In the good books
UBS upgraded Mirvac Group to Buy from Neutral and raised earnings estimates over the forecast period to 2019. Sydney is the strongest residential market by far and critical to Mirvac, comprising around 63% of estimated residential earnings over the next three years.
Suncorp was upgraded to Outperform from Neutral by Credit Suisse. While Credit Suisse remains cautious regarding local and global general insurance markets, the situation is factored into Suncorp’s share price. The broker believes Suncorp is in a better position than its rivals Insurance Australia Group and QBE to hold on to its margin. In addition, 35% of Suncorp’s earnings are outside of general insurance and there are growth opportunities in the medium term.
In the not-so-good books
BHP was downgraded to Neutral from Buy by Citi. Citi expects the bear market will continue in iron ore with large-scale supply growth set to add pressure to weak demand. The broker expects iron ore prices to fall slightly over the first three quarters of 2015, then slowly rebound. Diversity has previously saved BHP but the broker is now bearish on the three biggest earnings drivers – iron ore, coking coal and oil. With debt rising further after the South32 de-merger, Citi expects further cuts to capex may be required.
UBS downgraded Computershare to Neutral from Buy and Credit Suisse downgraded to Neutral from Outperform. While organic revenue growth has challenged the company for some time UBS was encouraged at the February result by the renewed focus on costs. The US property rationalisation project remains the key structural catalyst for cost cutting, in the broker’s view. First quarter activity trends were generally positive, Credit Suisse observes, and the company has demonstrated its ability to generate underlying earnings growth in FY15 through a focus on cost savings. The stock is trading at a discount to its historical market premium and with earnings growth reliant on M&A and currency, a downgrade is justified in the broker’s view.
The above was compiled from reports on FNArena, which tabulates the views of eight major Australian and international stock brokers: BA-Merrill Lynch, CIMB, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie and UBS.
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