MARKETS SPECTATOR: Brokers caught behind the 8-ball

Bradken's surprising earnings results have suddenly seen brokers jump on the bandwagon. Others are now trying to catch up.

Following yesterday’s better-than-expected first half, Bradken has been upgraded by no less than four brokers this morning. As of yesterday, only seven out of 17 brokers had a buy rating on the stock and now those that were caught behind are trying to play catch up.

Macquarie and Credit Suisse have both upgraded the global supplier of differentiated consumable and capital products to outperform from neutral, with target prices of $7.25 and $7.35 respectively.

Elsewhere, Moelis & Co raised its recommendation to buy from hold, while BBY raised its target price by 14 per cent to $7 and kept its buy rating.

"We view Bradken’s first half 2013 result as a good outcome for three main reasons: (1) it met our expectations, and considering a relatively uncertain environment there was a chance it might not; (2) coming into the result we thought we might be downgrading our full-year 2013 numbers, but we ended up with modest upgrades; and (3) Bradken’s outlook implies that the operating cycle has bottomed. Overlaying realistic scope for both short- and longer-term margin expansion, we believe risk has shifted to the upside, faster than we expected,” Credit Suisse wrote in its research report.

Macquarie was also upbeat, saying Bradken is a well-managed company, multiples are undemanding and that it expects stabilisation in the order book and steady-to-improving margins which should drive modest earnings growth.

Among other stocks in the headlines, JB HiFi has been cut to hold from buy by Deutsche Bank, although it upped its price target by 10 per cent to $7.10. Harvey Norman was also downgraded to neutral from buy by UBS.

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