Changes to stockbroker recommendations in the past week
The past week has been a busy period for changes in broker ratings as the eight brokers in the FNArena database have upgraded recommendations on 12 stocks while downgrading 14. This means the trend of more downgrades than upgrades continues. Total Buy ratings now stand at 50.59%.
Upgrades
The only stock receiving multiple upgrades was Energy Resources of Australia (ERA), with both BA Merrill Lynch and UBS raising it to Buy. The upgrades reflect a more positive view post an update by the company on the progress of operations at Ranger.
BA-ML has also upgraded Alacer Gold (AQG) to Buy from Sell, reflecting the broker’s view that the market is too concerned about the group’s Australian assets to the point that value is emerging at current levels.
Interim earnings from Australian Pharmaceutical (API) were good enough for Macquarie to lift its earnings estimates and its price target, justifying an upgrade to a Buy.
Following a strategy update, UBS has upgraded Commonwealth Bank (CBA) to Buy as the broker sees strategy execution delivering relative outperformance.
UBS similarly upgraded CSL (CSL) to Buy on news Baxter faces delays with its HyQ product that should provide something of an earnings boost to CSL. Other brokers covering the stock have revised earnings expectations and price targets on the news.
News Fleetwood (FWD) will build an accommodation village in Gladstone caused RBS to upgrade it to a Buy as the expectation is that this will deliver an earnings boost from fiscal 2014.
Credit Suisse sees value in Perseus (PRU) posting a solid quarterly production report where output was solid and costs fell, while increases to earnings estimates for Tatt’s (TTS) from higher win rates on fixed odd bets are enough for the broker to move to a Neutral rating.
While not changing its earnings forecasts, Macquarie has upgraded UGL (UGL) to Buy, suggesting ongoing contract wins and the continued integration of DTZ which will act as catalysts for the stock in coming months.
Downgrades
On the downgrades side, UBS has cut its rating on AMP (AMP) to Neutral on valuation grounds post a review of its model, while JP Morgan has similarly downgraded Aristocrat Leisure (ALL) on the back of recent share price strength.
For the same reason, RBS has downgraded Automotive Holdings (AHE) to Hold, while Credit Suisse has similarly downgraded Caltex (CTX) to Neutral given recent share price strength.
Centro Retail (CRF) has been downgraded to Neutral by JP Morgan on news the company is to sell some of its assets. The broker says while the group’s balance sheet will be strengthened overall, asset quality will be reduced.
BA-ML suggests it is getting tougher for Newcrest (NCM) to achieve production guidance this year and this implies consensus earnings estimates are too high. It’s been downgraded to Neutral. Newcrest will release its March quarter production report in the week ahead.
While domestic market conditions are supportive, conditions for Nufarm (NUF) in other markets are more difficult and this has prompted Citi to downgrade its rating to Sell, while Spark Infrastructure’s (SKI) proposed expansion away from electricity is not a great move in the view of Macquarie. The broker downgraded it to Neutral.
The most downgrades were applied to Westfield Group (WDC) with UBS, Credit Suisse and Deutsche Bank all lowering ratings to Neutral. Westfield has announced plans to sell non-core assets and this news has been well received, but valuation has been the key driver behind the cuts in ratings.
Changes to earnings forecasts (EF) in cents per share
Note: FNArena monitors eight leading stockbrokers on a daily basis. The eight experts are: BA-Merrill Lynch, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie, RBS and UBS.
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