Why Ord Minnett upgraded these three stocks on the back of their interim results

The data is in and the earnings upgrades are thinning. Barrenjoey’s number crunchers have revealed that only 38% of the ASX 200 have beat consensus estimates for earnings per share while 35% have missed. As for company outlooks, the upgrades are even harder to find, as the chart shows below:

But even in the rubble of a tough earnings season, Ord Minnett has found three stocks to become a touch more optimistic on. This piece will cover those three names.

Magellan Financial Group (ASX: MFG)

The asset manager’s flagship funds have had a tough few years, marked by underperformance and the exit of several key portfolio managers. But some investors are betting on a turnaround story from the company, driven by new products – though questions around competitiveness linger.

A key question revolves around whether  Magellan’s performance (marked by fees and funds under management updates) is finally showing signs of a rebound. Ords argues the answer to this question is yes, adding the distinction between Magellan and its competition is “now less evident.”

The stock is now an ACCUMULATE, instead of a hold. Ord Minnett’s  fair value price target is a very punchy $11.50/share, a long way from the company’s current share price of about $8.70/share.

Platinum Asset Management (ASX: PTM)

Much like its beleaguered rival, Platinum has also suffered in recent years from underperformance and outflows. And while the Ords team credits its rivals as “astute”, they also argue investors need to brace for more volatility in returns, especially as global markets recover at different times. 

The broker team believes “extended outperformance is required to meaningfully grow funds under management”. Nonetheless, they believe Platinum can do it. 

New rating of ACCUMULATE, with a price target of $2.25/share.

Bega Cheese (ASX: BGA)

Although Bega’s result was well below Ords’ own expectations, the good news is that the surge in farm gate prices should be passed onto consumers leading to increased revenues. 

The only problem? Input cost pressures have also not mellowed out. Given retail prices have not caught up with these costs yet, it implies margins will be lower until they can do so.

But Ords says that this is only a matter of time. As long as those price rises don’t destroy demand and the milk market remains as tight as it is, there is reason for investors to believe better days are on the horizon. 

It’s now a HOLD recommendation, with a price target of $3.50/share.