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Weekly Recommendation, Target Price, Earnings Forecast Changes

Weekly Recommendation, Target Price, Earnings Forecast Changes

By Rudi Filapek-Vandyck, Editor FNArena


The FNArena database tabulates the views of eight major Australian and international stock brokers: Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie, Morgan Stanley, Morgans and UBS.

For the purpose of broker rating correlation, Outperform and Overweight ratings are grouped as Buy, Neutral is grouped with Hold and Underperform and Underweight are grouped as Sell to provide a Buy/Hold/Sell (B/H/S) ratio.

Ratings, consensus target price and forecast earnings tables are published at the bottom of this report.


Period: Monday October 19 to Friday October 23, 2015
Total Upgrades: 2
Total Downgrades: 10
Net Ratings Breakdown: Buy 45.71%; Hold 42.63%; Sell 11.67%

This might seem like a strange turn of events, given major share market indices in Australia are still in negative territory year-to-date (ex-divs), but the week ending on Friday, 23 October 2015, saw no less than ten downgrades for individual stocks against two upgrades only.

One of the upgrades was for Telstra, following recent underperformance, and went only up to Neutral. The other was for QBE Insurance, following in-depth research discovering the outlook might turn out better for the global insurer.

Broker downgrades for the week were mostly for resources stocks, and most were inspired by too-high share prices, at least for the short term. Gold producer Regis Resources copped three downgrades, but features positively elsewhere (proving the point broker downgrades are valuation oriented). The same can be said for sector peers Perseus Mining and Evolution Mining, though not for iron ore producer Grange Resources and for lithium hopeful Orocobre, whose market updates received a negative response.

Vitamin and nutrients producer Vitaco features also as more stockbrokers initiate coverage. Also remarkable are double-digit increases to profit estimates for iron ore producers Arrium and Rio Tinto. While Australian Pharmaceutical Industries and DUET make sure there’s also an industrial (non-resources) contribution to last week’s positive story.


QBE INSURANCE GROUP LIMITED (QBE) Upgrade to Buy from Neutral by UBS .B/H/S: 6/2/0

UBS has revisited its expectations for QBE and has become less negative on the cyclical trends in both personal and commercial lines in Australia.

Although the company still faces some unique challenges the broker believes it is the most attractive exposure across the general insurers.

UBS upgrades to Buy from Neutral. Target is steady at $ 14.50.

TELSTRA CORPORATION LIMITED ((TLS)) Upgrade to Neutral from Underperform by Macquarie .B/H/S: 0/6/2

Telstra has copped some selling recently on concerns over competition and uncertainty over the company’s investment strategy, Macquarie notes. The broker nevertheless sees this as priced in and believes the macro backdrop remains broadly supportive for defensive stocks.

The sell-off has also pushed up Telstra’s dividend yield. Ahead of the company’s investor day on Oct 29, Macquarie has upgraded to Neutral. Target unchanged at $ 5.85.



ASCIANO GROUP ((AIO)) Downgrade to Underperform from Outperform by Credit Suisse .B/H/S: 1/5/1

Credit Suisse suspects that to get ACCC approval of the Brookfield acquisition there needs to be significant changes to the regulatory framework for Brookfield rail and the Dalrymple Bay coal terminal.

This could change the risk/reward profile for Brookfield and require a lengthy process. Credit Suisse lowers its valuation of Asciano to a standalone basis and downgrades to Underperform from Outperform. Target is reduced to $ 7.00 from $ 9.15.

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* We’re coming off a roller coaster week for world markets and heading into potentially another one. There's been a big change in how markets react to news with hawkish news now seen as supportive for stocks and USD and dovish news now seen as a headwind.

There's another round of duelling Fed speakers this week and also a lot of news around the end of the month and quarter, particularly global manufacturing PMI reports and US ADP plus nonfarm payrolls.

Canada could also be active again this week on the GDP report (jobs aren't until next week), as traders try to figure out if the Bank of Canada may need to cut rates again this year.

CMC Markets is a global leader in online trading, offering CFD and FX trading. Learn how to trade CFDs with our variety of educational videos on trading strategies. Trade the financial markets such as currencies, commodities, indices, companies and treasuries.

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