At face value, it appears stockbroking analysts have been busier than usual during the week ending Friday, 19th June 2015. FNArena registered no less than 25 changes in individual ratings for stocks.

Companies affected vary from resources stocks to traditional and online media companies, finance, transport and retailers. Look closer, however, and many of the changes are company or event-specific.

In the good books

ANZ Banking Group (ANZ) was upgraded to Outperform from Neutral by Credit Suisse. Buy/Hold/Sell 4/2/2 The more positive view reflects improved valuations for both the bank and the sector. The broker believes ANZ offers relative value and growth and is the best sector play on US monetary tightening, Australian dollar depreciation and the recent strength in New Zealand.

Arrium (ARI) was upgraded to Neutral from Underperform by Macquarie. Buy/Hold/Sell: 0/6/2 Arrium has announced a further restructuring of its mining operations, in order to reduce capex, a strategic review to reduce debt, and a likely FY15 impairment of around $320 million. Arrium is under considerable pressure but is trading at around a 20% discount to net tangible assets, the broker notes. Debt is a concern but the company does have asset divestment options, hence the strategic review is worth watching.

BT Investment Management (BTT) was upgraded to Neutral from Underperform by Credit Suisse and to Neutral from Sell by UBS. Buy/Hold/Sell: 0/4/0 Westpac (WBC) will sell down up to 28% of BT Investment stock. Following a 15% fall in the share price since April and a positive market update Credit Suisse upgrades to Neutral from Underperform. The broker believes the stock is insulated from the earnings downgrades its Australian peers are likely to witness in the next month. UBS had suspected the market was capitalising a level of earnings growth that would prove difficult to maintain over the medium term. While continuing to expect the entrenched cost growth poses a risk, if flow and market tailwinds moderate, the broker now considers the share price has made some allowance for this.

Challenger (CGF) was upgraded to Hold from Sell by Deutsche Bank. Buy/Hold/Sell: 5/3/0 Challenger’s investor briefing included a downgrade to retail annuity growth guidance in FY15, with the company suggesting this will be 9.0% instead of 11-13% as previously targeted. Higher margins offset the impact on FY16, Citi observes.

Incitec Pivot (IPL) was upgraded to Buy from Neutral by Citi. Buy/Hold/Sell: 3/2/2 Citi believes the quality of the cash flow should not be underestimated. Conversion is expected to average over 95% from FY15-18, enabling a capital return that could come earlier and be larger than expected. The broker makes some minor negative adjustments to forecasts centred on domestic fertiliser volumes but moves back to Buy from a Neutral rating.

Orora (ORA) was upgraded to Overweight from Neutral by JP Morgan. Buy/Hold/Sell: 5/2/0 The broker reviews the key themes in the packaging industry. The company is expected to achieve meaningful earnings growth through cost cutting from the B9 manufacturing facility and other recent rationalisation activities. In the longer term, the company’s participation in the highly fragmented North American distribution market provides significant ability to scale up operations in the region.

Qube Holdings (QUB) was upgraded to Outperform from Underperform by Credit Suisse. Buy/Hold/Sell: 5/2/1 The company has struck a deal with the government to develop the Moorebank terminal. Credit Suisse believes Qube has unfettered pricing power and can capture a large portion of the efficiency gains in the import/export container supply chain.

REA Group (REA) was upgraded to Add from Hold by Morgans. Buy/Hold/Sell: 6/1/1 Morgans believes the recent sell off was overdone and the stock is now trading at a significant discount to valuation. As the dominant player the broker expects REA Group to enjoy strong revenue growth for the next three to five years. The broker believes upside is based on a stabilisation of listing volumes and market acceptance of the new subscription packages.

In the not-so-good books

Alumina Ltd (AWC) downgraded to Neutral from Outperform by Credit Suisse. Buy/Hold/Sell: 6/1/1 Australian alumina prices are moving lower but Chinese prices have fallen even faster, on the back of re-sales of contracted Australian cargoes into the Pacific market. Supply is ample and buyers are scarce. Credit Suisse does not expect the market to absorb the supply pressure.

Energy Resources of Australia (ERA) was downgraded to Sell from Neutral by UBS. Buy/Hold/Sell: 0/0/3 Ranger 3 Deeps will not proceed to final feasibility in the current environment based on the lack of progress in the uranium market and the economics, which require operation beyond the current mining lease that expires in 2021. UBS has lowered the probability of the underground proceeding to 20% from 50%.

Nine Entertainment Corp (NEC) was downgraded to Neutral from Buy by Citi. Buy/Hold/Sell: 4/3/1 Operational issues appear company specific and not caused by the TV advertising market and Citi finds it hard to ignore the potential downside risk to earnings. Given no recovery is in sight the broker downgrades to Neutral from Buy.

Sonic Healthcare (SHL) downgraded to Hold from Buy by Deutsche Bank. Buy/Hold/Sell: 4/4/0 Sonic Healthcare will acquire Medisupport and become the largest lab company in Switzerland. The acquisition is to be funded by both debt and equity. Deutsche Bank suspects the consensus numbers are too high and finds few positive catalysts in the near term. The broker expects the acquisition will boost earnings by 8.0% in FY16.

Trade Me (TME) was downgraded to Sell from Neutral by Citi. Buy/Hold/Sell: 1/2/3 The business is in transition and Citi believes more investment is needed in the platform. The broker reduces earnings forecasts by 6.0% for FY16. With only modest growth and potential competitive risks the broker downgrades to Sell from Neutral. Citi believes the shares are trading at an unwarranted valuation premium. Target is reduced to $2.96 from $3.61.

Whitehaven Coal (WHC) was downgraded to Neutral from Outperform by Credit Suisse. Buy/Hold/Sell: 2/5/1 Credit Suisse has decided it’s time to swap Whitehaven Coal for New Hope Corp (NHC) as its preferred coal exposure. The rating is downgraded to Neutral from Outperform and the target to $1.60 from $2.00. World money supply continues to shrink, suggesting further downside for commodity prices, and the broker considers consensus earnings numbers for big cap stocks are still too high. Credit Suisse would want to see a turn around in money supply before re-weighting the mining sector in a broad-based manner.

Earnings Forecasts

FNArena 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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