ASX 200 stocks attracting the biggest broker upgrades this week: Super Retail Group, Fortescue

Super Retail Group (ASX: SUL) provided a first-half FY24 trading update last week, which attracted an uncommon target price upgrade but ratings downgrade from brokers.

The move makes sense, given the below factors:

• First-half FY24 sales growth of 3%

• First-half FY24 revenue of $2.0 billion (vs. $1.96bn in 1H23)

• First-half profit before tax guidance of $200-203 million which was broadly ahead of market expectations but down year-on-year

• Share price up 28% in the past twelve months to all-time highs

Putting it all together: SUL is pushing out some top-line growth while profit before tax is tracking ahead of market expectations. But the stock has rallied far too hard to justify a 'Buy' rating.

Biggest ASX 200 Upgrades

'Target price' is an aggregate of Refinitiv broker target prices. % Dif compares target prices between 12 January and 19 January 2024

UBS retained a Sell rating for Super Retail Group but hiked its share price target to $12.60 from $11.50. "The value focused consumer drove a constrained retail trading environment to end 2Q23 but attractive category exposure and sound promotional execution drove sales for SUL," the analysts said.

"We increased our ... valuation due to higher earning sand increased trading comparables ... Retain Sell rating despite earnings upgrades due to slowing sales and lack of valuation support."

Super Retail Group 12-month price chart (Source: Market Index)

BHP released its 2Q24 activities report last week which highlighted in-line iron ore and copper production, challenged coal production and a dire warning for nickel projects.

FY24 metallurgical coal guidance was downgraded by approximately 18% to 46-60 million tonnes after the weak first-half performance. While the integration of OZ Minerals assets is tracking six months ahead of schedule. The company expects to announce a major impairment of its Nickel West assets, which previously had a net operation asset value of US$1.2 billion as at June 2023.

"BHP's 2QFY24 result was solid for iron ore and copper, however a strong performance at NSWEC was offset by weakness at BMA where guidance has now been downgraded. The focus now turns to the dividend, which will be declared at the 1H results in February," said Macquarie analysts.

BHP 12-month price chart (Source: Market Index)