In the week ending Friday, July 4, 2025, FNArena tracked fourteen upgrades and sixteen downgrades for ASX-listed companies from brokers monitored daily.
Average target price reductions outpaced rises for the majority of entries in the table below, while upgrades to earnings forecasts were on the whole materially larger in percentage terms than downgrades.
Technology heavyweights WiseTech Global and Pro Medicus had a strong week finishing first and second respectively on the positive change to average earnings and target price tables.
WiiseTech’s average earnings forecast received a boost after Citi reinstated research coverage with a Buy rating and $127.40 target price, factoring in the recent E2open acquisition into estimates from the second half of FY26.
E2open is a US-based supply chain management software company offering end-to-end solutions to help businesses manage their global supply chains more effectively and collaboratively.
Near-term gains are expected from enhancing WiseTech’s existing Cargowise software for current customers, particularly in Container Transport Optimisation, Compliance, and Neo using E2open’s data and platforms.
While medium-term upside is also anticipated from expanding into Beneficial Cargo Owners (BCOs) for logistics execution, the analysts noted heavier go-to-market investment and execution risk.
Citi can also see potential for WiseTech to monetise payments through E2open’s existing products and partnerships, adding further upside to the broker’s forecasts.
The average target price for Pro Medicus in the FNArena database jumped by nearly 9% last week after two new US contract wins highlighted both a widening total addressable market and management’s ability to raise pricing.
Morgans Stanley estimated the lifetime value (LTV) of the new 10-year contract with UC Health and Mercy Health ($98m announced last October) to exceed $5bn, equating to roughly 20% of the company’s current equity market capitalisation.
Apart from the $170m contract size, the contract with Colorado-based UC Health included the first licensing of the company’s cardiology suite of its Visage 7 enterprise imaging platform.
For the Franciscan Missionaries of Our Lady Health System in Louisiana, management renewed its existing contract at $20m over five years ($4m annually), a substantial uplift from the original 2016 agreement of $7m over seven years, or $1m annually.
Morgans explained the increase reflects higher fees per transaction, an updated minimum contracted volume, and the addition of Visage 7 Open Archive to the offering, expanding the scope beyond the original viewer-only contract.
Ahead of Pro Medicus, Superloop’s around 13% lift in average target price last week resulted from management’s 6% upgrade to earnings guidance for FY25. Analysts are still updating for recent announcements.
While Macquarie also pointed to potential upside to consensus forecasts for FY26, much of the good news is already discounted in the share price, according to this broker.
Next up were financial services provider Hub24 and biopharmaceutical company Clinuvel Pharmaceuticals with increases in average targets of around 8% apiece.
Hub24’s earnings forecasts were upgraded by Bell Potter and Citi to reflect market movements and stronger flows. Bell Potter explained all major global indices closed higher on the prior quarter.
Citi also anticipated upside risk to medium-term flows as management looks to expand into adjacent market opportunities such as the broker segment by offering tailored platform, technology, and data solutions.
The average target for Clinuvel Pharmaceuticals received a boost after Ord Minnett initiated coverage with a $22.60 target, highlighting the established profitability of Scenesse, the only FDA-approved treatment for erythropoietic protoporphyria (EPP).
Elsewhere, pure copper play Capstone Copper and graphite miner and processor Syrah Resources follow WiseTech on the earnings upgrade table.
Capstone holds four operating assets: Pinto Valley in Arizona, USA; Cozamin in Mexico; Mantos Blancos; and Mantoverde in Chile, plus a development project also in Chile, Santo Domingo.
The company’s average earnings forecast received a boost after Morgans initiated coverage with a Buy rating and $11.50 target.
Regarding Syrah Resources, here UBS noted an improved outlook for the company’s flagship Balama graphite mine, which outweighs the broker’s negative stance on the natural graphite sector.
Near-term graphite price forecasts have been reduced on a lower electric vehicle (EV) demand forecast and stubborn synthetic capacity.
Balama supplies natural graphite for battery anode material producers and is a key supplier to the global EV and battery industries.
On the flipside, AIC Mines and NextDC feature first and third, respectively, for negative changes to average earnings.
AIC Mines is funding the expansion of its Eloise copper processing plant in northwest Queensland and bringing the nearby Jericho deposit into production through a combination of $55m raised via a placement and a US$40m debt facility.
After taking these changes into account, Ord Minnett lowered its target to 50c from 62c and kept a Speculative Buy rating, while Shaw and Partners (Buy, High Risk) amended to 70c from $1.10.
NextDC’s lower average earnings forecast was the product of ongoing, incidental updates by brokers.
After meeting with management, Citi last week noted the pipeline remains solid with further contract wins dependent upon development progress at both existing and new sites, especially in Sydney.
While a joint venture structure for the hyperscale facilities also reduces capital intensity, the broker continues to assume an equity raise in the second half of FY26.
AIC Mines also suffers the largest percentage fall in average target in the table below, followed by Reece, which downgraded FY25 earnings guidance to a level -6% below the consensus forecast.
Bellevue Gold and Chalice Mining are next with falls in average target of more than -14%. The change for Bellevue should be ignored as UBS recently moved to research restriction on the stock, meaning the broker no longer has a target price or rating for the time being.
While Chalice Mining’s pre-feasibility study (PFS) for its Gonneville project is progressing to plan for completion in the December quarter, Bell Potter lowered its target to $4.10 from $5.75 after updating commodity price forecasts.
The broker lowered its palladium price by -14% and factored in an 8% higher Australian dollar, partially offset by stronger platinum and nickel forecasts.
The project, 100%-owned by Chalice, is the largest undeveloped palladium-nickel-copper project in the western world.
In the good books
Upgrades
ARB CORPORATION LIMITED ((ARB)) was upgraded to Buy from Neutral by Citi .B/H/S: 5/0/1
Citi upgrades ARB Corp to Buy from Neutral with a revised target price of $38.70 from $39.54 due to the decline in the stock price of -20% this year, which the analyst believes reflects the market already discounting weakness over 2H25 in domestic aftermarket sales and a lack of parts for the BYD Shark.
The outlook looks better with expectations of further interest rate cuts three -25bps over the rest of 2025 which should support a lift in new vehicle sales, with some momentum apparent towards the end of 2H25.
Parts are also anticipated for the BYD Shark to become available this year.
Citi lowers the FY26 EPS estimate by -3.3%, while FY25 is unchanged.
ARENA REIT ((ARF)) was upgraded to Buy from Accumulate by Ord Minnett .B/H/S: 2/2/0
Ord Minnett expects the Property sector to deliver operating EPS growth of 5.6% in FY26 and a three-year compound annual growth rate (CAGR) of 5.8%. Support is expected from falling interest rates, rising asset values, and limited supply of quality assets.
Property trusts are trading on a 12-month forward distribution yield of around 5%, notes the analyst.
Within large caps, the broker favours Vicinity Centres for net operating income (NOI) upgrades tied to rent growth and Scentre Group for lower interest costs on refinancing. GPT Group is also preferred for rising specialty sales and a capital-light model.
For Arena REIT, the $4.30 target is unchanged and the rating upgraded to Buy from Accumulate.
CAPRICORN METALS LIMITED ((CMM)) was upgraded to Accumulate from Hold by Ord Minnett .B/H/S: 1/2/0
Ord Minnett reviewed forecasts for mining companies ahead of the June quarterlies and marked-to-market commodity prices.
The broker believes there’s a risk of FY26 capex and operating costs guidance exceeding expectations, with gold and lithium miners more at risk than others.
Strong iron ore volumes are likely for the June quarter due to improved weather conditions, and less so for coal.
Rating for Capricorn Metals upgraded to Accumulate from Hold. Target unchanged at $10.90.
DOMINO’S PIZZA ENTERPRISES LIMITED ((DMP)) was upgraded to Buy from Hold by Ord Minnett .B/H/S: 2/3/1
Following the surprise resignation of Domino’s Pizza Enterprises’ CEO Mark van Dyck, Ord Minnett has revisited its forecasts for the company.
The broker expects growth in store numbers to be minimal, which means lower capex needs. Focus on margins and profitability would slow same-store sales growth in the broker’s view.
The analyst now forecasts no final dividend for FY25 and no dividend for FY26. EPS forecast for FY25 cut by -0.6%, FY26 by -1.1% and FY27 by -5.9%.
Target cut to $28 from $31. Rating upgraded to Buy from Hold following share price fall.
See also DMP downgrade.
DEXUS ((DXS)) was upgraded to Accumulate from Hold by Ord Minnett .B/H/S: 3/1/1
Ord Minnett expects the Property sector to deliver operating EPS growth of 5.6% in FY26 and a three-year compound annual growth rate (CAGR) of 5.8%. Support is expected from falling interest rates, rising asset values, and limited supply of quality assets.
For Dexus, the target falls to $7.20 from $7.40 and the rating is upgraded to Accumulate from Hold.
EMERALD RESOURCES NL ((EMR)) was upgraded to Hold from Lighten by Ord Minnett .B/H/S: 0/1/0
Ord Minnett reviewed forecasts for mining companies ahead of the June quarterlies and marked-to-market commodity prices.
Rating for Emerald Resources upgraded to Hold from Lighten. Target cut to $4.00 from $4.10.
HELIA GROUP LIMITED ((HLI)) was upgraded to Neutral from Underperform by Macquarie .B/H/S: 0/1/0
Helia Group has lost its lender’s mortgage insurance contract with ING Bank, which accounted for around 17% of FY24 gross written premiums (GWP), notes Macquarie.
This ING outcome follows an earlier loss of the CommBank ((CBA)) contract and changes to the Government Home Guarantee Scheme, highlights the analyst.
The broker estimates GWP will fall to roughly one-third of FY24 levels, but points out earnings impacts will be delayed until FY28-29 due to the slow revenue recognition of existing premium reserves.
Despite the weaker long-term outlook, Macquarie highlights capital generation from the back-book remains robust, supported by low claims, enabling potential returns through to FY28.
Reflecting slight changes to profitability, Macquarie upgrades its EPS forecasts by 47% across FY2527 and raises its target price to $3.35 from $3.25. The rating is also upgraded to Neutral from Underperform.
The business is now undertaking a strategic review, with potential risks to capital returns should Helia choose to stop writing new business, explains the analyst.
HMC CAPITAL LIMITED ((HMC)) was upgraded to Buy from Hold by Ord Minnett .B/H/S: 3/2/0
Ord Minnett expects the Property sector to deliver operating EPS growth of 5.6% in FY26 and a three-year compound annual growth rate (CAGR) of 5.8%. Support is expected from falling interest rates, rising asset values, and limited supply of quality assets.
For HMC Capital, the target falls to $6.00 from $6.30 and the rating is upgraded to Buy from Hold.
MEDIBANK PRIVATE LIMITED ((MPL)) was upgraded to Overweight from Equal-weight by Morgan Stanley .B/H/S: 2/3/0
Morgan Stanley expects strong FY25 results from both Medibank Private and nib Holdings ((NHF)) but upgrades the former to Overweight from Equal-weight.
The analysts believe hospital claims are running below expectations, supporting margin expansion for private health insurers in FY2526.
The broker cites Medibank Private’s ability to sustain margins through easing competition and lower claims inflation.
It’s also felt management’s pivot toward broader health services, including specialist and primary care, supports multiple expansion.
Morgan Stanley raises its target price to $5.57 from $4.50. Industry View: In-Line.
See also MPL downgrade.
MOTORCYCLE HOLDINGS LIMITED ((MTO)) was upgraded to Buy from Accumulate by Morgans .B/H/S: 1/0/0
Morgans raises its target for Motorcycle Holdings to $4.10 from $2.75 and upgrades to Buy from Accumulate. These changes follow the acquisition of seven profitable dealerships from Peter Stevens Motorcycles, including four Harley-Davidson outlets, for -$7-9m.
The broker expects the acquisition will lift the company’s national market share to around 20% and be EPS accretive from 1H FY26, with additional upside from operational synergies.
Peter Stevens Motorcycles delivered FY24 revenue of $144m and profit (PBT) of $2.5m, with management at Motorcycle Holdings assuming $150m and $3m respectively in FY26. Gradual margin improvement toward group levels is also expected.
Morgans lifts its FY26 and F27 EPS forecasts by 10.5% and 11.6%, respectively, and suggests the group is well-positioned for further organic and inorganic growth.
NIB HOLDINGS LIMITED ((NHF)) was upgraded to Buy from Neutral by UBS .B/H/S: 2/3/1
UBS has upgraded nib Holdings to Buy from Neutral and raised the target price to $7.85 from $7.35.
The analyst believes the stock’s valuation discount relative to Medibank Private ((MPL)) has become too wide, and sees this as unjustified.
UBS also anticipates a better outlook for nib’s Australian Residents Health Insurance (ARHI) division.
Private health insurance statistics for the March quarter showed solid policy growth of 2%-3%, with market share reaching an eight-year high, alongside signs of weakening hospital claims inflation per person.
Between FY25 and FY28, the analyst forecasts compound average EPS growth of 10%.
PERPETUAL LIMITED ((PPT)) was upgraded to Buy from Neutral by UBS .B/H/S: 2/3/0
UBS marks-to-market wealth managers for June Qtr with an upgrade in FY26 EPS estimates across the broker’s coverage, up between 1%-27% due to robust equity markets, boosting companies with higher operating leverage, gearing, and fee performance exposure.
Preferred stocks in funds are GQG Partners ((GQG)) with Insignia Financial ((IFL)) a special situation.
UBS lifts EPS estimates for Perpetual by 2.4% for FY25 and 36.6% for FY26.
The analyst upgrades Perpetual to Buy from Neutral, with the stock viewed as oversold and trading below the upgraded target price of $22.50 (from $18.50) due to higher FUM, operating leverage, and cost controls.
PLATINUM ASSET MANAGEMENT LIMITED ((PTM)) was upgraded to Neutral from Sell by UBS .B/H/S: 0/2/0
UBS marks-to-market wealth managers for June Qtr with an upgrade in FY26 EPS estimates across the broker’s coverage, up between 1%-27% due to robust equity markets, boosting companies with higher operating leverage, gearing, and fee performance exposure.
UBS upgrades Platinum Asset Management to Neutral from Sell with a target of 47c (down from 50c), as the stock is down -30% since the proposed merger with L1 was announced. The merger terms continue to appear more favourable for L1 shareholders than Platinum minorities, the broker asserts.
EPS forecasts are lowered by -4.2% for FY25 and raised 16.8% for FY26.
REECE LIMITED ((REH)) was upgraded to Buy from Accumulate by Ord Minnett .B/H/S: 1/3/2
Ord Minnett lowers its target for Reece by -$2.00 to $18.40 but upgrades to Buy from Accumulate, expecting returns to improve as the company moves through a cyclical low.
The broker notes FY25 earnings (EBIT) guidance of $548$558m (midpoint: $553m) is -5% below its forecast and -6% under consensus, reflecting ongoing weakness in both A&NZ and US construction markets.
In A&NZ, volumes remain soft and interest rate cuts have yet to spur activity, while in the US, Reece’s exposure to residential construction and heightened competition continue to weigh on performance, explains the broker.
Despite the downturn, the analysts highlight Reece is continuing to invest through the cycle, positioning the company well for a rebound in building activity.
A modest recovery is expected in A&NZ in FY26, with a more significant improvement anticipated in FY27.
See also REH downgrade.
In the bad books
Downgrades
AUSTRALIAN FINANCE GROUP LIMITED ((AFG)) was downgraded to Neutral from Buy by Citi .B/H/S: 1/1/0
Citi points to the strong performance of Australian Finance Group and Pepper Money ((PPM)) with the stocks up between 40%45% year-to-date.
The analyst views the re-rating of the share prices as due to the change in the interest rate narrative, with expectations the cash rate will decline to 3.1%.
Much of the good news is believed to be understood by the market and discounted in the prices with an expected uplift in credit demand.
A consolidation in the share prices is flagged before expectations for an earnings recovery in FY26 become more apparent.
Target price for Australian Finance Group is set at $2.10 and the company is downgraded to Neutral from Buy.
CENTURIA INDUSTRIAL REIT ((CIP)) was downgraded to Hold from Accumulate by Ord Minnett .B/H/S: 3/2/0
Ord Minnett expects the Property sector to deliver operating EPS growth of 5.6% in FY26 and a three-year compound annual growth rate (CAGR) of 5.8%. Support is expected from falling interest rates, rising asset values, and limited supply of quality assets.
For Centuria Industrial REIT, the $3.10 target is unchanged and the rating is downgraded to Hold from Accumulate.
DOMINO’S PIZZA ENTERPRISES LIMITED ((DMP)) was downgraded to Sell from Neutral by Citi .B/H/S: 2/3/1
Citi expresses surprise at the announced departure of Domino’s Pizza Enterprises’ CEO while acknowledging his position was more of a “turnaround specialist” than a longer-term prospect.
Alongside other management changes, the analyst infers some of the turnaround strategies in Japan and France are not reaping the desired results.
Due to the uncertainty about a new CEO and ongoing high leverage of over two times on the balance sheet, Citi downgrades the stock to Sell from Neutral and lowers net profit after tax forecasts by -4% for FY25 to -11% out to FY27.
Target price is almost halved to $14.20, down -40% due to the valuation discounts applied to the A&NZ and European businesses.
See also DMP upgrade.
G8 EDUCATION LIMITED ((GEM)) was downgraded to Neutral from Outperform by Macquarie .B/H/S: 0/2/0
Macquarie cut rating and target price on G8 Education after downgrading the occupancy forecasts for FY25-27 and uncertainty regarding the potential impact of the incident at its Creative Garden Cook Point centre.
A man who met with all employment-related checks and employed at the centre was charged with offences related to children. The broker reckons there’s uncertainty about how this incident will impact the company’s reputation and financials.
The broker also cut occupancy forecast for FY25 to 65% from 65.7%, and for FY26-27 to 70.5% and 71%, from 71.4% and 71.9%, respectively.
Target cut to $1.15 from $1.53. Rating downgraded to Neutral from Outperform.
HUB24 LIMITED ((HUB)) was downgraded to Neutral from Buy by Citi .B/H/S: 2/4/0
Citi downgrades Hub24 to Neutral from Buy due to valuation, with the stock trading at more than 60 times FY26 earnings estimates, which the analyst has lifted by 3% to 13% for FY25FY27. Target price set at $89.80.
The broker forecasts 4Q25 net flows of around $4.9bn, which is 1% above consensus and down -2% on a year earlier and -1% on the previous quarter, including $900m from the Equity Trustees transition, compared to $1.8bn the previous quarter and $1.3bn from Clearview in 3Q25.
Excluding the large transactions, Citi expects net flows of circa $4bn, a rise of 26% on last year and up 9% on the March quarter.
A rise in hiring, with total headcount up 7% from a year ago versus 2% growth in the December quarter, infers some pressure towards further margin gains, the report highlights.
JAMES HARDIE INDUSTRIES PLC ((JHX)) was downgraded to Accumulate from Buy by Morgans .B/H/S: 3/3/0
James Hardie Industries announced it has completed the acquisition of Azek following approval from Azek’s shareholders for the transaction.
Morgans factored in the business in its forecasts, but its sales estimates are conservative vs the forecasts presented by both Azek and the company.
While positive on the acquisition, the analyst expects FY26 to be soft due to high interest rates and a decline in new housing sales.
The broker also expects synergies of US$200m by FY31, far less than the US$500m-plus by FY30 flagged by the company. EPS forecasts for FY26/27/28 cut by -3%/-8%/-7%, respectively.
Target trimmed to $49 from $50. Rating downgraded to Accumulate from Buy.
LOTTERY CORPORATION LIMITED ((TLC)) was downgraded to Sell from Buy by Citi .B/H/S: 3/2/1
Citi downgrades Lottery Corp to Sell from Buy with the target price declining to $5 from $5.60.
The company is due to report FY25 earnings on August 20, and the analyst anticipates a fall in earnings before interest and tax of around -13% to $628m.
Ongoing declines in Powerballs in May and June, with like-for-like Powerballs down circa -9% to June versus down -4% to April, are in part due to cannibalisation with Oz Lotto and increased player interest in Oz Lotto.
Citi reduces EPS forecasts by -3.1% for FY25 and -4.3% for FY26.
LOVISA HOLDINGS LIMITED ((LOV)) was downgraded to Hold from Buy by Bell Potter .B/H/S: 3/3/1
Bell Potter notes the retail sector has lagged behind peer markets in 2025 due to the delayed start of the RBA easing cycle but a meaningful pickup is likely from the third rate cut expected next week.
The broker sees potential for a trend shift in the September quarter and reflected in the AGM season updates. For the FY25 reporting season in August, the broker sees gross margin pressure as a key risk due to higher promotional activity.
In the case of Lovisa Holdings, the broker believes the seasonal period discount was the highest among its retail coverage, but pressure on gross margin was low due to low-cost product advantage.
The analyst lifted FY26/26/27 net profit forecasts by 1.7%/1.9%/2.2%, respectively.
Rating downgraded to Hold from Buy. Target lifted to $31 from $30.
LYNAS RARE EARTHS LIMITED ((LYC)) was downgraded to Hold from Accumulate by Ord Minnett .B/H/S: 2/1/3
Ord Minnett downgrades its recommendation on Lynas Rare Earths to Hold from Accumulate, following a strong share price run, while retaining a target price of $8.70.
The broker acknowledges Lynas stands to benefit from Western efforts to reduce reliance on Chinese rare earth exports, especially given geopolitical risks.
Still, a lack of downstream magnet manufacturing capacity in the US and Europe may constrain sales volumes, despite the company targeting 11.5ktpa NdPr output under its “Lynas 2025” plan.
Ord Minnett also notes high costs at the new Kalgoorlie plant (which is operating below capacity) weigh on near-term earnings, with valuation multiples considered stretched.
While Western buyers are likely to pay a premium for supply security, the broker cautions the timing and extent of price realisation remains unclear due to limited visibility on Western pricing benchmarks.
MEDIBANK PRIVATE LIMITED ((MPL)) was downgraded to Neutral from Buy by UBS .B/H/S: 2/3/0
UBS marks-to-market insurers and brokers for the June Qtr quarter with an across-the-board EPS uplift in estimates by 0%-9% for the sector, due to a recovery in markets and a more subdued CAT period over the June quarter.
The broker prefers QBE Insurance ((QBE)) and nib Holdings ((NHF)) for the private health insurers.
UBS downgrades Medibank Private to Neutral from Buy, with a target set at $5.45 (from $5.10), as the stock is offering more limited upside to the target price.
The analyst tweaks EPS estimates up 4.4% for FY25 and down -1.6% for FY26.
See also MPL upgrade.
NETWEALTH GROUP LIMITED ((NWL)) was downgraded to Neutral from Buy by Citi .B/H/S: 1/5/0
Citi downgrades Netwealth Group to Neutral from Buy due to valuation, which exceeds 60 times FY26 earnings estimates, post a rise in the forecast for net profit after tax by 2% to 7% for FY25FY27. New target price is set at $33.65.
The analyst views consensus forecasts for net flows in 4Q25 as too high for the platform and forecasts growth of 7% annually and up 12% on the March quarter at $3.9bn, which assumes gross inflow of $8.1bn (up 18% on the previous year) and gross outflow of -$4.3bn, a rise of 29% annually.
Citi expects gross outflows to be higher in 4Q25 due to market volatility in April, especially for high net worth accounts, and the broker is positioned below consensus by -12%.
Looking ahead, opex is anticipated to advance by 17% in FY26, which sits 2ppts higher than consensus.
PRO MEDICUS LIMITED ((PME)) was downgraded to Hold from Buy by Bell Potter .B/H/S: 1/3/1
Pro Medicus announced two contracts, with the first being the renewal and extension of the contract with Franciscan Missionaries of Our Lady of Health System in Louisiana.
The second contract with the University of Colorado Health is the second-largest in revenue terms. Bell Potter highlights the drivers of the company’s Visage systems remain in place, noting key selling points are swift deployment, radiologist shortages and upload speed.
The broker expects exam revenue to grow to $299m in FY27 from an estimated $230m revenue in FY26, with upcoming contract renewals providing further upside potential.
Target price lifted to $320 from $280. Rating downgraded to Hold from Buy.
PEPPER MONEY LIMITED ((PPM)) was downgraded to Neutral from Buy by Citi .B/H/S: 1/1/0
Citi points to the strong performance of Australian Finance Group ((AFG)) and Pepper Money with the stocks up between 40%45% year-to-date.
The analyst views the re-rating of the share prices as due to the change in the interest rate narrative, with expectations the cash rate will decline to 3.1%.
Much of the good news is believed to be understood by the market and discounted in the prices with an expected uplift in credit demand.
A consolidation in the share prices is flagged before expectations for an earnings recovery in FY26 become more apparent.
Target price for Pepper Money is set at $1.75 and the stock is downgraded to Neutral from Buy.
QBE INSURANCE GROUP LIMITED ((QBE)) was downgraded to Neutral from Outperform by Macquarie .B/H/S: 4/3/0
Macquarie flags upside risk to catastrophe claims for QBE Insurance in 1H25, estimating $575m in events due to Northern NSW floods versus the company’s $549m allowance.
The broker expects FY25 gross written premium (GWP) growth of 5.7% in constant currency, consistent with guidance, supported by UK volumes and new underwriting deals with Youi and Sure.
The analyst’s forecast imply a combined operating ratio (COR) of 92.7%, slightly above 92.5% guidance due to modest catastrophe over-runs. (Note: The insurer is making an underwriting profit at less than 100%)
As the group trades at a 15.7% premium to global peers on a two-year forward PE, Macquarie downgrades to Neutral from Outperform as the valuation multiple is no longer considered attractive. The $23 target is unchanged.
REECE LIMITED ((REH)) was downgraded to Hold from Buy by Morgans .B/H/S: 1/3/2
Morgans cuts its target price for Reece to $14.80 from $18.70 and downgrades to Hold from Buy following a weak FY25 trading update and a subdued housing outlook in A&NZ and the US.
FY25 group earnings (EBIT) are guided at $548558m, with the midpoint around -5% below Morgans’ forecast and -6% below consensus.
The broker lowers its FY2527 earnings forecasts by -5% to -7%, with second-half FY25 earnings expected to fall -35% year-on-year.
Ongoing softness in housing activity, persistent margin pressure, and rising competition, particularly in the US residential construction sector, are expected to weigh on profitability.
While Reece remains a quality business with a long-term growth track record, Morgans prefers to await further updates at the FY25 result on August 25 before reassessing its view.
See also REH upgrade.
SUNCORP GROUP LIMITED ((SUN)) was downgraded to Hold from Accumulate by Ord Minnett .B/H/S: 2/4/0
Ord Minnett notes Suncorp Group’s review of reinsurance programs for FY26 showed a lower cost for general catastrophe coverage but more expensive options for additional coverage like quota share.
The broker is unsurprised, noting quota-share policies are not financially viable for the insurer or its key rival Insurance Australia Group ((IAG)).
However, other provisions for weather events along with reinsurance should provide sufficient coverage, the analyst reckons.
FY25 EPS forecast trimmed by -0.2% but FY26 lifted by 3.8% and FY27 by 2.6%. Target rises to $22 from $21. Rating downgraded to Hold from Accumulate for valuation reasons.
Earnings forecast
Listed below are the companies that have had their forecast current year earnings raised or lowered by the brokers last week. The qualification is that the stock must be covered by at least two brokers. The table shows the previous forecast on an earnings per share basis, the new forecast, and the percentage change.
