UGL got upgraded by Morgan Stanley but not to the same extent as DOW. See below:
"Contractor Downer EDI has attributed a sudden spike in its share price to an analyst's upgrade after receiving a "please explain" inquiry from the Australian Securities Exchange.
Downer's shares closed up 8¢ at $3.19 after rising as high as $3.50 during the day, prompting the ASX inquiry.
Downer said it was not aware of any new information that could have caused the share price jump other than a new research report from Morgan Stanley, which upgraded Downer to "overweight" with a price target of $3.65.
Morgan Stanley had previously rated Downer, whose stock has dropped 18 per cent over the past 12 months, at "underweight" for 2½ years.
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"This is the first time we have held a positive view on the stock since May 2013," Morgan Stanley analyst Nicholas Robison said in the report.
"After a long period of being considerably more bearish on the stock than consensus (which has generally rated Downer as a consensus buy) we think there is now enough doubt factored into Downer's share price and earnings estimates to justify becoming more positive."
Morgan Stanley warned that it risked being "too early" on its call, given expected falls in Downer's earnings from contract mining, but said the risks were "largely captured" in current consensus earnings forecasts.
Tecnicas Reunidas claims
Other risks to Downer's earnings include provisions for $60 million in claims the company is pursuing with Spain's Tecnicas Reunidas for work on a Western Australian ammonium nitrate plant, partially owned by chemicals group Orica, after terminating its construction contract with the Spanish group.
Downer is expected to generate future earnings from rail projects, although it lost a bid for Canberra's new light rail system after a consortium led by construction group CIMIC was named the preferred tenderer.
CIMIC's shares rose 66¢ to close at $24.73 on Monday.
Downer on Monday reduced its 2015-16 net profit after tax forecast to $180 million from $190 million to compensate for around $13 million in costs associated with bidding on the light rail project. It will report its half-year results on Thursday.
Morgan Stanley also upgraded rival contractor UGL to "equal weight" from "underweight", arguing that its new management team, led by chief executive Ross Taylor, had reduced business risks and put the company back on "a path to sustained profitability and cash generation".
While conditions in the engineering and construction sector were not yet improving, there was scope for optimism, Mr Robison said. Corporate bankruptcies and consolidation were removing excess capacity in the sector, while earnings forecasts had become more realistic.
Work from the mining and oil and gas sectors was also becoming a much smaller proportion of revenue and earnings than in recent years. "We are beginning to see increased evidence of a transition to new work streams which have the potential to slowly replace lost mining and oil and gas capital spending work."
New work streams include public roads, tunnels, rail and trains, telecommunication work, oil and gas maintenance and utility maintenance."
http://www.watoday.com.au/business/downer-edi-boosted-by-morgan-stanley-upgrade-ahead-of-halfyear-results-20160201-gmira2.html?
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