With earnings season in full swing it certainly is a busy time for Australian brokers. As new data becomes available analysts are able to go back to their discounted cash flow models, crunch the numbers, and fine tune their recommendations.
This morning there were three upgrades that caught my eye. Here they are:
a2 Milk Company Ltd (Australia) (ASX: A2M)
A research note out of UBS reveals that it has upgraded a2 Milk from neutral to a buy rating. The investment bank conducted a survey in China of pregnant women and found that a top priority for these consumers was where the product was sourced from. This certainly bodes well for New Zealand-based a2 Milk. Regardless of this survey, I believe a2 Milk is a strong buy and great long-term investment. As well as China, the company has opportunities for growth in the lucrative UK and US markets.
Cimic Group Ltd (ASX: CIM)
Analysts on the equities desk at Macquarie were clearly impressed by this construction giant's half-year results yesterday which saw net profit after tax jump 11.5%. They have upgraded its shares to an outperform rating from neutral. Although I'm not a fan of the company, I'll happily acknowledge that Cimic delivered an impressive result. Even better though was the full-year guidance of bottom line growth of up to 21%. Although this could well make it a good investment, the company's mixed past makes it one to avoid in my opinion.
Premier Investments Limited (ASX: PMV)
UBS has also upgraded Premier Investments from neutral to a buy rating after its solid first-half trading update yesterday. For the first-half of FY 2017 the owner and operator of retail brands including Dotti and Smiggle expects to post underlying EBIT growth of between 9.4% and 10.6%. Whilst I think Premier Investments is a great buy and hold investment, after yesterday's huge share price gain it might be best for investors to sit tight and wait for a better entry point. If one presents itself then I would snap up shares immediately. Thanks to the international expansion of its Smiggle brand I believe the company has substantial growth ahead of it.
