There have been an equal number (six) of upgrades and downgrades from the 7 stockbrokers monitored by FNArena so far this week.
In the good books
Australia and New Zealand Banking Group Limited (ANZ) was upgraded to Outperform from Neutral by Credit Suisse
ANZ Bank has issued its first quarter trading update, showing a net interest margin compression to 1.57% from 1.65% at the end of FY21 and prompting Credit Suisse to reduce its expected net interest margin for the year down three basis points to 1.56%.
While the bank’s update did not include earnings, Credit Suisse issued a -4% decrease to earnings, earnings per share and dividends per share forecasts in FY22, and a -1% decrease to each in FY23. The expenses forecast increases $50m in FY22 given investment.
The broker finds ANZ Bank to be better positioned at this point in the cycle, although challenges remain, and notes the company trades at a -16% discount to the sector.
The rating is upgraded to Outperform from Neutral and the target price of $28.50 is retained.
Centuria Office REIT (COF) was upgraded to Add from Hold by Morgans
Centuria Office REIT reported fist half funds from operations of 9.8c which, Morgans notes, included surrender lease payments that would otherwise have contributed to the second half.
The result nonetheless highlighted stable metrics, the broker suggests, and FY22 guidance is reiterated. Investor demand remains strong for a pure-play office REIT despite omicron, so at a -10% discount to net tangible asset value the broker upgrades to Add from Hold.
Target unchanged at $2.50.
Domino’s Pizza Enterprises Limited (DMP) was upgraded to Buy from Neutral by UBS
UBS has again downgraded earnings for Domino Pizza Enterprises, cutting the target price -20% to $120 from $150.
But it upgrades to Buy from Neutral to reflect the strident retreat in the share price from nearly $165 in September.
The share price slumped after AGM commentary guided to weaker-than-expected Japanese earnings (courtesy covid), and rising inflation.
UBS maintains Domino’s growth prospects remain attractive despite headwinds, citing developed markets; same-store-sales growth; margin expansion; and new store growth. It also believes Domino’s experience in home delivery positions it well for structural ESG trends and believes the company is better positioned than many to manage rising inflation challenges.
FY22 EPS forecasts fall -8% and FY23 forecasts fall -11%.
Lendlease Group (LLC) was upgraded to Accumulate from Hold by Ord Minnett
While Ord Minnett acknowledges a poor short-term outlook for Lendlease Group (and lowers its target price to $12.50 from $13, there’s considered to be potential for significant medium-term upside. Thus, the rating rises to Accumulate from Hold.
The potential upside derives from a $114bn development pipeline and $40bn of funds under management (FUM), explains the analyst. The stock is expected to rerate as a more predictable earnings stream (in two or three years) is being delivered.
The broker feels the upcoming 1H result will be the low point for the company.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Super Retail Group Limited (SUL) was upgraded to Accumulate from Hold by Ord Minnett
In a review of the Retail sector, Ord Minnett points out retailers are entering the reporting season with low sales and margin expectations for the first time during the pandemic. Solid results, cautious outlook statements and volatility are expected.
The broker upgrades its rating for Super Retail Group to Accumulate from Hold following a share price fall leading into results. The target rises to $14.50 from $14.20.
A strong online offering, and the trend towards driving and camping holidays are a few factors that should provide upside potential for earnings, explains the analyst.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
Suncorp Group Limited (SUN) was upgraded to Add from Hold by Morgans
Suncorp’s first half profit was down -21% year on year but 22% above consensus forecasts. The dividend of 23c beat a consensus 17c.
Morgans sees this as a solid result, highlighted by improving top line momentum and a positive trajectory being seen in the key
underlying insurance margin.
Morgans upgrades its FY22 earnings forecast and raises its target to $13.19 from $12.25. Solid business momentum and cost-outs into FY23 lead to an upgrade to Add from Hold.
In the not-so-good books
APA Group (APA) was downgraded to Hold from Add by Morgans
After APA Group’s share price has climbed towards Morgans’ $9.98 target price, the broker’s rating is now lowered to Hold from Add.
No changes are made to the analyst’s forecasts. First half results are released on 23 February.
Graincorp Limited (GNC) was downgraded to Hold from Add by Morgans
Morgans is wary of near perfect trading conditions across both grain Marketing and Processing and lowers its rating for GrainCorp to Hold from Add on valuation. This comes despite FY22 earnings guidance which was materially higher than the consensus estimate.
The broker upgrades its FY22-24 earnings (EBITDA) forecasts by 33.3%,15.8% and 3.9%, respectively, on the upgraded guidance, and because high carry-over grain will assist future earnings. The target price rises to $8.06 from $7.90.
Janus Henderson Group PLC (JHG) was downgraded to Neutral from Outperform by Macquarie
Macquarie downgrades its rating for Janus Henderson to Neutral from Outperform after a recent outperformance relative to peers and with the prospect of a weaker equity performance accelerating outflows.
This comes as the December quarter operating result beat the broker’s forecast though non comp expense guidance was a material miss versus the flat growth forecast. The target price falls to $52 from $64.
Nanosonics Limited (NAN) was downgraded to Lighten from Hold by Ord Minnett
Ord Minnett has tempered its growth expectations for both Nanosonics’ current business and the yet-to-be-launched Coris device.
The broker cuts its profit forecast to breakeven, largely from lost sales to GE Healthcare, after the announced changes to distributor arrangements. These changes are thought to offer both greater opportunity and risk, as the company takes greater control over its destiny.
EPS estimates are also lowered by -30% to reflect slower sales penetration assumptions and higher costs, explains the analyst.
The Lighten rating is unchanged and the target falls to $4.05 from $6.40.
Nearmap Limited (NEA) was downgraded to Underperform from Neutral by Macquarie
Macquarie forecasts the aerial imagery market to see 13-14% growth over both A&NZ as well as North America over the coming
few years. Major industries already using aerial mapping include government, insurance, engineering, and solar companies amongst other users.
Nearmap enjoys some 80% of the A&NZ market, but the broker sees competition building from Aerometrex ((AMX)). In the 15x larger but more fragmented North American market, the broker sees opportunity for Nearmap to increase its current 3% share.
But this will require greater operating expenditure, and litigation risk remains. The broker thus downgrades Nearmap to Underperform from Neutral, target falls to $1.30 from $2.20.
Wesfarmers Limited (WES) was downgraded to Hold from Accumulate by Ord Minnett
In a review of the Retail sector, Ord Minnett points out retailers are entering the reporting season with low sales and margin expectations for the first time during the pandemic. Solid results, cautious outlook statements and volatility are expected.
The broker lowers its rating for Wesfarmers to Hold from Accumulate largely due to market and peer deratings. Exposure to housing will be a likely headwind in a rising interest rate environment, notes the analyst.
The target price falls to $57 from $60.60.
This stock is not covered in-house by Ord Minnett. Instead, the broker whitelabels research by JP Morgan.
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.