STW Communications (SGN) was upgraded to Outperform from Neutral by Credit Suisse on the back of the acquisition of Active Display Group and maintaining FY14 guidance. The analysts note the acquisition is expected to be EPS accretive from year one onwards. Active Display Group is Australia’s largest provider of retail marketing solutions and should strengthen STW’s position in the brand/in-store sector of the advertising market, both in Australia and abroad.

Tabcorp Holdings (TAH) was upgraded to Buy from Underperform by BA-Merrill Lynch. Recent changes to race field fees significantly tilt the competitive landscape towards the company, in the broker’s view. Merrills expects competitors will see a material erosion in profitability and a more rational market is likely to evolve where incumbency is the key. Surprisingly, the broker notes Tabcorp has lost the case in the Victorian Supreme Court against the Victorian government on the licences dispute, but expects the decision to be appealed. The Buy rating is unaffected by the announcement. The broker thinks the stock’s valuation is undemanding for the long-term defensive qualities in wagering.

In the not-so-good books

Mount Gibson Iron (MGX) was downgraded to Neutral from Outperform by Credit Suisse. Credit Suisse has reduced the target price to 80c from $1.05 following a revision to iron ore price forecasts. The broker believes Mount Gibson remains relatively robust in a difficult market, underpinned by $500 million in cash and the mining of higher-grade ore that is less exposed to the quality discounts that peers are enduring.

OZ Minerals (OZL) was downgraded to Neutral from Outperform by Credit Suisse. Credit Suisse has adjusted commodity price forecasts, with marginal increases to copper prices expected in 2014 but a lower price in 2015 and 2016 than previously forecast. Minor increases have also been made to the Australian dollar forecasts.

PanAust (PNA) was downgraded to Underperform from Outperform by Credit Suisse, following changes to the broker’s commodity price forecasts (see OZ Minerals). The broker downgrades PanAust to Underperform, given recent share price gains post the proposed takeover announced by its major shareholder.

Treasury Wine Estates (TWE) was downgraded to Sell from Neutral by Citi. The company has announced more strategic initiatives, changing the release date for Penfolds and writing down US brands in FY14, which the broker thinks will pave the way for a sale of some of the portfolio. The broker thinks FY14 guidance should be achieved but expects the result will be low quality, propped up by a delaying of US de-stocking and heavy promotions. Citi thinks, in the short term, downside risk from a disappointing FY15 outweigh the chance of a higher bid for the company, which the share price implies.

Earnings Forecast

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.