The market finished the last day of the month on a backfoot as investors brace for the earnings report deluge in August.
The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index closed near the bottom of its intraday band as it slipped 0.5% into the red on Wednesday.
This is no time to panic even though many are probably feeling anxious about the profit results and FY20 outlook from ASX-listed companies in their portfolio.
However, it pays to be alert and investors may be keen to find out which are the latest large cap ASX shares to be downgraded by leading brokers.
Earnings winter cometh
The AGL Energy Limited (ASX: AGL) share price is one that copped a downgrade as Macquarie Group Ltd (ASX: MQG) cut its recommendation on the stock to “underperform” from “neutral” as it believes consensus earnings forecasts for the stock are too high.
“AGL flagged four headwinds at our conference in May. Since then, FY20 consensus has dropped ~$80m, for the flagged turbine outage (June). FY21 consensus is down only $50m,” said the broker.
“We expect an earnings winter to emerge as core power prices start to drop, especially for the baseload power providers. This chill will emerge in FY21.”
The broker has a price target of $19.50 per share.
Stuck in holding pattern
A stock that’s fallen from JP Morgan’s buy list is the Flight Centre Travel Group Ltd (ASX: FLT) share price with the broker downgrading the stock to “neutral” after the stock’s big bounce since May.
JP Morgan looked at a wide range of data sets from outbound and inbound passenger numbers to average airfares and shifted its preference to Webjet Limited (ASX: WEB) and Corporate Travel Management Ltd (ASX: CTD).
“FLT’s shares have risen 22% in the last 3 months (outperforming WEB -19%, CTD -11%, HLO +11%, ASX 200 +8%),” said the broker which has a $50 price target on Flight Centre.
“Our preference is for WEB/CTD who we believe can continue grow (FY20: +40% WEB, +18% CTD) despite current macro headwinds in Europe.”
Nothing to Smiggle about
Meanwhile, the Premier Investments Limited (ASX: PMV) share price took a 3.3% stumble today to $15.80 after Macquarie downgraded the stock to “neutral” on worries about the UK economy.
The apparel and stationary retailer is expanding its successful Smiggle business into the UK when that country is facing a Brexit meltdown and structural challenges with the online shopping shift.
“UK cyclical weakness looks set to persist near term, while structural headwinds require some caution,” said Macquarie.
“Smiggle’s transition is in its earlier stages with sales to build & the trajectory appearing non-linear, adding to market uncertainty.”
The broker has a 12-month price target of $17.20 on the stock.
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Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited, Webjet Ltd and Premier Investments Limited. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Flight Centre Travel Group Limited, Macquarie Group Limited, and Premier Investments Limited. The Motley Fool Australia has recommended Webjet Ltd. 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.