Buy, Sell, Hold – what the brokers say

Editorial director of Switzer
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Broker activity was again dominated by reporting season as companies ramped up their results announcements this week. Commonwealth Bank of Australia announced a better than expected profit (see Charlie Aitken’s analysis above for what analysts thought of that). But there were other surprises on the upside also.

In the good books

Domino’s Pizza (DMP) announced its results on Tuesday, which most brokers said were in line with their expectations, but JP Morgan liked the group’s announcement that it would also acquire 75% of Domino’s Japan. JP Morgan upgraded it to Overweight from Neutral on the belief the acquisition will add to growth. Credit Suisse, Macquarie and UBS all maintained Neutral ratings on the stock.

Credit Suisse upgraded food and beverage group Goodman Fielder (GFF) to Neutral from Underperform, following its FY13 result. Earnings growth is expected to continue but the broker knows it is a tough environment and the company also has an expensive debt structure. JP Morgan maintained its Underweight rating on the stock following the results, which met its expectations.

Credit Suisse also upgraded Prime Media (PRT) to Outperform from Neutral following its decision to sell its Queensland radio business to pay down debt. The sale leaves the company a pure TV play and the broker believes it will become a takeover target.

The not-so-good books

Newcrest Mining (NCM) was in the naughty corner this week after announcing less than impressive results on Monday – a $5.78 billion net loss for FY13.

Credit Suisse downgraded it to Underperform from Neutral, saying the companies FY14 guidance on its Lihir operations is “inadequate and confusing”. Macquarie also downgraded it to Neutral from Outperform, also concerned about the risks at Lihir.

Deutsche Bank downgraded it to Sell from Hold, and is not very optimistic about the gold price outlook and JP Morgan downgraded it to Neutral from Overweight. JP Morgan was also disappointed by the Lihir guidance.

CSL (CSL) also announced yesterday, which prompted UBS to downgrade it from “Buy” to “Neutral”. Although it reported a better than expected 19% increase in net profit, the Broker believes it is fully priced. That said, UBS continues to rate it as a core portfolio holding. JP Morgan and Credit Suisse maintained their Overweight and Outperform ratings following the earnings announcement.

UGL (UGL) announced its results, which most brokers thought not too much of – maintaining three Neutrals and two Underperforms – but CIMB Securities downgraded it to Underperform from Neutral being more bearish on the cycle than UGL management. CIMB also thinks others in the space offer better value.

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.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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