recent recommendations by 6 brokers

CIMB Securities 04-Jun-13
Underperform

There have been some delays to the new product launch and soft US sales. This has led to disappointing FY13 guidance. CIMB expects the new N6 roll-out will support a recovery in earnings in FY14 but it could be subdued, especially with the growing reliance on adult patients and emerging markets.

The broker's FY13-15 earnings forecasts have been lowered by 12-17%. The target price has been reduced to $50.44 from $57.34. The Underperform rating is retained.


Macquarie 04-Jun-13
Upgrade to Neutral from Underperform

Macquarie had feared Cochlear would not meet top-line expectations and this fear has been borne out in the company's downgrade to FY13 guidance. The broker also fears the trend could persist given the improvement in competitor products.

Now the downgrade to earnings forecasts has happened the broker thinks the consensus expectations are likely to be at a more realistic level and, together with the launch of N6 and fading currency headwinds, the catalysts are more balanced.

The rating is upgraded to Neutral from Underperform and the price target is reduced to $58.00 from $64.40.

Citi 04-Jun-13
Sell

Target $42.40 (was $53.03). The latest FY guidance has come out from Cochlear and it is some 15% below Citi and consensus estimates. 2H earnings are now expected to fall 30% short of 1H efforts, with sales weakness the reason supplied.

Citi wonders where the sales weakness is coming from and while management says the softness should prove temporary, the broker has some doubts.

FY14-15 EPS forecasts are cut by 15% and 23% and Citi says even that would be a strong result for FY14. The share price may be down, but Citi thinks the price is still too expensive. Sell call maintained.

JP Morgan 04-Jun-13
Upgrade to Neutral from Underweight

Cochlear's trading update and guidance for FY13 was cautiously received. Earnings are expected to be 15-17% below FY12. The company did maintain its dividend forecast of $1.25, implying a pay-out of 130% and a yield of 4.7%. Cochlear confirmed weak sales in the US.

The new N6 processor is unlikely to support US earnings until the second half of FY14, assuming FDA approval is obtained by the end of 2013.

JP Morgan has upgraded the rating to Neutral from Underweight after the share price reaction. The price target is reduced to $56.14 from $65.14.


UBS 04-Jun-13
Sell

Target $48.00 (was $56.90). The company has come out and cut its FY net profit guidance to $130-$135m, or in other terms, 15% short of consensus. Flat sales were blamed. The broker has cut its own FY net profit forecast by 12.4% to $135m, with reductions also made to out year forecasts.

The broker assumes FY14 will also see the company lose 5%-10% market share, mostly to AB's new system, which recent industry checks indicate is better than COH's new N6 processor yet to be launched. The broker has been of the opinion earnings growth does not justify the current PER premium and the latest news supports this view. The Sell call is maintained.


BA-Merrill Lynch 03-Jun-13
Downgrade to Underperform from Neutral

Target $59.60 (was $70.82). The broker is now assuming that the global cochlear implant growth rate has slowed to around 5% over the past few years and with most of the kids now out of the way, adults have overtaken as the main recipients.

Thus while the broker is still upbeat about the upside to come from technology progress and new clinic growth, this is being increasingly offset by near term earnings softness from the above mentioned slowing implant growth rate. FY13-14 EPS forecasts are trimmed by 2% and 9%. This pulls the price target lower, which in turn sees the recommendation downgraded to Underperform from Neutral.