reflects changes to commodity price assumptions from Macquarie, while Credit Suisse has also tweaked its model.

ARB Corporation ((ARP)) is expected to experience some difficulty in sourcing parts given flooding in Thailand, where most of its products are sourced. Both Macquarie and Credit Suisse have adjusted estimates, with the former also trimming its price target for the stock.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=124,121,128,106,90,147,195,158&h0=74,92,80,118,87,94,106,80&s0=39,16,14,6,27,21,7,12" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	BLUESCOPE STEEL LIMITED	Neutral	Buy	Macquarie
2	GOODMAN FIELDER LIMITED	Sell	Neutral	Macquarie
3	LEND LEASE CORPORATION LIMITED	Neutral	Buy	JP Morgan
4	SONIC HEALTHCARE LIMITED	Sell	Neutral	UBS
Downgrade
5	ASTON RESOURCES LIMITED	Buy	Neutral	Macquarie
6	Campbell Brothers Limited	Buy	Neutral	BA-Merrill Lynch
7	Campbell Brothers Limited	Buy	Neutral	UBS
8	COCA-COLA AMATIL LIMITED	Buy	Neutral	JP Morgan
9	COMMONWEALTH BANK OF AUSTRALIA	Neutral	Sell	Citi
10	ILUKA RESOURCES LIMITED	Buy	Neutral	RBS Australia
11	INCITEC PIVOT LIMITED	Buy	Neutral	Credit Suisse
12	JAMES HARDIE INDUSTRIES N.V.	Buy	Neutral	Citi
13	MACQUARIE AIRPORTS	Neutral	Sell	JP Morgan
14	Mount Gibson Iron Limited	Neutral	Sell	Macquarie
15	PEET & COMPANY LIMITED	Buy	Neutral	Macquarie
16	PEET & COMPANY LIMITED	Buy	Neutral	UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	ALZ	50.0%	67.0%	17.0%	6
2	LLC	71.0%	86.0%	15.0%	7
3	BSL	43.0%	57.0%	14.0%	7
4	IFL	57.0%	71.0%	14.0%	7
5	QAN	75.0%	88.0%	13.0%	8
6	BXB	63.0%	75.0%	12.0%	8
7	SHL	63.0%	75.0%	12.0%	8
8	SGT	50.0%	57.0%	7.0%	7
9	AZT	75.0%	80.0%	5.0%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	PPC	100.0%	67.0%	- 33.0%	6
2	CPB	57.0%	29.0%	- 28.0%	7
3	MAP	50.0%	33.0%	- 17.0%	6
4	ILU	88.0%	75.0%	- 13.0%	8
5	IPL	63.0%	50.0%	- 13.0%	8
6	JHX	25.0%	13.0%	- 12.0%	8
7	CCL	75.0%	63.0%	- 12.0%	8
8	BLY	88.0%	86.0%	- 2.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	AZT	12.088	12.870	6.47%	5
2	JHX	6.391	6.609	3.41%	8
3	ILU	19.938	20.456	2.60%	8
4	QAN	2.125	2.166	1.93%	8
5	LLC	9.729	9.836	1.10%	7
6	SHL	12.804	12.908	0.81%	8
7	CPB	49.024	49.327	0.62%	7
8	ALZ	2.985	2.990	0.17%	6
9	CCL	12.459	12.478	0.15%	8
10	BXB	7.601	7.608	0.09%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	PPC	1.817	1.445	- 20.47%	6
2	IPL	4.150	3.931	- 5.28%	8
3	SGT	2.820	2.700	- 4.26%	7
4	BSL	1.363	1.356	- 0.51%	7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	AZT	25.275	39.460	56.12%	5
2	LYC	0.540	0.580	7.41%	4
3	CAB	53.333	54.450	2.09%	5
4	JHX	29.712	30.223	1.72%	8
5	CHC	22.467	22.800	1.48%	6
6	IPL	32.054	32.413	1.12%	8
7	CPB	283.886	286.857	1.05%	7
8	STO	61.163	61.775	1.00%	8
9	CWN	54.025	54.525	0.93%	8
10	MAP	7.259	7.287	0.39%	6

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PPC	12.833	7.108	- 44.61%	6
2	GBG	1.157	0.771	- 33.36%	6
3	AQG	67.394	59.400	- 11.86%	5
4	SGM	128.943	115.414	- 10.49%	7
5	ELD	5.525	5.000	- 9.50%	3
6	SLM	35.350	32.017	- 9.43%	6
7	SFH	8.520	8.120	- 4.69%	5
8	AIO	10.025	9.650	- 3.74%	8
9	BHP	418.629	403.328	- 3.66%	8
10	ARP	57.225	55.625	- 2.80%	4

Technical limitations

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The past week has proven to be a more balanced one for broker rating changes, the eight brokers in the FNArena database upgrading five ratings while downgrading seven stocks. Total Buy ratings now stand at 57.7%.

Among the upgrades was RBS Australia lifting its rating on Collection House ((CLH)) to Buy from Hold post a trading update that showed ongoing earnings momentum. While an equity raising is expected the size should be modest and given the move will reduce balance sheet leverage RBS sees the decision as a positive.

Also upgraded during the week was Computershare ((CPU)) after the company announced it had received approval for the acquisition of BNY Mellon Shareowner Services. Macquarie saw the announcement as enough of a positive to move to an Outperform rating from Underperform previously, given the long-term growth the deal should deliver.

Brokers across the market have adjusted earnings estimates and price targets for Computershare, not only to reflect the acquisition and two other small bolt-on deals, but to also include AGM earnings guidance that implied still weak operating conditions.

UBS upgraded Myer ((MYR)) post a quarterly sales result that met expectations, which for the broker implies evidence of some form of positive momentum building into the Christmas sales period. While no other ratings were adjusted brokers in general lifted earnings estimates and price targets for Myer on the back of the sales result.

An upgrade to Outperform from Neutral for Qantas ((QAN)) by Macquarie is a reflection of a de-risking of the earnings profile, this following some industrial resolutions. Macquarie has also lifted its price target but lowered earnings for FY12 to account for the airline paying compensation to passengers impacted by the recent grounding.

On the downgrade side of the ledger, Australian Pipeline Trust ((APA)) saw two downgrades during the week, Macquarie and Credit Suisse moving to Neutral ratings from Outperform previously to account for a less attractive valuation following recent gains for the former and a sector review by the latter.

Credit Suisse similarly downgraded Diversified Utility and Energy Trusts ((DUE)) to Neutral from Outperform as part of its sector review, while Macquarie has downgraded SP Ausnet ((SPN)) to Neutral from Outperform on the back of a fall in price target. The change reflects cuts to earnings forecasts to account for higher interest costs and a delay to some earnings.

Citi downgraded CSR ((CSR)) to Neutral from Buy post the interim earnings result, this as management downgraded the outlook for coming periods at the time of the result. Cuts to earnings estimates and price targets reflect ongoing headwinds, a theme identified also by others in the market.

Expectations of further falls in employment advertisement volumes have seen BA Merrill Lynch downgrade Seek ((SEK)) to Neutral from Buy, the move accompanied by cuts to earnings estimates and price target. As BA-ML points out, the current share price implies an unemployment rate of 6.0% for Australia, meaning there is downside risk if conditions in the labour market worsen beyond this level.

Citi has moved to Neutral from Buy on White Energy ((WEC)) to reflect uncertainty from news JV partner and coal supplier PT Bayan plans to increase the cost of feedstock coal. The move means increased risk to production expectations at the Tabang plant and so creates enough uncertainty for Citi to take a more cautious stance. The share price tanked following the news.

Ongoing uncertainty as to the full extent of recall issues for Cochlear ((COH)) has prompted Credit Suisse to downgrade to an Underperform rating from Neutral previously. The removal of a previous multiple premium sees the broker lower its price target for the stock as well.

With Citi initiating coverage on Miclyn Offshore ((MIO)) with a Buy rating and $2.15 price target overall ratings and the consensus target for the company have improved, while targets for Brambles have been adjusted slightly post a solid quarterly trading update.

One consequence of the industrial issues at Qantas is an increase to earnings estimates for Virgin Blue ((VBA)) as both BA-ML and JP Morgan expect earnings to receive a boost from the company having picked up additional traffic in recent months.

Better than expected interim guidance from Seven Group ((SVW)) has seen earnings forecasts lifted across the market, while signs of a recovery for Macmahon ((MAH)) have prompted Macquarie to lift its full year numbers.

JP Morgan now sees a better US market outlook for Aristocrat ((ALL)) and has adjusted its numbers accordingly, while Telecom New Zealand ((TEL)) has seen some minor changes to valuation models leading into structural separation.

The announcement of $50 million in losses related to the flooding in Thailand has led to brokers lowering earnings estimates for Insurance Australia ((IAG)), while commissioning delays have caused Deutsche Bank to lower forecasts for Lynas Corporation ((LYC)). A similar delay to first shipments from Karara have prompted cuts to earnings estimates and price targets for Gindalbie ((GBG)).

Weak interim guidance was enough for brokers to lower forecasts for Perpetual ((PPT)), while difficult trading conditions have seen Credit Suisse trim forecasts for Boral ((BLD)). Orica ((ORI)) has also seen earnings estimates lowered to reflect additional costs stemming from the forced shutdown of the Kooragang ammonia storage facility.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	COLLECTION HOUSE LIMITED	Neutral	Buy	RBS Australia
2	COMPUTERSHARE LIMITED	Sell	Buy	Macquarie
3	MYER HOLDINGS LIMITED	Neutral	Buy	UBS
4	QANTAS AIRWAYS LIMITED	Neutral	Buy	Macquarie
Downgrade
5	AUSTRALIAN PIPELINE TRUST	Buy	Neutral	Credit Suisse
6	CSR LIMITED	Neutral	Neutral	Citi
7	DIVERSIFIED UTILITY AND ENERGY TRUSTS	Buy	Neutral	Credit Suisse
8	SEEK LIMITED	Buy	Neutral	BA-Merrill Lynch
9	SP AUSNET	Buy	Neutral	Macquarie
10	SP AUSNET	Buy	Neutral	UBS
11	WHITE ENERGY COMPANY LIMITED	Buy	Neutral	Citi

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	CPU	14.0%	57.0%	43.0%	7
2	BXB	63.0%	75.0%	12.0%	8
3	MYR	13.0%	25.0%	12.0%	8
4	MIO	67.0%	75.0%	8.0%	4

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	APA	63.0%	38.0%	- 25.0%	8
2	SEK	88.0%	75.0%	- 13.0%	8
3	COH	- 25.0%	- 38.0%	- 13.0%	8
4	MRM	80.0%	67.0%	- 13.0%	6
5	DUE	50.0%	38.0%	- 12.0%	8
6	TSE	50.0%	40.0%	- 10.0%	5
7	SGT	50.0%	43.0%	- 7.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	CPU	8.526	9.277	8.81%	7
2	MIO	1.970	2.015	2.28%	4
3	MYR	2.509	2.563	2.15%	8
4	BXB	7.581	7.626	0.59%	8
5	APA	4.430	4.443	0.29%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	TSE	2.922	2.788	- 4.59%	5
2	MRM	3.500	3.433	- 1.91%	6
3	COH	55.315	54.840	- 0.86%	8
4	DUE	1.796	1.785	- 0.61%	8
5	SEK	7.309	7.265	- 0.60%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	VBA	2.614	2.871	9.83%	7
2	SVW	78.100	81.900	4.87%	4
3	MAH	5.800	5.933	2.29%	3
4	ORI	195.563	199.613	2.07%	8
5	ALL	10.688	10.863	1.64%	8
6	MIO	21.072	21.377	1.45%	4
7	TEL	18.347	18.532	1.01%	8
8	EGP	20.538	20.725	0.91%	8
9	APA	19.163	19.288	0.65%	8
10	IAG	26.725	26.875	0.56%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	LYC	0.850	0.540	- 36.47%	4
2	GBG	1.157	0.771	- 33.36%	6
3	IGO	15.760	12.820	- 18.65%	5
4	DUE	11.169	9.569	- 14.33%	8
5	PPT	154.100	135.400	- 12.13%	7
6	OST	17.043	15.114	- 11.32%	7
7	CSR	17.525	16.225	- 7.42%	8
8	CPU	54.560	51.497	- 5.61%	7
9	PRU	23.600	22.517	- 4.59%	6
10	BLD	26.550	25.425	- 4.24%	8

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US Potential Makes Breville A Buy

- Breville facing tough domestic market conditions
- Overseas operations offer growth potential
- Moelis sees value at current levels

By Chris Shaw

Annual general meeting commentary from management at Breville ((BRG)) offered no specific earnings guidance for the coming year, which was no great surprise to stock broker Moelis given the importance of the upcoming Christmas trading period for 1H12 and full year earnings.

Breville, which imports and distributes electrical consumer products both in Australia and in a number of overseas markets, has had to deal with an uncertain macro environment and weak consumer sentiment for some time. Despite this, management has indicated sales for the year to date have been consistent with expectations.

This means Moelis has made no changes to its earnings per share (EPS) forecasts for Breville, which stand at 29.2c for FY12 and 32.6c for FY13. This suggests solid growth from the 27.2c achieved in FY11, which itself was an increase of 25% from the previous corresponding period.

Moelis's EPS forecasts compare to consensus estimates according to the FNArena database of 29.6c for FY12 and 31.4c for FY13.

Despite the difficult operating conditions in Breville's markets, Moelis sees some opportunities. In particular, a now entrenched footprint in the US high-end electrical appliance market offers solid growth potential.

Moelis estimates Breville now has a 10% share of the niche top-end market segment in the US, thanks to around 20 specialty and department store retail customers. Moelis expects the US market can deliver sustainable 10-15% in annual constant currency revenue gains over the next 10 years.

The US operation highlights the fact growth is coming from Breville's International division, which accounted for 63% of group earnings in FY11. This division delivered sales growth of 3.5% in Australian dollar terms and by 14% on a constant currency basis in FY11, while margins expanded to 18.7% from 14.2% previously.

As Moelis points out, this improvement reflected a combination of strong consumer acceptance of new products, an increased distribution footprint and entry by Breville into new product categories.

In contrast, Moelis notes the going was tougher for the Domestic Electricals division, this given some Australian dollar driven deflationary pressures and market share losses by the core Kambrook brand. The result was a 3.5% fall in sales and a 7% decline in EBITDA (earnings before interest, tax, depreciation and amortisation).

The earnings growth potential from the US operations leads Moelis to suggest Breville Group shares continue to offer value at current levels, this despite a 9% increase in the share price over the course of 2011 to date.

Trading on a FY12 earnings multiple of 10 times for FY12 on Moelis's numbers, the broker sees enough value to rate the stock as a Buy. Others in the market agree, as the FNArena database shows all three brokers to cover Breville rate the company as a Buy.

Macquarie is one of those positive on the stock and offers a similar argument to Moelis, pointing out the growth potential of Breville's overseas operations is enough to justify a positive rating even given tougher domestic market conditions. The consensus price target according to the database is $3.47, broadly in line with the $3.40 target of Moelis.

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

The tide appears to have well and truly turned in favour of ratings downgrades on the Australian market, as over the past week brokers in the FNArena database have pushed through 18 cuts in ratings compared to just four upgrades. This brings total Buy ratings to 57.6%, down from 58.2% previously.

A resilient interim earnings result from Macquarie Bank ((MQG)) was enough for BA Merrill Lynch to upgrade to a Buy rating, the change also a reflection of what the broker sees as strong valuation support at current levels.

As BA-ML points out, if current funding sources prove sustainable the value available from annuity-style income alone is enough to justify most of the current market value of the bank. This implies upside when an improvement in market conditions boosts earnings in other divisions. Others in the market have adjusted forecasts and price target for Macquarie post its profit result.

QR National ((QRN)) was also upgraded, Deutsche Bank moving to a Buy rating from the potential for upside to volumes, which should translate into increased earnings. Further justifying the upgrade in rating was Deutsche's new numbers translate to an increase in price target.

BA-ML also upgraded Santos (STO)) to Buy during the week, this following a review of its model resulting in a revaluation of the group's assets. While the value of the GLNG assets were reduced, this has been offset by increases to the value of the Cooper gas assets.

Expected price tension in gas markets in the coming year should be a further positive and support BA-ML's upgrade. Price target has also been increased modestly. Credit Suisse went the other way, downgrading Santos to Neutral on the back of recent share price outperformance.

A restructuring of debt and a capital raising by Transpacific Industries ((TPI)) has seen both RBS Australia and Credit Suisse upgrade to Buy ratings from Hold previously. The improved balance sheet removes some headwinds in the view of RBS, while management will be able to focus on operational rather than financial issues and this should boost the company's financial performance according to Credit Suisse.

On the downgrades side, OneSteel's ((OST)) revision to earnings guidance on the back of lower iron ore prices saw brokers cut earnings forecasts and price targets significantly. Both Deutsche Bank and RBS Australia downgraded ratings to Sell and Hold respectively, reflecting concerns over debt covenants and ongoing tough market conditions.

While quarterly production for Aquila Resources ((AQA)) was solid, RBS Australia has still downgraded to a Sell rating, this reflecting the broker's concern over the company's ability to raise sufficient cash to meet its development ambitions. This implies a capital raising is a possibility in coming months.

A similarly disappointing production report from Kingsgate ((KCN)) saw both Deutsche and Citi downgrade the stock to Hold from Buy previously, with targets and earnings estimates cut accordingly. A disappointing quarterly from Paladin ((PDN)) was also enough for RBS to downgrade to Hold from Buy, with earnings and price target also reduced.

Australian Pipeline Trust ((APA)) has been downgraded on valuation grounds by Macquarie following recent share price gains, while valuation has seen Credit Suisse make the same shift to Hold from Buy on Australian Worldwide Exploration ((AWE)) while RBS Australia issued a similar downgrade for Consolidated Media ((CMJ)).

UBS also downgraded Mirvac ((MGR)) to a Hold following a review of sector valuations, while Citi resumed coverage on Spotless ((SPT)) with a downgrade to a Neutral rating as tough market conditions have caused the broker to lower earnings expectations. Price target was also reduced.

Ongoing increases to the N5 implant failure rate have Credit Suisse concerned enough about Cochlear ((COH)) to downgrade to an Underperform rating on the stock, with the broker also cutting its price target.

Ongoing tough market conditions are behind Deutsche Bank downgrading to Hold from Buy on CSR ((CSR)), the broker also lowering earnings estimates and price target leading into the company's interim profit result. James Hardie ((JHX)) was downgraded by both Credit Suisse and JP Morgan, in both cases the rating moving to Underperform from Neutral.

Harvey Norman ((HVN)) copped two ratings downgrades to Neutral from Outperform post a 1Q sales result that showed the company has had to sacrifice margins to defend market share. Brokers across the market also lowered earnings estimates and price targets for the stock on the back of the report.

For Iron Road ((IRD)) it was a review of magnetite projects and changes to foreign exchange assumptions that saw RBS Australia downgrade to a Hold rating from Buy, the broker's price target also being reduced.

Tatts ((TTS)), GPT ((GPT)) and Blackmores ((BKL)) were also downgraded during the week, with valuation the key factor in the decisions of brokers to lower ratings for the three stocks, while tough ad market conditions saw forecasts, price target and rating for Ten Network ((TEN)) lowered by RBS.

Earnings and price targets for AMP ((AMP)) were trimmed to reflect weak fund flows in the September quarter, while construction delays have pushed out earnings expectations for Lynas ((LYC)) and this has resulted in Deutsche Bank also trimming its price target for the stock.

A mixed quarterly result has seen earnings estimates and price targets revised for Independence Group ((IGO)), while earnings expectations for Qantas ((QAN)) have come down to account for the impact of the grounding of the group's fleet and the industrial action of recent weeks.

Slightly lower than expected production for OceanaGold ((OGC)) has seen a trimming of earnings estimates and price targets, while it has been a similar story for earnings expectations for Horizon Oil ((HZN)) post its quarterly.

On a more positive note, earnings expectations for Campbell Brothers ((CPB)) have been lifted slightly following two bolt-on acquisitions by the company, while National Australia Bank's ((NAB)) result was enough to see minor increases to earnings estimates. Forecasts for Miclyn Offshore ((MIO)) have also moved higher as the company is to acquire the balance of Samson Marine it doesn't already own.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=125,119,129,104,88,144,193,159&h0=73,92,77,118,88,94,106,77&s0=39,15,14,6,26,22,7,13" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	MACQUARIE GROUP LIMITED	Neutral	Buy	BA-Merrill Lynch
2	QR NATIONAL	Neutral	Buy	Deutsche Bank
3	SANTOS LIMITED	Neutral	Buy	BA-Merrill Lynch
4	Transpacific Industries Group Ltd	Neutral	Buy	RBS Australia
Downgrade
5	AQUILA RESOURCES LIMITED	Neutral	Sell	RBS Australia
6	AUSTRALIAN PIPELINE TRUST	Buy	Neutral	Macquarie
7	AUSTRALIAN WORLDWIDE EXPLORATION LIMITED	Buy	Neutral	Credit Suisse
8	COCHLEAR LIMITED	Neutral	Sell	Credit Suisse
9	CONSOLIDATED MEDIA HOLDINGS LIMITED	Buy	Neutral	RBS Australia
10	CSR LIMITED	Buy	Neutral	Deutsche Bank
11	HARVEY NORMAN HOLDINGS LIMITED	Buy	Neutral	Citi
12	HARVEY NORMAN HOLDINGS LIMITED	Buy	Neutral	Credit Suisse
13	IRON ROAD LIMITED	Buy	Neutral	RBS Australia
14	JAMES HARDIE INDUSTRIES N.V.	Neutral	Sell	Credit Suisse
15	KINGSGATE CONSOLIDATED LIMITED	Buy	Neutral	Citi
16	KINGSGATE CONSOLIDATED LIMITED	Buy	Neutral	Deutsche Bank
17	MIRVAC GROUP	Buy	Neutral	UBS
18	ONESTEEL LIMITED	Buy	Neutral	RBS Australia
19	ONESTEEL LIMITED	Neutral	Sell	Deutsche Bank
20	PALADIN ENERGY LTD	Buy	Neutral	RBS Australia
21	SANTOS LIMITED	Buy	Neutral	Credit Suisse
22	SPOTLESS GROUP LIMITED	Buy	Neutral	Citi

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	TPI	17.0%	50.0%	33.0%	6
2	MQG	43.0%	57.0%	14.0%	7
3	AMP	75.0%	88.0%	13.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	KCN	60.0%	20.0%	- 40.0%	5
2	BKL	67.0%	33.0%	- 34.0%	3
3	OST	86.0%	57.0%	- 29.0%	7
4	HVN	50.0%	25.0%	- 25.0%	8
5	TTS	57.0%	38.0%	- 19.0%	8
6	GPT	50.0%	33.0%	- 17.0%	6
7	AWE	86.0%	71.0%	- 15.0%	7
8	MGR	86.0%	71.0%	- 15.0%	7
9	SIP	- 14.0%	- 29.0%	- 15.0%	7
10	CMJ	57.0%	43.0%	- 14.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	TPI	0.842	0.872	3.56%	6
2	MQG	30.611	30.999	1.27%	7
3	CWN	10.263	10.350	0.85%	8
4	SIP	0.583	0.587	0.69%	7
5	MGR	1.369	1.371	0.15%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	OST	2.104	1.619	- 23.05%	7
2	HVN	2.558	2.321	- 9.27%	8
3	KCN	9.444	8.804	- 6.78%	5
4	PDN	2.456	2.333	- 5.01%	7
5	TEN	1.090	1.036	- 4.95%	8
6	AMP	5.244	5.141	- 1.96%	8
7	TTS	2.410	2.363	- 1.95%	8
8	NWS	18.720	18.483	- 1.27%	7
9	COH	55.315	54.840	- 0.86%	8
10	CSR	2.805	2.798	- 0.25%	8

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	IMD	20.467	22.040	7.69%	3
2	AIX	22.300	23.033	3.29%	6
3	DMP	35.250	36.317	3.03%	6
4	FLT	185.338	188.838	1.89%	8
5	NAB	265.138	267.775	0.99%	8
6	MIO	20.904	21.070	0.79%	3
7	NWS	130.886	131.913	0.78%	7
8	CPB	282.029	283.886	0.66%	7
9	CTX	115.817	116.483	0.58%	6
10	BPT	4.040	4.060	0.50%	5

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PDN	2.074	- 1.623	- 178.25%	7
2	LYC	4.475	0.850	- 81.01%	3
3	IGO	24.334	12.820	- 47.32%	5
4	AQP	31.065	16.798	- 45.93%	5
5	OST	24.343	15.114	- 37.91%	7
6	QAN	20.513	15.075	- 26.51%	8
7	AWE	8.857	6.871	- 22.42%	7
8	OGC	18.673	15.449	- 17.27%	3
9	HZN	2.720	2.425	- 10.85%	4
10	TEN	7.963	7.204	- 9.53%	8

Technical limitations

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

As companies have updated outlook commentary at annual general meetings over the past week, stockbrokers have reacted by making double the number of ratings downgrades to upgrades. Among the eight brokers in the FNArena database eight ratings were upgraded this week against 16 downgrades, meaning total Buy recommendations have fallen to 58.2% from 58.7% previously.

One to enjoy an upgrade in rating was Wotif.com ((WTF)), with BA Merrill Lynch lifting its rating to Neutral from Underperform. The upgrade reflects both minor changes to estimates following updated guidance from management and underperformance by the stock over the past 12 months that has improved the value on offer. The show stopper during the week was biotech Pharmaxis ((PXS)) who finally received product approval from Europe which saw investors jumping back in the shares and stockbrokers (3) lifting their ratings and price targets.

SingTel ((SGT)) was also upgraded to Overweight by JP Morgan, this to account for the expectation Singapore's NBN project will solidify the company's dominant position in that market. Regional asset earnings growth should also be solid and this sees the broker ahead of consensus with its earnings forecasts. Alacer Gold was upgraded too, by two notches to Buy by Credit Suisse.

Southern Cross Media ((SXL)) saw an initiation of coverage with an Outperform rating by Credit Suisse and this has lifted the consensus recommendation for the company. In the view of the broker, while ratings are under pressure and advertising is weaker this appears priced into the stock at current levels.

On the downgrade side Oz Minerals ((OZL)) saw RBS Australia move to a Hold from Buy previously on the back of changes to commodity price assumptions and foreign exchange forecasts. Kingsgate Consolidated ((KCN)) was similarly downgraded to a Hold rating by RBS. Earnings estimates and price targets were also adjusted, the move on OZL by RBS following similar downgrades a week earlier by UBS and Credit Suisse.

Brokers have continued to react to Super Retail's ((SUL)) move to acquire Rebel Sport with Citi the latest to downgrade to Neutral from Buy previously, with associated changes to earnings estimates and price target.

ResMed ((RMD)) was similarly downgraded by Credit Suisse following a Q1 result that showed the group's markets were relatively challenging at present. Earnings estimates and price targets for ResMed across the market have also been revised on the back of the result.

Following an investor day JP Morgan suggests the market may have gotten a little ahead of itself with respect to the outlook for WorleyParsons ((WOR)), so the broker downgraded to Underweight from Neutral. The change in rating has been accompanied by adjustments to earnings estimates and price target.

Caltex ((CTX)) has also received a few changes to ratings in recent sessions, both BA Merrill Lynch and Citi downgrading to a Neutral rating on valuation grounds while Credit Suisse has upgraded to a Neutral rating on the back of an increase in price target on news of a rationalisation of operations at the Kurnell refinery.

Valuation has come into play for Computershare ((CPU)) as adjustments to RBS Australia's model and target have been enough to prompt a downgrade to a Hold rating, while Credit Suisse has done the same with Wesfarmers ((WES)). Relative pricing grounds have seen UBS cut its rating on Charter Hall Retail ((CQR)) to Hold.

Some minor changes to its model have caused RBS to lift earnings and price target for Adelaide Brighton ((ABC)), while BA-ML has gone the other way in cutting forecasts and target for Insurance Australia Group ((IAG)) given a tough market for insurance margins and some capital issues.

Leading into next week's result Macquarie has cut its target for CSR ((CSR)) on the back of some adjustments to estimates, which follows a similar move by UBS earlier this month.

Earnings forecasts have been lifted for Regis Resources ((RRL)) following a solid quarter of production, while estimates for Santos ((STO)) and Woodside ((WPL)) have similarly increased post respective production reports.

Still strong exploration activity levels have prompted RBS to lift forecasts for Imdex ((IMD)), which has also generated an increase in price target. The changes follow similar adjustments made by BA-ML and Deutsche Bank.

Further progress at Maules Creek has seen RBS lift earnings estimates for Aston ((AZT)), while a solid quarterly report from Webjet ((WEB)) has been enough for BA-ML and UBS to lift earnings estimates and price targets.

Changes to earnings estimates for Panoramic ((PAN)) are more a reflection of changes to expectations for commodity prices and foreign exchange rates than operational issues, but weaker production and sales have been behind cuts to expectations for Gloucester Coal ((GCL)).

Forecasts for Macquarie Atlas ((MQA)) have come down post a slightly weaker Q3 traffic result, while weaker nickel prices are impacting on earnings estimates for Western Areas ((WSA)). On the back of a reasonable quarterly production report there have been modest changes to estimates for Atlas Iron ((AGO)), while the announcement of a capital raising has resulted in adjustments to estimates for Transpacific Industries ((TPI)).

Tough operating conditions have seen forecasts lowered for GWA International ((GWA)), while changed commodity price and forex assumptions have prompted a lowering of earnings estimates for BHP Billiton ((BHP)).

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup Suisse,Deutsche<br>Bank,JP<br>Morgan,Macquarie,RBS<br>Australia,UBS&b0=123,122,130,105,88,146,196,160&h0=75,90,77,118,88,92,104,76&s0=39,15,12,5,26,21,6,13" style="border-bottom: #000000 1px solid; border-left: #000000 1px solid; border-top: #000000 1px solid; border-right: #000000 1px solid" />

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	ALACER GOLD CORP	Sell	Buy	Credit Suisse
2	Pharmaxis Ltd	Neutral	Buy	RBS Australia
3	Pharmaxis Ltd	Neutral	Buy	BA-Merrill Lynch
4	Pharmaxis Ltd	Neutral	Buy	Credit Suisse
5	SINGAPORE TELECOMMUNICATIONS LIMITED	Neutral	Buy	JP Morgan
6	WOTIF.COM HOLDINGS LIMITED	Sell	Neutral	BA-Merrill Lynch
Downgrade
7	ADELAIDE BRIGHTON LIMITED	Buy	Neutral	RBS Australia
8	CALTEX AUSTRALIA LIMITED	Buy	Neutral	BA-Merrill Lynch
9	CHARTER HALL RETAIL REIT	Buy	Neutral	UBS
10	CSG LIMITED	Buy	Neutral	RBS Australia
11	INSURANCE AUSTRALIA GROUP LIMITED	Buy	Neutral	BA-Merrill Lynch
12	KINGSGATE CONSOLIDATED LIMITED	Buy	Neutral	RBS Australia
13	OZ MINERALS LIMITED	Buy	Neutral	RBS Australia
14	PRIMARY HEALTH CARE LIMITED	Buy	Neutral	Credit Suisse
15	RESMED INC	Buy	Neutral	Credit Suisse
16	WESFARMERS LIMITED	Buy	Neutral	Credit Suisse
17	WESTERN AREAS NL	Buy	Neutral	UBS
18	WESTFIELD RETAIL TRUST	Buy	Neutral	Deutsche Bank
19	WORLEYPARSONS LIMITED	Neutral	Sell	JP Morgan

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	RRL	33.0%	67.0%	34.0%	3
2	WTF	25.0%	38.0%	13.0%	8
3	SGT	40.0%	50.0%	10.0%	6
4	SXL	71.0%	75.0%	4.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	OZL	88.0%	50.0%	- 38.0%	8
2	SUL	67.0%	33.0%	- 34.0%	6
3	RMD	63.0%	38.0%	- 25.0%	8
4	KCN	80.0%	60.0%	- 20.0%	5
5	WOR	33.0%	14.0%	- 19.0%	7
6	CTX	33.0%	17.0%	- 16.0%	6
7	CPU	29.0%	14.0%	- 15.0%	7
8	CQR	29.0%	14.0%	- 15.0%	7
9	WRT	100.0%	86.0%	- 14.0%	7
10	WES	63.0%	50.0%	- 13.0%	8

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	ABC	3.343	3.348	0.15%	8
2	CQR	3.317	3.321	0.12%	7
3	SVW	9.314	9.318	0.04%	4

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	RMD	3.527	3.193	- 9.47%	8
2	OZL	13.729	12.919	- 5.90%	8
3	SUL	7.155	6.756	- 5.58%	6
4	KCN	9.658	9.444	- 2.22%	5
5	IAG	3.508	3.435	- 2.08%	8
6	WTF	4.425	4.348	- 1.74%	8
7	RRL	3.287	3.257	- 0.91%	3
8	WES	33.108	32.941	- 0.50%	8
9	CSR	2.818	2.805	- 0.46%	8
10	WOR	28.862	28.769	- 0.32%	7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	MAP	6.187	7.259	17.33%	6
2	RRL	13.607	15.867	16.61%	3
3	STO	56.425	61.125	8.33%	8
4	WPL	205.928	216.457	5.11%	8
5	OSH	14.479	14.902	2.92%	8
6	MQG	261.386	268.214	2.61%	7
7	IMD	20.133	20.467	1.66%	3
8	AZT	24.900	25.275	1.51%	4
9	WEB	16.900	17.125	1.33%	4
10	MMS	72.567	73.333	1.06%	3

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PAN	16.450	11.475	- 30.24%	4
2	GCL	50.200	41.220	- 17.89%	5
3	OZL	113.513	94.029	- 17.16%	8
4	MQA	9.683	8.433	- 12.91%	6
5	WSA	53.667	48.700	- 9.26%	6
6	AGO	34.850	31.638	- 9.22%	8
7	TPI	7.233	6.567	- 9.21%	6
8	GWA	19.583	18.117	- 7.49%	6
9	GRR	10.900	10.250	- 5.96%	4
10	BHP	447.715	421.154	- 5.93%	8

Technical limitations

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Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

For the second week in a row downgrades from the eight brokers in the FNArena database have outnumbered upgrades, this week by a score of 12 to three. This brings total Buy recommendations to 58.7%, down from last week's 59.3%.

Among the few receiving an upgrade this week were Cardno ((CDD)), Macquarie lifting its rating to Outperform from Neutral on the back of the company announcing the acquisition of TEC in the US. The new assets are seen as a good fit with existing operations and should boost earnings.

Macquarie also upgraded fund manager Henderson Group ((HGG)) to Neutral from Underperform on valuation grounds. Looking through short-term market headwinds suggest the stock is attractive even post some cuts to earnings estimates, while a 6% dividend yield is also viewed positively by the broker.

Toll Holdings ((TOL)) was also upgraded by Macquarie to Neutral from Underperform, this change also reflecting an improved valuation for the stock at current levels. A review of its model saw Macquarie make minor changes to earnings forecasts and price target.

On the resources side, an initiation of coverage by UBS with a Buy rating on Atlas Iron ((AGO)) has lifted overall ratings for the stock, while bringing about a minor reduction in consensus price target given UBS set a lower target than others in the FNArena database.

Among the companies where ratings were downgraded was Super Retail Group ((SUL)), Citi, BA Merrill Lynch and Credit Suisse all downgrading to Neutral ratings from Buy previously on the back of the purchase of the Rebel Sport assets.

The general view is that the assets being acquired are not top quality and a full price is being paid, while the magnitude of the deal also changes Super Retail's risk profile going forward. Price targets have thus been reduced on the back of the acquisition, while earnings estimates have been adjusted lower to reflect earnings dilution from a share issue to pay for part of the purchase.

While a soft retail environment won't help Super Cheap succeed with the Rebel Sport purchase, it has also seen Deutsche Bank downgrade to a Hold rating on Carsales.com ((CRZ)), the broker also lowering earnings estimates as well as its price target.

It is a similar story for the likes of Computershare ((CPU)) with RBS downgrading to a Hold rating on valuation grounds given tough operating conditions, Credit Suisse downgrading on Aristocrat Leisure ((ALL)) to an Underperform rating and Macquarie downgrading to a Neutral rating on Ten Network ((TEN)) - all on the same basis.

Tough conditions saw Fletcher Building ((FBU)) lower earnings guidance and brokers responded by cutting forecasts and price targets accordingly. Only Macquarie saw fit to downgrade to a Neutral rating from Outperform, the broker arguing the tough environment makes outperformance for the shares unlikely in the shorter-term.

Oz Minerals ((OZL)) also copped a downgrade to a Neutral rating from Credit Suisse post a quarterly production report that disappointed on the gold side, while Deutsche Bank downgraded Energy Resources of Australia (ERA) to Hold on the back of an unexpected rights issue. Rio Tinto ((RIO)) is underwriting the capital raising and is likely to boost its equity ownership past 80% as a result.

Changes in price targets were largely tied to changes in earnings estimates for the industrial plays such as Cardno and Toll Holdings, while for resources stocks such as ERA, Oz Minerals and PanAust ((PNA)) the changes tended to reflect either production reports falling short of expectations or adjustments to commodity price assumptions by brokers.

The consensus target for Jetset Travelworld ((JET)) has fallen as UBS's initiation added a lower target than those already in the market.

Changes to earnings forecasts for Macquarie Airports ((MAP)) were modest following September traffic data, while a better performance on costs contributed to increases to earnings forecasts for Fortescue Metals ((FMG)).

Estimates for Caltex ((CTX)) moved slightly higher as broker models were updated for the latest refiner margins, while better volumes and cost performance saw estimates lifted for mineral sands play Iluka ((ILU)).

Cochlear (COH)) continues to struggle from an earnings perspective given uncertainty with respect to total costs relating to its hearing implant recall, while a slower than expected ramp-up of some operations has led to Macquarie trimming estimates for Beach Energy ((BPT)).

For Bank of Queensland ((BOQ)) full year earnings were a little lower than expected and so estimates have been trimmed, the changes also impacting on price targets for brokers in the database. BHP Billiton ((BHP)) and Customers ((CUS)) also experienced minor changes to earnings estimates over the week.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	CARDNO LIMITED	Neutral	Buy	Macquarie
2	MINCOR RESOURCES NL	Sell	Neutral	UBS
3	SINGAPORE TELECOMMUNICATIONS LIMITED	Neutral	Buy	JP Morgan
4	TOLL HOLDINGS LIMITED	Sell	Neutral	Macquarie
Downgrade
5	CARSALES.COM LIMITED	Buy	Neutral	Deutsche Bank
6	COMPUTERSHARE LIMITED	Buy	Neutral	RBS Australia
7	CSG LIMITED	Buy	Neutral	RBS Australia
8	IRESS MARKET TECHNOLOGY LIMITED	Buy	Neutral	Credit Suisse
9	OZ MINERALS LIMITED	Buy	Neutral	UBS
10	OZ MINERALS LIMITED	Buy	Neutral	Credit Suisse
11	PRIMARY HEALTH CARE LIMITED	Buy	Neutral	Credit Suisse
12	SUPER RETAIL GROUP LIMITED	Buy	Neutral	Citi
13	SUPER RETAIL GROUP LIMITED	Buy	Neutral	BA-Merrill Lynch
14	SUPER RETAIL GROUP LIMITED	Buy	Neutral	Credit Suisse
15	TEN NETWORK HOLDINGS LIMITED	Buy	Neutral	Macquarie
16	TREASURY WINE ESTATES LIMITED	Buy	Neutral	Deutsche Bank
17	WESFARMERS LIMITED	Buy	Neutral	Credit Suisse
18	WESTERN AREAS NL	Buy	Neutral	UBS

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	CDD	33.0%	67.0%	34.0%	3
2	TOL	25.0%	38.0%	13.0%	8
3	SGT	40.0%	50.0%	10.0%	6
4	TTS	50.0%	57.0%	7.0%	7
5	AGO	71.0%	75.0%	4.0%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	SUL	100.0%	33.0%	- 67.0%	6
2	OZL	88.0%	63.0%	- 25.0%	8
3	CRZ	100.0%	83.0%	- 17.0%	6
4	JET	67.0%	50.0%	- 17.0%	4
5	CPU	29.0%	14.0%	- 15.0%	7
6	TWE	- 14.0%	- 29.0%	- 15.0%	7
7	WES	63.0%	50.0%	- 13.0%	8
8	TEN	50.0%	38.0%	- 12.0%	8
9	SVW	60.0%	50.0%	- 10.0%	4
10	FGL	- 13.0%	- 14.0%	- 1.0%	7

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	TWE	3.376	3.390	0.41%	7
2	TOL	5.254	5.275	0.40%	8
3	CDD	6.190	6.203	0.21%	3
4	SVW	9.314	9.318	0.04%	4
5	TTS	2.409	2.410	0.04%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	JET	1.050	0.988	- 5.90%	4
2	SUL	7.297	6.996	- 4.12%	6
3	OZL	13.641	13.169	- 3.46%	8
4	TEN	1.105	1.090	- 1.36%	8
5	WES	33.108	32.941	- 0.50%	8
6	CRZ	5.477	5.452	- 0.46%	6
7	CPU	8.550	8.526	- 0.28%	7

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PDN	1.753	2.075	18.37%	7
2	MAP	6.187	7.259	17.33%	6
3	GBG	1.014	1.157	14.10%	6
4	STO	56.425	61.125	8.33%	8
5	WPL	204.950	216.917	5.84%	8
6	FMG	66.736	70.301	5.34%	8
7	GNM	6.600	6.933	5.05%	3
8	GCL	47.800	50.200	5.02%	5
9	NCM	217.229	222.250	2.31%	8
10	AWC	5.777	5.897	2.08%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	PAN	16.450	11.475	- 30.24%	4
2	OZL	113.513	95.200	- 16.13%	8
3	COH	255.638	220.275	- 13.83%	8
4	MQA	9.683	8.433	- 12.91%	6
5	WSA	53.667	48.700	- 9.26%	6
6	PRU	25.433	23.600	- 7.21%	6
7	GWA	19.583	18.250	- 6.81%	6
8	BHP	446.994	426.732	- 4.53%	8
9	CUS	12.740	12.200	- 4.24%	5
10	GUD	78.100	74.983	- 3.99%	6

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Top Ten Weekly Recommendation, Target Price, Earnings Forecast Changes

By Chris Shaw

In a change from the recent pattern, the last week has seen broker downgrades outnumber upgrades by a score of seven to three based on recommendations by the eight brokers in the FNArena database. This brings total Buy ratings to 59.3%, down slightly from 59.5% last week.

Fund manager Henderson Group ((HGG)) enjoyed one of the upgrades courtesy of Macquarie, the broker moving to Neutral from Underperform to reflect improved value following recent share price weakness. This has offset ongoing weakness in fund flows thanks to still tough equity market conditions. Macquarie is also attracted to the yield of 6%.

Macquarie also upgraded Tabcorp ((TAH)) to Neutral from Underperform following a trading update that supports the view the stock offers value around current levels. A move to a more positive rating is not justified in the broker's view given overhanging uncertainty of compensation relating to claims in the Victorian market. Earnings estimates have been trimmed as part of the review.

Among resource stocks Credit Suisse has upgraded to an Outperform rating on Western Areas ((WSA)) from Neutral, this due to revisions to earnings and price target on the back of changes to nickel price expectations.

Credit Suisse has also upgraded CSL to Outperform from Neutral following changes to foreign exchange assumptions. Again, there have been related changes to earnings forecasts and price target. Charter Hall Office ((CQO)) has been upgraded by UBS to Buy from Neutral, as while a consortium bidding for the stock has lifted its offer there remains scope for a revised offer closer to net tangible asset backing.

On the downgrade side, Credit Suisse has lowered its rating on Navitas ((NVT)) to Neutral from Outperform to reflect a full valuation. While the Knight Review offered some positives the broker notes earnings are unlikely to be impacted prior to FY13. This suggests a full short-term valuation.

A rights issue announced by Energy Resources of Australia ((ERA)) has prompted Deutsche Bank to downgrade the stock to Hold from Buy. Not only was the issue a surprise but Deutsche notes even if the key Ranger 3 Deeps project goes ahead, it will be one of the world's most expensive uranium mines.

Deutsche has sliced its price target as well on the news, while other brokers in the market similarly lowered both targets and earnings forecasts to reflect the dilution to earnings per share from the capital raising.

A downgrade to earnings guidance by Fletcher Building ((FBU)) given ongoing difficult operating conditions has seen brokers lower earnings forecasts and price targets. Macquarie has gone a step further, downgrading to Neutral from Outperform on valuation grounds, as any recovery in earnings appears set to take some time.

James Hardie ((JHX)) is another building materials group to suffer a downgrade, JP Morgan moving to an Underweight rating from Neutral on the back of lower earnings forecasts. Price target also comes down as the broker sees little chance of strong performance relative to the sector in the current market.

Brokers ceasing coverage have also been a feature this week, with both Macquarie and JP Morgan stopping coverage on ConnectEast ((CEU)) given shareholder approval of a takeover offer. Macquarie has also dropped coverage on Minara ((MRE)).

With respect to earnings, an increase to long-term iron ore price assumptions by Credit Suisse has had a positive impact on expectations for Gindalbie ((GBG)). Forecasts for Paladin ((PDN)) have been adjusted to reflect an equity issue that has also meant changes in price targets, while changes to gold price assumptions have impacted on earnings estimates for Newcrest ((NCM)).

BA Merrill Lynch rolled forward its model for Caltex ((CTX)) and this has prompted some increases in estimates, while higher margin assumptions saw Citi also lift its numbers for the stock. Virgin Blue ((VBA)) also saw an upgrade to forecasts from Macquarie as the company is seen as a beneficiary of the issues at Qantas ((QAN)).

Forecasts for Alumina ((AWC)) have come down slightly thanks to a lower than expected 3Q earnings result from Alcoa, while a slower project ramp up has contributed to Macquarie trimming its numbers for Beach ((BPT)).

For Perpetual ((PPT)), a move to outsource some back office functions will impact on earnings in the medium-term, prompting JP Morgan to lower its forecasts and price target. Others have similarly adjusted estimates to reflect weak market conditions.

Conditions also remain tough for Oakton ((OKN)) and brokers have reacted to AGM commentary by trimming earnings estimates, which has also brought about a trimming in price targets.

Total Recommendations	Recommendation Changes
Broker Recommendation Breakup

Broker Rating

Order	Company	Old Rating	New Rating	Broker
Upgrade
1	HENDERSON GROUP PLC.	Sell	Neutral	Macquarie
2	TABCORP HOLDINGS LIMITED	Neutral	Neutral	Macquarie
3	WESTERN AREAS NL	Neutral	Buy	Credit Suisse
Downgrade
4	ENERGY RESOURCES OF AUSTRALIA	Neutral	Sell	UBS
5	FLETCHER BUILDING LIMITED	Buy	Neutral	Macquarie
6	JAMES HARDIE INDUSTRIES N.V.	Neutral	Sell	JP Morgan
7	NAVITAS LIMITED	Buy	Neutral	Credit Suisse

Recommendation

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	HGG	60.0%	80.0%	20.0%	5
2	WSA	33.0%	50.0%	17.0%	6
3	CQO	29.0%	43.0%	14.0%	7
4	PNA	75.0%	88.0%	13.0%	8
5	CSL	50.0%	63.0%	13.0%	8
6	TAH	13.0%	25.0%	12.0%	8
7	CPA	- 17.0%	- 14.0%	3.0%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Rating	New Rating	Change	Recs
1	GPT	67.0%	50.0%	- 17.0%	6
2	CER	50.0%	33.0%	- 17.0%	3
3	NVT	43.0%	29.0%	- 14.0%	7
4	CQR	43.0%	29.0%	- 14.0%	7
5	ERA	- 25.0%	- 38.0%	- 13.0%	8
6	FBU	50.0%	38.0%	- 12.0%	8
7	JHX	50.0%	38.0%	- 12.0%	8
8	MRE	- 25.0%	- 33.0%	- 8.0%	3
9	CAB	67.0%	60.0%	- 7.0%	5
10	CEU	- 17.0%	- 20.0%	- 3.0%	5

Target Price

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	CQO	3.426	3.568	4.14%	7
2	WSA	6.325	6.400	1.19%	6
3	CSL	33.249	33.499	0.75%	8
4	TAH	3.356	3.375	0.57%	8

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous Target	New Target	Change	Recs
1	ERA	4.650	3.795	- 18.39%	8
2	PNA	4.591	4.348	- 5.29%	8
3	CAB	5.627	5.426	- 3.57%	5
4	HGG	2.624	2.574	- 1.91%	5

Earning Forecast

Positive Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	GBG	0.614	1.014	65.15%	6
2	OGC	15.388	18.697	21.50%	3
3	PDN	1.672	1.753	4.84%	7
4	NCM	208.971	217.229	3.95%	8
5	PRU	24.600	25.433	3.39%	6
6	CTX	110.900	113.550	2.39%	6
7	WHC	37.950	38.750	2.11%	5
8	TCL	12.157	12.400	2.00%	7
9	AIZ	10.326	10.524	1.92%	4
10	VBA	2.571	2.614	1.67%	7

Negative Change Covered by > 2 Brokers

Order	Symbol	Previous EF	New EF	Change	Recs
1	ROC	0.259	- 0.169	- 165.25%	4
2	MRE	5.400	3.500	- 35.19%	3
3	CER	4.250	3.633	- 14.52%	3
4	AWC	6.832	6.009	- 12.05%	8
5	BPT	5.280	4.780	- 9.47%	5
6	FBU	49.214	46.293	- 5.94%	8
7	PPT	169.614	160.486	- 5.38%	7
8	PAN	17.325	16.450	- 5.05%	4
9	OKN	20.300	19.420	- 4.33%	5
10	IGO	25.294	24.334	- 3.80%	5

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Defensiveness A Thorny Issue

- Thorn Group management indicates Radio Rentals performing solidly
- New concept stores also proving successful
- Defensive earnings suggest value at current levels
- Moelis reiterates Buy rating

By Chris Shaw

Thorn Group ((TGA)),the operations of which include the Radio Rentals business, is currently rated as a Buy by all three brokers in the FNArena database to provide coverage on the stock. Moelis is not in the database but also rates Thorn Group as a Buy, seeing valuation as attractive at current levels.

Moelis's Buy rating has been reiterated following a meeting with management, the broker coming away comfortable in the view the core Radio Rentals operation continues to perform well despite the challenges posed by a tough operating environment at present.

As the Radio Rentals model is to rent essential household items, the business thrives in an uncertain environment for consumers. In the view of Moelis the defensiveness of this business was demonstrated by FY11 results, where underlying net profit after tax increased by 40%.

Management also indicated the recently introduced concepts such as kiosks in metro areas and 1-2 man branches in regional centres are proving to be successful. Moelis is positive on such moves as they offer a low cost opportunity to channel increased volumes into the existing footprint of more than 70 stores.

Moelis sees Thorn Group as on track to have 5-10 of the new concept stores opened by the end of FY12. This will help to offset the recent negative news of newly acquired National Credit Management being unsuccessful in a tender to renew a contract with the Australian Tax Office.

The financial impact of this is not overly significant in the view of Moelis, the broker estimating the contract had contributed less than $1.5 million to EBIT (earnings before interest and tax) and National Credit Management accounts for less than 15% of Thorn Group earnings.

To reflect the insights offered during the meeting with management Moelis has trimmed earnings per share (EPS) forecasts by 4% through FY14. This leaves Moelis forecasting EPS of 19.4c in FY12 and 21.3c in FY13. These estimates compare to consensus EPS estimates according to the FNArena database of 19.5c and 21.2c respectively.

Based on its EPS forecasts Moelis has set a price target on Thorn Group of $1.90, which is below the consensus price target in the FNArena database of $2.10. A Buy rating is justified according to Moelis as at current levels Thorn Group is trading on a FY12 earnings multiple of eight times.

This appears cheap given the defensive nature of Thorn's earnings. Moelis also points out Thorn Group's share price has declined by around 30% since late in February, which is seen as an over-reaction given the resiliency of earnings.

Macquarie and RBS Australia also see value at current levels, while Credit Suisse is positive on Thorn Group's solid earnings growth outlook in coming years.

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Brokers Still Like JB Hi-Fi

- JB Hi-Fi AGM offers sales update
- Group sales higher, like-for-like sales down
- Tough macro outlook impacting on earnings
- Brokers remain broadly positive on the stock

By Chris Shaw

At its annual general meeting yesterday JB Hi-Fi ((JBH)) indicated like-for-like sales for the first quarter of FY12 were down 3.5% in year-on-year terms, broadly in line with the fall of 3.3% recorded in July. Sales overall rose 6.6% for the quarter.

In the view of UBS the sales result reflected ongoing price deflation in Audio Visual products, promotional activity in IT products and softer Telco sales ahead of the launch of iPhone 4S. As the result was broadly in line with its expectations UBS has made no changes to forecasts, viewing the 1Q12 result as solid given the current macro backdrop.

JP Morgan was a little more negative on the update, indicating it was weaker than had been forecast. Even factoring in the cycling of a less demanding second quarter of FY11, the update has caused the broker to trim its like-for-like sales growth forecasts for 1H12 to minus 2.5%, down from minus 1.1% previously.

The changes to sales growth expectations impact on earnings, with JP Morgan cutting its earnings estimates by 2-6% through FY14. This reflects the view that even allowing for the cycling of easier comparable numbers, there remains downside risk to earnings from the weak discretionary retail environment.

The 1Q12 sales result was also weaker than Macquarie had expected, though the broker has not adjusted earnings estimates as a result. This reflects the fact any shortfall can be made up, as Christmas trading generates about two-thirds of first half revenue for JB Hi-Fi. Management remains confident the interim result will still be solid given new iPhone, movie, music and game releases.

Looking beyond the short-term, Goldman Sachs continues to expect solid earnings growth in coming years thanks to the combination of new store openings, the maturation of the existing store network and ongoing product category management.

With respect to the store rollout program, Citi expects a further 14 new stores will commence trading in FY12, 10 of these by Christmas. Citi notes management remain confident they can secure 13-15 new sites annually.

For Goldman Sachs, earnings growth expectations of 12% in earnings per share (EPS) terms for FY12 remains achievable, as a buyback of shares in May of this year will deliver about 4% of this growth. With group sales growth of around 8% expected for the full year, there is no requirement for margin expansion during the period.

A possible driver of some earnings growth is the pending launch of JB Hi-Fi's web-based music platform, JB Hi-Fi NOW. Citi estimates this service has the potential to add $5-$10 million to group sales in the first 12 months of operations.

JP Morgan remains more cautious on earnings, suggesting consensus net profit forecasts for JB Hi-Fi of a result of around $137.5 million for FY12 are a little high given the risks posed by weak trading conditions.

JP Morgan's profit forecast of $134.3 million implies EPS of 133c, rising to 144.7c in FY13. This compares to consensus EPS estimates according to the FNArena database of 138.3c and 155c respectively. Goldman Sachs is not in the database but forecasts EPS of 139.2c for FY12 and 151.8c for FY13.

No ratings have changed post JB Hi-FI's AGM, the database showing six Buy ratings and two Hold recommendations. Goldman Sachs also rates the stock as a Hold. The consensus price target according to the FNArena database stands at $18.00, while Goldman Sachs has set its target at $17.49.

Shares in JB Hi-Fi today are stronger and as at 11.25am the stock was up 44c at $14.80. This compares to a range over the past year of $13.35 to $20.50, the current share price implying upside of about 21% to the consensus price target in the FNArena database.

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