In the good books
Citi upgraded Ansell (ANN) to Neutral from Sell and UBS upgraded to Buy from Neutral. Buy/Hold/Sell: 2/6/0 Although both brokers found FY15 results disappointing, after the sharp fall in the share price, they find the price/earnings ratio more reasonable.
Credit Suisse upgraded Commonwealth Bank (CBA) to Outperform from Neutral. Buy/Hold/Sell: 2/6/0 FY15 results were clean, in line and the capital raising was sized right. Cash earnings estimates are upgraded by 2.0%. Earnings per share estimates are reduced by 1.0% to account for the $5 billion capital raising. As a result Credit Suisse upgraded to Outperform from Neutral, reflecting a more positive view on the sector.
Citi upgraded Cochlear (COH) to Neutral from Sell. Buy/Hold/Sell: 1/2/5 FY15 results were considered solid, albeit below the broker’s expectations. FY16 guidance is up 13-20% on FY15. On Citi’s forecasts of a US71c average exchange rate there is a tailwind to earnings. However, if using a US75c exchange rate in forecasts then the broker’s estimates would be at the low end of guidance. See downgrade
Morgan Stanley upgraded Virgin Australia (VAH) to Equal-weight from Underweight. Buy/Hold/Sell: 1/5/0 The FY15 results surprised positively, even though the headline was pre-announced. The company’s domestic offering is finally showing some signs of life. Cash generation is likely to remain the priority.
In the not-so-good books
Deutsche Bank downgraded Carsales.com (CAR) to Hold from Buy. Buy/Hold/Sell: 5/2/1 FY15 results were below the broker’s estimates. Deutsche Bank notes, outside the dealer category, all others were weaker. While the slowdown is explained by some revenue being channelled to Stratton, the outlook points to a relatively subdued environment, in the broker’s opinion.
JP Morgan downgraded Cochlear (COH) to Neutral from Overweight. Buy/Hold/Sell: 1/2/5 The FY15 report fell well short of expectations, but then guidance for FY16 looks robust and the global market for cochlear implants has resumed growing. Cochlear’s approach to the preservation of residual hearing is actually growing the overall market but JP Morgan has difficulties with the valuation. See upgrade.
Macquarie downgraded Computershare (CPU) to Neutral from Outperform. Buy/Hold/Sell: 1/6/1 It was not Computershare’s result that sent the share price spiralling, it was FY16 guidance which came in at around 10% below consensus. The broker had held an Outperform rating based on assumed leverage to interest rates, forex and corporate actions at an undemanding PE, but FY16 guidance puts off this cyclical view to FY17. The reason to buy the stock has now dissipated. Organic growth remains challenged, earnings visibility is low, and acquisition opportunities are rare.
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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