A review of analysts' recommendations by Bloomberg identified a surprising list of companies that have earned the ire of Australia's top analysts due to either disappointing results or a lacklustre outlook for 2015. As upgrades and downgrades are made to price forecasts it's worth considering which stocks may be re-rated.
Consumer discretionary stocks were hit hard in the lead up to reporting season in June and July, but it's a motley group of companies that have suffered analyst downgrades this month.
Four Disappointments
The following four companies appear to have one factor in common; analysts are not convinced about the outlook for sales and profit growth in 2015.
Lynas Corporation Limited (ASX: LYC) revealed another disappointing set of results that has analysts and investors expecting yet another capital raising in the near future. The rare earths market has had another tough year and Lynas' ramp up to full production isn't yet producing enough cash to cover costs. Speculators moving in and out of Lynas' stock have no doubt made more money than long-term investors in this perennial disappointment.
Orora Ltd (ASX: ORA) reported a 44% increase in net profit for the year to June 30, however analysts are a little concerned that the group hasn't made as many acquisitions as expected and thus growth may be slower in the next 12 months.
Similarly, Pact Group Holdings Ltd (ASX: PGH) beat profit expectations but investors were disappointed at the outlook for negligible growth in 2015 unless acquisitions are made. Companies relying on domestic consumption appear to be struggling at the moment.
Finally, Tatts Group Limited (ASX: TTS) reported a 19% fall in net profit and 15% fall in dividend payout, well below expectations. Analysts are questioning whether Tatts should remain on such a high price to earnings ratio seeing as earnings from the company's defensive lotteries division (accounting for 60% of earnings) grew less than 1% for the year.
