ANZ Bank finds itself in both camps among the two upgrades and three 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 Buy from Neutral by Citi
Citi believes the Reserve Bank’s tightening cycle is set to reshape the Bank sector’s earnings profile over the next two and a half years. The sector view is raised to positive with forecast earnings changes of more than 10%.
The broker forecasts a cash rate of 0.75% by the end of 2022, and 1.75% by the end of 2023.
Despite natural concerns around credit quality, a ‘sweet spot’ is predicted by the analysts, with net interest margins forecast to return to pre-pandemic levels, materially above consensus.
Citi now prefers the ‘cheaper’ majors such as Westpac ((WBC)) and ANZ Bank. For ANZ Bank the rating is increased to Buy from Neutral and the target rises to $30.75 from $29.25.
See downgrade below
Webjet Limited (WEB) was upgraded to Buy from Neutral by Citi
Citi expects Webjet should lead re-opening earnings thanks to its exposure to volumes from its user-pay business model and low fixed costs.
The broker also expects B2B trade should recover with a vengeance thanks to lower costs, an American growth leg, and improved industry position; and that the company may capture B2C market share from bricks-and-mortar monopolist Flight Centre ((FLT)) as online trade grows.
Earnings forecasts fall -32% to reflect omicron disruption, but the broker expects the market will look through this to the re-opening play.
Rating upgraded to Buy from Neutral. Target price inches up to $6.50 from $6.46.
In the not-so-good books
Adbri Limited (ABC) was downgraded to Equal-weight from Overweight by Morgan Stanley
Morgan Stanley downgrades its rating for AdBri to Equal-weight from Overweight following unfavourable construction conditions in the March quarter resulting from above-average rainfall across Australia.
The broker highlights competitor Boral ((BLD)) has already downgraded earnings due to the weather and rising energy costs. The target price falls to $3.40 from $3.60 as Morgan Stanley’s FY22 earnings (EBIT) forecast falls by -5%. Industry view: In line.
Australia and New Zealand Banking Group Limited (ANZ) was downgraded to Equal-weight from Overweight by Morgan Stanley
Morgan Stanley downgrades its rating for ANZ Bank to Equal-weight from Overweight for a number of reasons including ongoing challenges in Australian retail and business banking.
The broker also cites a weaker outlook in New Zealand and uncertainty around group costs, as reasons for the downgrade in rating.
The analyst believes market share loss, falling margins and lower non-interest income will impact upon revenue this year. Relative to peers, it’s thought the bank will have weaker volume growth and more headwinds from increasing competition for deposits in A&NZ.
The price target falls to $28.60 from $30.30 following downgrades to Morgan Stanley’s cash EPS forecasts. Industry view: Attractive.
See upgrade above
Nearmap Limited was downgraded to Neutral from Outperform by Macquarie
On advice from an industry contact, Macquarie notes there will be difficulties in Nearmap penetrating the North American aerial imaging for claims insurance segment particularly given the company is late to the game.
Macquarie notes insurance contributions are material for the company, but Nearmap faces limitations on software integration given competitor EagleView holds strong measuring technology patents. Macquarie expects Nearmap would need to partner with EagleView to access technology.
The rating is downgraded to Neutral from Outperform and the target price of $1.40 is retained.
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.