Commonwealth Office Property Fund ((CPA)) upgraded to Hold from Sell by Macquarie. The broker noted Commonwealth Property has lost 9% in recent weeks, underperforming the A-REIT index. CPA’s occupancy challenges have been well flagged and the broker suggests a 6.0% yield compared to the REIT average 5.7% means the stock no longer looks so unattractive.

David Jones ((DJS)) upgraded to Neutral from Underperform by Macquarie. In the wake of the third quarter sales results, Macquarie noted retailing remains a dark art at David Jones, rather than a science. The broker said the company has little data or insight into its customers and why they shop. David Jones now has to catch up in terms of investment in technology to improve this situation. Still, the rating was upgraded on valuation grounds to account for the recent underperformance in the share price.

Flight Centre ((FLT)) upgraded to Outperform from Neutral by Credit Suisse. The broker suggested Flight Centre is a core growth stock with a globally expanding business that generates high returns on capital. Also, Credit Suisse said the market is underestimating the magnitude and durability of the growth. Recent weakness was seen as a buying opportunity and the price target was also raised to $45.10 from $33.50.

GPT Group ((GPT)) upgraded to Overweight from Neutral by JP Morgan. GPT is now in the territory of material underperformance in relation to the sector. JP Morgan said GPT has paid a price for its stance on Australand ((ALZ)) amidst uncertainty regarding the bid negotiations. GPT has a high quality asset base and stands out in terms of valuation support, said JP Morgan. The price target was also raised to $4.33 from $4.04.

Paladin Energy ((PDN)) upgraded to Overweight from Neutral by JP Morgan. The broker has lowered its price target on Paladin to $1.25 from $1.75. This is based on a consideration of the current low uranium price, the balance sheet leverage and weak cash flow. Having done that, with close to a 30% potential return to target, the rating was upgraded. Reasons to be positive include the stock trading at an un-risked price to net present value of less than 0.6 times, the potential for asset sales and improving operational performance and cash flow.

Downgrades

Cabcharge Australia ((CAB)) downgraded to Sell from Hold by Deutsche Bank. The Victorian Government has made its ruling on the taxi industry enquiry and its findings represent the worst possible outcome for Cabcharge, said Deutsche Bank. Aside from direct earnings losses, the broker envisages a much more competitive market in the future, one in which Cabcharge will hold a decreasing share. What’s even worse, other states could follow, said the broker. Earnings forecasts from FY14 onwards were cut, the price target dropped and the recommendation was downgraded.

Invocare ((IVC)) downgraded to Sell from Neutral by UBS. AGM commentary disappointed UBS, and while group revenue growth remained strong, growth in operating earnings was running well below the broker’s expectations. UBS blamed lower case volumes and extra costs. FY13-15 revenue forecasts were unchanged, but EPS was trimmed by 6.5%, 5.3% and 4.9% on higher costs and thus lower margins. With forecasts lower and the PE ratio still very steep at 26.8x FY13 earnings, the recommendation was downgraded.

Programmed Maintenance Services ((PRG)) downgraded to Neutral from Outperform by CIMB. The company beat FY13 results expectations, which the broker thought was commendable given the current environment. Nevertheless, caution still prevails in terms of FY14, especially in the marine business. The gap between the projects that are ramping down and those ramping up could force falls in demand and sales. There is also the risk of a negative earnings impact from the EBA negotiations. Earnings forecasts were reduced by 12%-13% over FY14-15, CIMB suggesting it sees more risk and less reward.

Sigma Pharmaceuticals ((SIP)) downgraded to Sell from Neutral by Citi. Sigma shares have enjoyed a strong rally of late and Citi analysts said it is all a bit too much, too soon. Instead, they counter the company is still facing ongoing risks associated with a weak retail environment, competitive industry dynamics and ongoing regulatory scrutiny of PBS funding. Also, Listed NZ company, EBOS, has acquired 60% of Symbion, but Citi said doesn’t see a material impact on Sigma for the foreseeable future.

Wesfarmers ((WES)) downgraded to Underperform from Neutral by Macquarie. The broker noted the Coles, Kmart and Officeworks stories continue to impress. Target remains a basket full of question marks and Kmart, well it appears to be stealing customers from Target. FY13-14 earnings forecasts were cut a little, while FY15 is up 2%. A lower price target is due to changes in the broker’s outer year earnings assumptions for the Resources division. The stock has been expensive for a while now, but with the yield trade starting to unwind, the recommendation was lowered.

Woolworths ((WOW)) downgraded to Underweight from Neutral by JP Morgan. JP Morgan has reduced earnings estimates for FY14 and FY15 by 3.0% and 4.8% respectively. The stock was downgraded because the valuation is expensive given the low rate of earnings growth. The home improvement losses also appear greater than expected. Woolworths remains a high quality company but JP Morgan wants further evidence of an improvement in Australian food and liquor like-for-like sales and a path to break even within the home improvement division.