A tale of two companies on the nose, it seems with the market: Downer EDI and Macquarie Group.
Both were sold off yesterday by worried investors.
Following the big falls overnight, the shares of both companies will be under renewed pressures in Australoia today.
Macquarie Group shares continued to fall yesterday after a round of downgrades from brokers reacted to its surprise non warning on Thursday of last week.
The bank said in a presentation to an investment conference that short term forecasting had become difficult and uncertain markets were impacting some parts of the business.
The shares fell 5% at one stage, or $2.17, to an 11 month low of $40.50 on Thursday before closing down 2% at $40.65, also an 11 month closing low.
Since then the fall, which actually started before Thursday, has continued and they lost another 2.2%, or 87 cents, yesterday to finish at $38.08, the lowest since early last July.
All up, the stock has fallen 16.3% since its most recent peak of $45.55 on June 16.
The overall market is off around 4.5% in the same time.
Morgan Stanley has cut its rating on the stock while JPMorgan Chase and UBS reduced price targets.
Bank of America/Merrill Lynch and Citigroup are both gloomy on the bank’s ability to win new business, and achieve the forecast guidance (at the April profit announcement) for a rise in earnings this year.
Downer EDI is worrying investors as it grapples with poorly performing subsidiaries, losses and fears about its finances.
It’s had problems with a big rail contract, rising costs, asset impairment write-downs and losses, and yesterday bad publicity from a leaked internal email that suggested the company could be trying to manage payments to creditors to improve its cash flow picture ahead of the June 30 balance date (today).
The shares have fallen sharply this year and the company’s value has more than halved from around $3 billion to less than $1.3 billion.
The shares hit yet another 52 week low yesterday of $3.72 before closing at $3.74, down 25c on the day, or 6.3%.
They peaked at $9.44 on January 12.
The Fairfax business press reported the contents of the leaked email that seemed to suggest the company was trying to dress up its accounts for the end of financial year.
That was denied in one statement to the ASX, which then had to be clarified with a second statement to the Exchange.
In the first statement Downer denied deferring payments to suppliers, but then reversed the position shortly in the second statement a couple of hours later, providing “additional clarification” that cash management in its troubled Works division included “a proposal to manage creditor payments”.
Investor belief in the stock was also hit by a target price downgrade from Goldman Sachs JBWere.
But the broker kep a “Hold”on Downer, while cutting its target price from $6.26 to $5.00.
