April certainly has been a busy month filled with countless quarterly and trading updates.
Unsurprisingly, this has kept many of Australia’s leading brokers busy adjusting their estimates and recommendations accordingly.
Three that have fared well and been given buy ratings are listed below. Here’s why brokers like them:
Fortescue Metals Group Limited (ASX: FMG)
According to a note out of Credit Suisse, it has retained its outperform rating and $5.75 price target on the iron ore producer’s shares following its recent quarterly update. Although the broker acknowledges that Fortescue will need to deliver a strong June quarter to meet its guidance, it sees a lot of value in its shares regardless. Furthermore, it notes that the realised price of its ore is slowly improving. While it wouldn’t be my first pick in the space, I do agree that there is a lot of value in Fortescue’s shares. Especially after management advised that it is confident demand for its low grade ore will pick up from Chinese steel producers now their margins have peaked.
G8 Education Ltd (ASX: GEM)
A note out of Morgans reveals that it has retained its add rating but cut the price target on the childcare operator’s shares from $3.53 to $3.07. While the broker believes that trading conditions could be difficult in the short term, it expects things to ease in the medium term. In light of this, its analysts have held firm with their add rating following its recent trading update. While I do think G8 Education’s shares look cheap, I would stay clear of them. I’m not convinced that a turnaround is coming any time soon and wouldn’t be surprised to see its shares sink lower. Especially if its weak financial performance puts pressure on its dividend.
Metcash Limited (ASX: MTS)
Analysts at Morgan Stanley have retained their overweight rating and lifted the price target on the wholesale distributor’s shares to $4.00 from $3.40. According to the note, the broker believes that the market has not factored in the robust growth of its hardware business. In addition to this, its research indicates that supermarket price wars are easing and trading conditions have improved. Because of this, the broker has forecast FY 2018 earnings per share of 23 cents, 1 cent ahead of the market’s expectations. Based on Morgan Stanley’s forecast, Metcash’s shares are changing hands at under 15x full-year earnings. This could make it worth a closer look.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.