In the good books
Fortescue Metals Group Limited (FMG) was Upgraded to Hold from Reduce by Morgans
Morgans assesses an in-line 1Q result for Fortescue Metals Group during a period of falling demand for low-grade iron ore and an -8% decline in shipments by the group. The broker raises its rating to Hold from Reduce after a -50% decline in the share price.
Management maintained FY22 guidance. The broker feels lower iron ore prices and the low-grade discounts will directly reduce the group’s extraordinary dividend and pace of investment in Fortescue Future Industries (FFI). The target price falls to $13 from $14.15.
Insurance Australia Group Limited (IAG) was Upgraded to Buy from Accumulate by Ord Minnett
Insurance Australia Group guides to higher perils claims for FY22 as catastrophe claims rise $280m above allowance (3.6% of the net-equity premium).
Perils-claim guidance rises to $1.045bn from $765m and margin guidance falls to 10%-12% from 13.5%-15.5%
Ord Minnett says the company’s assumption of no increase in reinsurance recoveries is most likely conservative.
The broker upgrades to Buy from Accumulate in light of the recent share-price retreat. Target price steady at $5.35.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Macquarie Group Limited (MQG) was Upgraded to Buy from Neutral by Citi
Citi notes Macquarie Group has reported a fourth consecutive quarter averaging around $1bn in net profit after tax, after first half profit after tax of $2,043m. Given market conditions, the broker expects the trend to continue for the next two quarters.
While the broker notes Macquarie Group is well placed to benefit from an evolving energy crisis, an acceleration in equity investments is offering sustainability to outer-year results.
Citi increases its FY22 net profit after tax forecast 17% to $4,145m and forecasts for FY23 and FY24 by around 10%, noting it expects earnings to moderate in FY23 and FY24.
The rating is upgraded to Buy from neutral and the target price increases to $226.00 from $200.00.
In the not-so-good books
Westpac Banking Corporation (WBC) was Downgraded to Neutral from Outperform by Credit Suisse, and Equal-weight from Overweight by Morgan Stanley
Westpac Banking surprised Credit Suisse, with “unprecedented” margin re-basing. The broker assesses the bank continues to re-position its mortgage portfolio wherein lies most of the downside risks.
Upside risks are likely to come from a steepening of the yield curve and higher interest rates. Target is reduced to $25.20 from $28.00 and the rating is downgraded to Neutral from Outperform.
A poor second half result and worse-than-expected outlook on FY22 margins and expenses has impacted Morgan Stanley’s confidence in Westpac Banking’s ability to execute a successful turnaround in the next year.
The company reported a -10 basis point margin decline in the second half. With the broker noting decline acceleration in recent months it is now forecasting an approximate -18 basis point margin decline in FY22.
The rating is downgraded to Equal-weight from Overweight and the target price decreases to $24.80 from $28.90. Industry view: In-line.
The above was compiled from reports on FNArena. The FNArena database tabulates the views of seven major Australian and international stockbrokers: Citi, Credit Suisse, Macquarie, Morgan Stanley, Morgans, Ord Minnett and UBS. 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.