These 2 S&P/ASX 200 stocks have just been upgraded by top brokers

The market has recovered most of the day’s loss but is still likely to finish the last day of the week in the red.

However, there’re two stocks that are bucking the trend and outperforming today after brokers upgraded their recommendations on the shares.

The two stocks are rail operator Aurizon Holdings Ltd (ASX: AZJ) and energy giant Woodside Petroleum Limited (ASX: WPL) with their share prices up 1.1% to $4.14 and 0.3% to $36.09 at the time of writing. In contrast, the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index is down 0.2% in the last hour of trade.

The rally in Aurizon’s share price will be a relief to shareholders who have witnessed the stock crash 18% over the past year.

The stock is still trading close to its two-year low although the optimists will point out that this means it has plenty of room to climb.

Credit Suisse believes the stock is cheap after its sell-off and has upgraded Aurizon to “outperform” from “neutral” with a price target of $4.50, although valuation isn’t the only reason to turn bullish on the company.

The Queensland Competition Authority (QCA) announced yesterday that it is considering changing the averaging period for the risk-free rate and if that happens, Credit Suisse notes that the WACC (weighted average cost of capital) will increase to around 5.73% from 5.41% in the draft decision.

A higher WACC will allow Aurizon to charge more to recover the cost of capital and that could see its earnings before interest and tax (EBIT) by circa $20 million a year.

There’s no guarantee that the QCA will change the risk-free rate period but the stock will likely jump higher on such news.

Given the valuation support touted by Credit Suisse, this bet might be worth taking.

Meanwhile, JP Morgan has upped its rating on Woodside to “neutral” from “underweight” after the stock dropped 8% over the past two weeks and after it released a reasonably upbeat quarterly production report yesterday.

“Woodside reported a solid September 2018 quarter, with production above our expectations,” said the broker who has a $37 a share price target on the stock.

“Overall, the company’s base business continues to perform, delivering higher production of 23mmboe and sales revenue of US$1,157 million in the quarter.”

The company’s key projects are also tracking well with its Browse and North West Shelf joint ventures entering the concept definition phase and its Greater Western Flank Phase 2 project reaching 98% completion (and it’s under budget too!).

This positions Woodside for a strong FY19, especially if oil prices continue to stay stubbornly high.

These aren’t the only stocks with a bright outlook. The experts at the Motley Fool are tipping three other blue-chips to outperform in FY19.

Follow the free link below to find out what these stocks are and why they should be on your radar.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Brendon Lau 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.