Review Of Analyst Upgrades This Week - Part VII

by: The Value Investor

Analysts have been sending out research reports to clients again this week. The following is a review of the most important upgrades for the week of May 21 till May 25.

BHP Billiton

RBC Capital Markets has raised its advice for BHP Billiton (NYSE:BHP) from sector perform to outperform. RBC expects the miner to cut its capital expenditure budget by 30% in 2013 and 2014 which analysts believe is a good thing. Earlier BHP admitted that the investment climate has changed during the last months. BHP's CEO Klopper expects miners to generate less cash flows in the coming twelve months on the back of lower commodity prices and project costs overruns. Shares of the Australian miner have lost 12% year to date trading at $62 after peaking at $82 earlier this year.

Oppenheimer has raised its advice for (NYSE:CRM) from perform to outperform with a $180 price target. Analysts see 22% more upside potential for the provider of enterprise cloud services after shares have already returned 45% this year. Oppenheimer believes has a "disruptive" technology which enables the firm to aggressively gain market share. Furthermore analysts do not exclude a possible takeover by a large technology company.


Citigroup has raised its advice for Carter's (NYSE:CRI) from neutral to buy with a $62 price target. Revenue growth exceeding 10% and operating margin expansion will drive double-digit earnings per share growth. The bank sees 20% further potential to the upside for the producer of apparel for babies and young children as operating margins exceed that of competitors. Shares have already returned 37% year to date after the company issued a strong full year outlook, which beat analysts expectations.

Illinois Tool Works

JP Morgan raised its advice for Illinois Tool Works (NYSE:ITW) from neutral to overweight. Analysts see room for shares to appreciate to levels around $66 suggesting some 18% more upside for the diversified multinational manufacturer. The bank is impressed after a recent meeting with Illinois' management. Shares have returned 20% year to date after the company issued a strong full year guidance in January.

Eastman Chemical

JP Morgan raised its advice for Eastman Chemical (NYSE:EMN) from neutral to overweight. The chemical company has been extensively in the news this year after the company announced to acquire Solutia in January. Despite a recent pullback from $54 to $47, shares still trade up 22% on the year. Analysts see potential for shares to move upwards towards the $57 area, suggesting some 21% upside potential. Eastman Chemical has an exposure towards "inexpensive and growing natural gas supply" according to the analysts.

PPG Industries

Bank of America/Merrill Lynch raised its advice for PPG Industries (NYSE:PPG) from neutral to buy with a $115 price target. There is some 12% upside potential for the supplier of protective and decorative coatings as the company should see lower raw material costs, according to analysts. Despite a 23% return year to date, the recent pull back from highs of $107 to $103 at the moment creates a good entry-point according to analysts.


Bank of America/Merrill Lynch raised its advice for Starbucks (NASDAQ:SBUX) from neutral to buy with a $68 price target. Analysts see 25% more upside potential for the coffee retailer as it views the recent pullback from $62 to $54 per share as a "matter of expectations getting too high, rather than any significant fundamental issue". Despite the pull-back shares in Starbucks still trade 18% above the levels of January 1st.


Stock markets have seen a modest rebound this week, closing about 1.5% higher in the case of the S&P 500. Despite the slight correction, brokers have sent out favorable research reports again to clients. Many of the recommendations were made after the release of earnings reports and often come after a large move to the upside. However on the day of the announcement, analyst recommendations can still move the stock price significantly.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.