The positive side of earnings revisions consists largely of small adjustments on FX recalculations or otherwise for the likes of Primary Healthcare, Harvey Norman and Amcor-offshoot Orora. The overall picture of an Australian share market struggling to report positive profit growth momentum remains intact and it will be interesting to find out in August whether optimism for FY16 remains intact, or requires further cuts and downgrades.

In the good books

CSR (CSR) upgraded to Buy from Neutral by UBS. B/H/S: 6/2/0 UBS upgrades to Buy from Neutral on the back of the latest housing starts estimates and reflecting share price changes. CSR is also positively exposed to a fall in the Australian dollar via its aluminium division. The broker believes revenue growth in housing segments is running around a 12% pace and possibly accelerating. Target is raised to $4.38 from $4.36.

Platinum Asset Management (PTM) upgraded to Neutral from Underperform by Credit Suisse. B/H/S: 1/2/1 Platinum’s May funds under management balance was up 3.6% and up 25.4% over the year to May. This was stronger than Credit Suisse expected and leads to a 1.0% upgrade to earnings estimates. The share price is now 20% off its peak and trading at fair value so the broker upgrades to Neutral from Underperform. Target is $8.10. The broker envisages upside from a depreciation of the Australian dollar which is not factored into forecasts. Still, the business is considered to have less operational leverage than its peers and is struggling to attract meaningful inflows.

Specialty Fashion (SFH) upgraded to Neutral from Underperform by Macquarie. B/H/S: 1/1/1 The broker has reviewed its outlook for Specialty and is now expecting a strong second half result. The consumer environment has been improving and a cold start to winter has boosted the early winter sales season. Rivers will nevertheless continue to be a drag. Specialty will also face the headwinds of rising rent and a falling A$ in the second half but the broker is expecting more upbeat commentary from new management, and suggests a swing factor would be signs of losses being reduced at Rivers. The broker is happy enough to upgrade to Neutral, retaining a 75c target.

Santos (STO) upgraded to Overweight from Equal-weight by Morgan Stanley. B/H/S: 7/0/1 Morgan Stanley considers 2015 to be a transformational year with major capex giving way to free cash flow from the fourth quarter of 2015. Still a history of under-delivering fuels bearish sentiment, the broker observes. The broker considers the bearishness is captured in the share price and the company has acted decisively to cut spending. Execution risks are low. Rating is upgraded to Overweight from Equal-weight and the target to $9.60 from $7.88. In-Line sector view retained.

STW Communications (SGN) upgraded to Outperform from Neutral by Credit Suisse. B/H/S: 1/3/0 The company’s strategy update is a move in the right direction, in the broker’s view. The company has outlined a path to de-leveraging and cost reductions. Credit Suisse considers the net impact is modest, with 1-7% upgrades to 2015-17 assumptions. Still, the market appears to be pricing in a significantly worse outcome than the broker suspects will actually materialise. With a new analyst covering the stock, the rating is upgraded to Outperform from Neutral. Target is reduced to 82c from 86c.

Westpac Banking (WBC) upgraded to Neutral from Underperform by Credit Suisse. B/H/S: 3/3/2 Credit Suisse is upgrading to Neutral from Underperform, which reflects both stock specific and sector factors. The broker considers the worst of the sector de-rating has run its course and value is starting to emerge. Fundamental risks remain, but associated share price risks are diminishing. The broker views Westpac’s divisional restructure positively, with the potential for an announcement around a productivity-based restructuring program. Target is reduced to $33 from $36.

In the not so good books

Adelaide Brighton (ABC) downgraded to Neutral from Buy by UBS. B/H/S: 0/6/2 Despite a strong earnings and cash flow outlook, and the prospect of capital management with further land sales, the broker believes these positives are reflected in the share price. While a quarter of the business is leveraged to the strong housing market the exposure to mining is of a similar magnitude, with risks to the downside. UBS downgrades to Neutral from Buy. Target is raised to $4.69 from $4.63.

iiNet (IIN) downgraded to Reduce from Hold by Morgans. B/H/S: 1/6/1 The preliminary view of the ACCC indicates competition concerns with respect to TPG Telecom’s ((TPM)) potential acquisition of iiNet. A final ruling is due in August. The ACCC may yet approve the bid, with conditions, but the current situation is now one of uncertainty. This creates more downside risk in Morgan’s view as the offer is fully priced into the iiNet share price. Given the risk the broker downgrades to Reduce from Hold and recommends locking in the offer price ($9.55) now. Target is lowered to $8.51 from $9.55.

Nine Entertainment (NEC) downgraded to Underweight from Overweight by Morgan Stanley and to Neutral from Outperform by Credit Suisse. B/H/S: 5/2/1 Further gains in revenue share, and hence earnings, look difficult to Morgan Stanley. In the wake of the company’s reduction to earnings forecasts for FY15 the broker lowers estimates and downgrades to Underweight from Overweight. Morgan Stanley has had a fundamentally bearish outlook on free-to-air TV assets in Australia for some time as advertising as a percentage of GDP is trending lower. Target is lowered to $1.80 from $2.40. Attractive sector view maintained. Credit Suisse reduces FY15 earnings estimates by 6.0% to account for the trading update which lowered guidance to $285-290m. The broker considers the size of the downgrade is a function of the extreme leverage that all TV stocks have to relatively small changes in market growth and share. Nine continues to appear inexpensive but the update highlights for the broker the difficult investment proposition in TV at the current time. Rating is downgraded to Neutral from Outperform and the target is reduced to $1.90 from $2.42.

Qube Logistics (QUB) downgraded to Sell from Hold by Deutsche Bank. B/H/S: 4/2/2 Deutsche Bank has noted the heightened pressure on the company’s ports & bulk division with several contracts coming to an end in the second half. The broker downgrades expectations for the segment. Trading conditions are not expected to improve going into FY16 either. Deutsche Bank has also analysed the potential from Moorebank hub, with capex for the initial stages expected to be $400-450m over 10 years and additional earnings of $51.9m expected by 2020. The broker has downgraded FY16 earnings forecasts by 16% and reduced the target to $2.25 from $2.70. Rating is downgraded to Sell from Hold, given the downside risk to the current price.

Earnings Forecast

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