The balance between stockbrokers downgrading and upgrading their recommendations for individual ASX-listed stocks remains overwhelmingly positive, but underneath the surface, where valuations and earnings forecasts are being assessed and recalibrated, the outlook seems more mixed.

Luckily for Australian investors, the negative balance for the week merely affects smaller cap companies while large cap names feature prominently among the rating upgrades. Unfortunately, Trump’s negotiation antics with China are currently dominating news headlines, and this is weighing upon short-term prospects for equities globally.

In the good books

AUSTRALIA & NEW ZEALAND BANKING GROUP (ANZ) was upgraded to Buy from Neutral by Citi. B/H/S: 4/4/0. The share price has declined around 6% in the year to date and Citi upgrades to Buy from Neutral. The broker believes ANZ, in particular, will be able to shift its dividend payout higher, to 80% by the second half of 2020 from the current 65%.  The CET1 ratio is forecast to remain above the 10.5% target despite around $7 billion in share buybacks. Target is steady at $30.

AP EAGERS LIMITED (APE) was upgraded to Equal-weight from Underweight by Morgan Stanley. B/H/S: 1/3/0. New car sales growth has improved and regulatory headwinds have been factored into the stock, but the valuation holds Morgan Stanley back from being more positive on AP Eagers. There is upside relative to FY17 on the removal of trading losses at sold dealerships, while the impact from regulatory changes has largely passed. Target is raised to $8.50 from $6.85.

CYBG PLC (CYB) was upgraded to Outperform from Neutral by Macquarie. B/H/S: 2/1/1. Macquarie’s investment thesis for CYBG is underpinned by expectations of improving profitability through efficiencies, market share gains, capital returns and, eventually, higher interest rates. While some factors will take time and indeed benefit all UK banks, the broker sees CYBG as a greater net beneficiary. Given an undemanding valuation, Macquarie upgrades to Outperform from Neutral. Target rises to $6.50 from $5.27.

INFIGEN ENERGY (IFN) was upgraded to Buy from Hold by Ord Minnett. B/H/S: 1/1/1. Ord Minnett has had a negative outlook on the company’s three traditional revenue streams. While the situation has not changed that much, the broker notes the stock has de-rated such that it would be now at least 10% cheaper to buy Infigen than to build new wind farms. As the valuation looks significantly more interesting Ord Minnett upgrades to Buy from Hold. Target falls to $0.71 from $0.73.

In the not-so-good books

See last week’s downgrades.

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.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.