As earnings season drew to a close, analysts and the market seem to be taking a breather, with very little activity causing very little movements on ratings.
In the good books
National Australia Bank (NAB) was upgraded to Outperform from Neutral by CIMB but that was because the broker decided to lower the risk-free rate used in discounted cash flow calculations to 4.25% from 5.25%. That had a positive impact on the bank’s target price, which rose to $35.02 from $31.72.
Harvey Norman was also upgraded to Buy from Neutral by UBS, which was the only broker to move after the company announced its results late last week. The other seven kept ratings at one Outperform, two Neutrals or Holds and three Underperforms or Sells. Harvey Norman reported in line with consensus but below UBS’s forecast. However, the broker remains upbeat on the back of improving housing trends, better pricing and a reduction in franchisee support.
An upgrade in Bank of Queensland’s credit rating by Standard & Poor’s – to A-minus from BBB-plus – prompted JP Morgan to upgrade its rating on the stock to Neutral from Underweight. The ratings improvement, which relieves some concerns the broker had around the ability of the bank to fund its growth efficiently, had not been factored into JP Morgan’s earlier forecasts.
In the not-so-good books
Macquarie downgraded pharmaceutical company Acrux to Underperform from Neutral. An extensive survey by the broker of 381 endocrinologists globally about testosterone therapy, showed a lack of affinity for Acrux’s product, Axiron. The broker is now concerned about further market share gains and price.
Also in the pharmaceutical sector, CIMB downgraded Sirtex to Underperform from Neutral, due to inroads made by a competing drug Stirvarga in the EU, where it was approved for the treatment of metastatic colorectal cancer. This makes Europe an even more difficult market for Sirtex.
Credit Suisse downgraded Evolution Mining on the back of its earnings results, which missed consensus. The second half was near break-even, which confirmed the broker’s expectations for weakness, and it was downgraded to Underperform from Neutral.
The above was compiled from reports on the FNArena database, 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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Also in the Switzer Super Report:
- Charlie Aitken: Time to go shopping – JB Hi-Fi and Woolworths [1]
- Fundie’s Favourite: Reasons to love toll operator Transurban [2]
- Ron Bewley: Financials outside the Big Four – Magellan and FlexiGroup [3]
- Tony Negline: Hands off our super ATO [4]
- Paul Rickard: The best broker for my SMSF [5]