Australian Broker Call

Citi rates AGL as Sell (5) -

Citi continues to envisage earnings headwinds but feels comfortable with the long-term energy transition. Hence, the broker struggles with the marginal buyer of the stock.

The broker notes AGL is disciplined regarding the balance sheet, as it learns about the telco space with the Southern Phone acquisition.

However, at the investor briefing the company did not shy away from the prospect of further acquisitions. Citi maintains a Sell rating and raises the target to $16.88 from $16.28.

Target price is $16.88 Current Price is $19.78 Difference: minus $2.9 (current price is over target).
If AGL meets the Citi target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.31, suggesting downside of -7.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates AGL as Underperform (5) -

The company has reiterated guidance at its investor briefing while Macquarie notes the risk is to the upside and the focus is on strategy not the financials.

AGL articulated a strategy around the customer and desire to leverage its dual fuel offer into other commodities.

The question for Macquarie is whether the potential revenue and earnings are sufficient to offset the current profitability from baseload.

Underperform rating maintained. Target is $18.84.

Target price is $18.84 Current Price is $19.78 Difference: minus $0.94 (current price is over target).
If AGL meets the Macquarie target it will return approximately minus 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.31, suggesting downside of -7.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates AGL as Upgrade to Hold from Reduce (3) -

First quarter generation output was 5% higher than the prior corresponding period and Morgans lifts estimates for the first half result. The broker envisages several issues in the medium term in the electricity market, as fuel costs increase and speculation mounts about the future of the Portland smelter.

However, the company's extensive vertical integration and hedging should insulate earnings from major swings in the electricity spot market over the next 12 months and the broker upgrades to Hold from Reduce, raising the target to $17.45 from $16.86.

Target price is $17.45 Current Price is $19.78 Difference: minus $2.33 (current price is over target).
If AGL meets the Morgans target it will return approximately minus 12% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.31, suggesting downside of -7.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates AGL as Hold (3) -

Ord Minnett observes the company's investor briefing was far more measured this time around. Management has indicated the transitional state of the market provides opportunities for growth over the medium to longer term.

The company is looking to evolve into a multi-product brand, specifically targeting data services to consumers.

Ord Minnett believes the competitive position in the retail and wholesale segment should serve AGL Energy well over the medium term, although government pressure on retail electricity prices is likely to hamper its ability to grow profit.

Hold rating maintained. Target rises to $19.10 from $18.90.

Target price is $19.10 Current Price is $19.78 Difference: minus $0.68 (current price is over target).
If AGL meets the Ord Minnett target it will return approximately minus 3% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $18.31, suggesting downside of -7.4% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates AMP as Neutral (3) -

The broker has had a hard look at its AMP valuation model, pulling the businesses apart and putting the parts back together again. The company has outlined its new strategy, but trying to come up with a 3-5 year view is no easy task, UBS admits. The decision to cut reliance on legacy platforms is the right thing to do, but painful nevertheless, the broker notes.

Earnings could halve in wealth management, before cost savings and an advice-led recovery. The upshot however is that a sum of the parts valuation leads the broker to increase its target to $1.80 from $1.75. Neutral retained.

Target price is $1.80 Current Price is $1.84 Difference: minus $0.04 (current price is over target).
If AMP meets the UBS target it will return approximately minus 2% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.83, suggesting downside of -0.7% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates AQG as Outperform (1) -

The company performed strongly in the September quarter with another upgrade to the oxide resource and the sulphide operation ramping up. Credit Suisse observes progress on the sulphide project has endorsed the quality, management capability and execution.

Meanwhile, guidance has been upgraded for the oxide component and the broker notes Copler Saddle may be a new ore source. Outperform rating and $7.20 target maintained.

Target price is $7.20 Current Price is $6.81 Difference: $0.39
If AQG meets the Credit Suisse target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $7.28, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates AQG as Outperform (1) -

Strong volumes at Copler oxides were reported in the September quarter while Macquarie observes the sulphide process plant continued its smooth ramp up.

Alacer Gold has lifted its oxide guidance for 2019, citing positive reconciliation. An interim resource update is expected from Ardich in the December quarter.

The broker maintains an Outperform rating and $7 target.

Target price is $7.00 Current Price is $6.81 Difference: $0.19
If AQG meets the Macquarie target it will return approximately 3% (excluding dividends, fees and charges).

Current consensus price target is $7.28, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates AQG as Buy (1) -

Alacer Gold's Sep Q metrics all either met or beat UBS forecasts, with production beating by 9%. The oxide plant outperformed, while the sulphide plant delivered consistent production through the quarter. Net debt is rapidly declining.

While the stock has run up 150% in 2019 as significant milestones are reached, the broker believes more is possible. The miner's free cash flow yield of 15% compares to peers on 3-5%, and mine life of 20+ years compares to 5-10. Buy retained.

Adjusting nominal discount rate and gold price assumptions sees target fall to $7.65 from $7.90.

Target price is $7.65 Current Price is $6.81 Difference: $0.84
If AQG meets the UBS target it will return approximately 12% (excluding dividends, fees and charges).

Current consensus price target is $7.28, suggesting upside of 7.0% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates CIA as Outperform (1) -

Macquarie notes strong operating results in the September quarter, although financials were affected by provisional pricing adjustments.

The company has completed the acquisition of the remaining interest in Bloom Lake and will double production with the development of phase 2.

Upgrade momentum is significant, in the broker's view. Macquarie maintains an Outperform rating and $3 target.

Target price is $3.00 Current Price is $2.14 Difference: $0.86
If CIA meets the Macquarie target it will return approximately 40% (excluding dividends, fees and charges).

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

This company reports in CAD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates CIM as Neutral (3) -

Earlier in the month, Cimic reiterated 2019 guidance and posted third quarter results in line with estimates. However, UBS noted operating cash flow conversion had not shown the seasonal recovery that is typical for the third quarter.

Following further review, the broker has cut its target to $35.80 from $46.00, reflecting a revision of the company's adjusted leverage position. Neutral retained.

Target price is $35.80 Current Price is $32.94 Difference: $2.86
If CIM meets the UBS target it will return approximately 9% (excluding dividends, fees and charges).

Current consensus price target is $39.00, suggesting upside of 18.4% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates CTP as Add (1) -

The company reported slower production in the September quarter. Morgans envisages the Range gas project will become the flagship asset.

Successful exploration and a pilot program have recently underpinned a 2C contingent resource of 270PJ. At this stage, first gas is expected in 2022.

The broker maintains an Add rating and $0.25 target.

Target price is $0.25 Current Price is $0.17 Difference: $0.08
If CTP meets the Morgans target it will return approximately 47% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates FAR as Outperform (1) -

FAR has released project economics for SNE, detailing a two-stage oil development. All options are being evaluated, including divesting a modest component of the company's share.

Credit Suisse suggests more cash in the door and a more manageable funding requirement could be in the best interests of shareholders. However, there are still a few steps towards receiving formal government approval and reaching a final investment decision.

The broker maintains an Outperform rating and $0.10 target.

Target price is $0.10 Current Price is $0.05 Difference: $0.05
If FAR meets the Credit Suisse target it will return approximately 100% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates FAR as Equal-weight (3) -

The company has updated on the economics of the SNE field. They appear robust to Morgan Stanley but there is a change with the purchase, rather than lease, of an FPSO, which will increase capital commitments.

The broker suggests this is likely to be a greater challenge for FAR than partner Woodside Petroleum ((WPL)).

Morgan Stanley believes FAR needs to demonstrate an acceptable funding solution to prevent further equity dilution in what is a high-class project.

The key issue will be how much oil is produced, as FAR has disclosed 640mmbbl of gross 2C vs Woodside's estimate of 561mmbbl.

Target is $0.06. Industry view is In-Line. Equal-weight rating maintained.

Target price is $0.06 Current Price is $0.05 Difference: $0.01
If FAR meets the Morgan Stanley target it will return approximately 20% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates GMA as Outperform (1) -

Macquarie re-bases reported claims ratios given the recent trend in reserve strengthening. The broker also transfers coverage to another analyst.

The September quarter appears to mark the beginning of the "growth thesis", in the broker's view, with 24.4% growth in gross written premium.

Neutral rating maintained. Target rises to $4.10 from $3.25.

Target price is $4.10 Current Price is $3.91 Difference: $0.19
If GMA meets the Macquarie target it will return approximately 5% (excluding dividends, fees and charges).

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates GNC as Buy (1) -

FY20 is likely to be the third consecutive year of severely drought-affected winter crops, the broker notes, which hasn't happened in 50 years. But Graincorp is no longer stuck with onerous rail take-or-pay contracts, and its new derivative product provides downside protection.

The proposed MaltCo demerger would unlock value, and the divestment of Bulk Terminals should sort out the debt issue, pending ACCC approval. If not approved, the broker does not believe Graincorp will be forced to raise new capital. Buy and $9.55 target retained.

Target price is $9.55 Current Price is $7.23 Difference: $2.32
If GNC meets the UBS target it will return approximately 32% (excluding dividends, fees and charges).

Current consensus price target is $8.90, suggesting upside of 23.1% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates JHG as Neutral (3) -

Outflows improved in the September quarter but Citi suspects the December quarter might deteriorate. The broker considers the stock reasonable value and the investment performance, ex Intech, is strong.

Fulcrum fees on US mutual funds are expected to soon turn positive. Citi maintains a Neutral rating and raises the target to $35.65 from $31.25.

Target price is $35.65 Current Price is $33.68 Difference: $1.97
If JHG meets the Citi target it will return approximately 6% (excluding dividends, fees and charges).

Current consensus price target is $32.79, suggesting downside of -2.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates JHG as Equal-weight (3) -

September quarter earnings per share were ahead of expectations and Morgan Stanley notes outflows are improving, with smaller gross outflows in equities and Intech.

Morgan Stanley expects only modest upgrades to consensus forecasts. Equal-weight rating is maintained. Target is $34.50. Industry view is In-Line.

Target price is $34.50 Current Price is $33.68 Difference: $0.82
If JHG meets the Morgan Stanley target it will return approximately 2% (excluding dividends, fees and charges).

Current consensus price target is $32.79, suggesting downside of -2.6% (ex-dividends)

The company's fiscal year ends in December.

Forecast for FY19:

Forecast for FY20:

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates MLX as Neutral (3) -

First quarter results were weak, in Macquarie's view. Broadly, production was in line at Renison and offset by a materially weaker outcome at Nifty.

The company continues to focus on improving development and services reticulation at Nifty. This remains the key catalyst, in the broker's opinion.

Neutral retained. Target rises to $0.19 from $0.18.

Target price is $0.19 Current Price is $0.17 Difference: $0.02
If MLX meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates MQG as Accumulate (2) -

Macquarie Group is reported to be planning to restructure its equities business to focus on the Asia-Pacific, where it has most scale. Ord Minnett notes media reports which suggest the company's domestic cash equities presence will be reduced in Europe, the Middle East, Africa and the Americas.

Ord Minnett is not surprised by this move, given scale has become increasingly important for equities. The move would be a minor positive for medium-term return on equity and the main downside risk is the extent to which equity capital markets are affected, given reduced research coverage.

The broker maintains an Accumulate rating and $133 target. Macquarie Group has signed a preliminary co-operation agreement with Kepler Cheuvreux which will give clients reciprocal access to equity capabilities across Europe and Asia.

Target price is $133.00 Current Price is $133.85 Difference: minus $0.85 (current price is over target).
If MQG meets the Ord Minnett target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $131.97, suggesting downside of -1.4% (ex-dividends)

The company's fiscal year ends in March.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.6

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates MWY as Hold (3) -

Supply-side impacts from excess pulp production in Brazil and a 25% tariff levied on Chinese paper exports by the US have materialised. As a result, Midway now expects first half operating earnings (EBITDA) to be more than -50% below the prior corresponding half.

Adding to its woes, the company's 25% equity investee ADDCO has been placed into administration. Despite the current conditions, Midway is confident buyers will return as inventory is depleted and Brazilian pulp production is scaled back.

Ord Minnett updates earnings estimates to account for soft volume and potentially weaker price negotiations in 2020. Hold rating maintained. Target is reduced to $2.20 from $3.31.

Target price is $2.20 Current Price is $1.87 Difference: $0.33
If MWY meets the Ord Minnett target it will return approximately 18% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates ORI as Neutral (3) -

Ahead of the company's financial report on November 1, Credit Suisse surmises Burrup will be operational from late March 2020 and contract positions remain stable.

The broker also notes a market-wide acceleration in the adoption of electronic detonation, delivery and data utilisation, all of which entrenches the company's position.

Neutral rating maintained. Target is raised to $21.45 from $21.22.

Target price is $21.45 Current Price is $22.90 Difference: minus $1.45 (current price is over target).
If ORI meets the Credit Suisse target it will return approximately minus 6% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $20.60, suggesting downside of -10.0% (ex-dividends)

The company's fiscal year ends in September.

Forecast for FY19:

Forecast for FY20:

Market Sentiment: -0.1

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates PLS as Outperform (1) -

September quarter production was weak, curtailed to meet soft customer demand and limit the cash burn. The company achieved structural cost reductions and is targeting a reduction in quarterly costs of -$5-10m.

December quarter sales have been downgraded to 35-70,000t, with Credit Suisse suggesting the lower end reflects firm orders.

The broker suspects the industry is yet to reach an inflection point in converter demand and this should be a leading indicator for lithium price stabilisation.

Outperform rating and $0.60 target maintained.

Target price is $0.60 Current Price is $0.32 Difference: $0.28
If PLS meets the Credit Suisse target it will return approximately 87% (excluding dividends, fees and charges).

Current consensus price target is $0.38, suggesting upside of 18.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates RAP as Add (1) -

Significant progress has been achieved over the September quarter, Morgans notes, including European and Australian approvals and positive results from the at-home sleep apnoea study.

The broker's focus is on the FDA clearance that is pending for the children's diagnostic.

Speculative Buy (Add) maintained. Target is raised to $0.40 from $0.32.

Target price is $0.40 Current Price is $0.31 Difference: $0.09
If RAP meets the Morgans target it will return approximately 29% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 1.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates REH as Add (1) -

The company's guidance update has confirmed it is tracking in line with forecasts. Morgans notes diversification into the US has supported the majority of the growth path as local markets slow.

The company expects first half operating earnings (EBITDA) to be broadly similar to the prior corresponding half result of $260m. Morgans suspects this may be slightly lower, reflecting more conservative forecasts for the Australasian construction market and modest growth in the US.

Add rating maintained. Target rises to $11.47 from $11.38.

Target price is $11.47 Current Price is $10.33 Difference: $1.14
If REH meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges).

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates SFR as Overweight (1) -

The updated resource at Black Butte has disappointed Morgan Stanley. A fall in contained copper is combined with a lower deposit grade. The new cut-off grade is 1.0% vs 1.5-1.6% previously.

The main offset for Morgan Stanley is that Black Butte forms only around 5% of the base case valuation of the stock. Geological confidence has increased slightly with a more accurate measured category of 22% compared with 19% previously.

Overweight rating and $7.55 target maintained. Industry view is Attractive.

Target price is $7.55 Current Price is $5.81 Difference: $1.74
If SFR meets the Morgan Stanley target it will return approximately 30% (excluding dividends, fees and charges).

Current consensus price target is $6.58, suggesting upside of 13.2% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.3

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates TWE as Buy (1) -

Industry data show Australian wine exports rose 7% in the twelve months to September -- the fastest rate of growth since the prior December quarter. Exports to China, which are 43% of total, rose 18%.

UBS suggests the trends are positive for Treasury Wine, being the largest exporter, although there are limitations in the data and the Penfolds release was brought forward. The broker nevertheless sees upside risk on current valuation and retains Buy and a $20.50 target.

Target price is $20.50 Current Price is $17.57 Difference: $2.93
If TWE meets the UBS target it will return approximately 17% (excluding dividends, fees and charges).

Current consensus price target is $19.00, suggesting upside of 8.1% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.5

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates WGN as Underperform (5) -

A capital raising of $40m has diminished risks on the balance sheet, Macquarie observes. Still, the Queensland market structure remains challenging and could get worse in the near term.

Hence, with the uncertainties relating to the pricing of sales to Boral ((BLD)) and an expansion program designed to obtain scale, Macquarie believes the valuation is too rich.

Underperform rating maintained. Target is reduced to $1.15 from $1.20.

Target price is $1.15 Current Price is $1.90 Difference: minus $0.75 (current price is over target).
If WGN meets the Macquarie target it will return approximately minus 39% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $1.61, suggesting downside of -15.3% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: 0.0

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Citi rates WOW as No Rating (-1) -

Like-for-like sales growth was led by food, up 6.6% in the September quarter. Citi notes the business was cycling a soft prior corresponding quarter.

The broker points to strong online expansion comprising around 150 basis points of sales growth in each of the past two quarters.

Given the company's market share of online grocery is over 50%, the broker calculates this market-wide shift to online is boosting sales by around 25 basis points, with the remaining 125 basis points reflecting cannibalisation of bricks & mortar sales.

Citi is restricted on rating and target at present.

Current Price is $37.26. Target price not assessed.

Current consensus price target is $33.90, suggesting downside of -9.0% (ex-dividends)

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Credit Suisse rates WOW as Underperform (5) -

Credit Suisse observes a temporary softening in competition appears to be more conducive to margin and profitability for Woolworths than in the recent past. The broker found automation and digital developments the highlight of the quarterly update.

Credit Suisse notes the potential for a one-off cash impact of around -$300m from underpayment of wages but the ongoing impact is not material.

Whilst not being dependent on a de-merger of Endeavour Drinks, Credit Suisse anticipates a de-merger would be a catalyst for an off-market buyback, as Woolworths has been generating cash ahead of requirements.

Underperform rating maintained. Target is raised to $31.83 from $31.68.

Target price is $31.83 Current Price is $37.26 Difference: minus $5.43 (current price is over target).
If WOW meets the Credit Suisse target it will return approximately minus 15% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.90, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Macquarie rates WOW as Upgrade to Neutral from Underperform (3) -

Macquarie notes supermarket like-for-like sales were up 6.6% in the first quarter and well ahead of rival Coles ((COL)). Nevertheless, this was at the lower bounds of market expectations.

The company has admitted to underpaying 5700 salaried staff and remediation costs of -$200-300m are envisaged. Macquarie notes Woolworths was already facing higher enterprise bargaining costs so the review will put further upward pressure on the wages bill.

The broker rolls forward its model and upgrades to Neutral from Underperform. Target is raised to $37.00 from $29.90.

Target price is $37.00 Current Price is $37.26 Difference: minus $0.26 (current price is over target).
If WOW meets the Macquarie target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.90, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgan Stanley rates WOW as Underweight (5) -

First quarter food sales growth of 6.6% was in line with expectations. Online sales growth accelerated to 43%. NZ food like-for-like sales growth was also strong, up 4.8%.

Woolworths has disclosed that salaried store staff have been underpaid and the initial estimate for the one-off remediation is -$200-300m. Morgan Stanley assesses the annual wage impact could be around 1% of FY20 estimated group earnings (EBIT).

Underweight. Industry view: Cautious. Target is $28.

Target price is $28.00 Current Price is $37.26 Difference: minus $9.26 (current price is over target).
If WOW meets the Morgan Stanley target it will return approximately minus 25% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.90, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Morgans rates WOW as Hold (3) -

First quarter sales were slightly weaker than Morgans expected, albeit all operating divisions recorded sales growth and Australian food increased 6.6%. Sales were supported by promotional programs as well as online growth.

Growth has also benefited from cycling a weaker comparable, which was affected by the removal of single-use plastic bags and the success of the Coles ((COL)) Little Shop campaign.

Morgans maintains a Hold rating and raises the target to $35.89 from $34.45.

Target price is $35.89 Current Price is $37.26 Difference: minus $1.37 (current price is over target).
If WOW meets the Morgans target it will return approximately minus 4% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.90, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

Ord Minnett rates WOW as No Rating (-1) -

September quarter sales were ahead of Ord Minnett's forecasts. The broker remains confident in the company's strong execution and strategy across the convenience and fresh food ranges. Market share gains are expected to continue.

Ord Minnett does not provide a rating or target at present.

Current Price is $37.26. Target price not assessed.

Current consensus price target is $33.90, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources

UBS rates WOW as Neutral (3) -

Woolworths delivered better than expected Sep Q sales growth of 7%, aided by cycling weak comparables in the prior period but boosted by successful promotional campaigns. Food was the primary driver, UBS notes, with Liquor and Big W in line.

The result was overshadowed by the wage underpayment news, although the broker does not further address this issue. Rather, the broker notes the stock is relatively expensive but opportunities to increase margins and reduce costs, along with a material opportunity over time to monetise the data opportunity, suggest earnings upside risk.

Neutral and $36.80 target retained, with a preference over Coles ((COL)).

Target price is $36.80 Current Price is $37.26 Difference: minus $0.46 (current price is over target).
If WOW meets the UBS target it will return approximately minus 1% (excluding dividends, fees and charges - negative figures indicate an expected loss).

Current consensus price target is $33.90, suggesting downside of -9.0% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Forecast for FY21:

Market Sentiment: -0.4

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources