Negative Shift in the Sentiment of Analysts During July

August 02, 2012 /

There was a slight negative shift in the sentiment of analysts during the month of July, based on changes to their ratings and target prices.

The overall percentage of Buy ratings dropped (to 49.0% from 50.4%) relative to the prior month, while the overall percentages of Hold ratings (to 37.2% from 35.9%) and Sell ratings (to 13.8% from 13.6%) increased during this time. The bottom-up target price also declined to 1424.33 (USD) from 1469.32 (USD) during the month.

Of the 10,218 ratings on MSCI Europe companies at the end of July, 49.0% were Buy ratings, 37.2% were Hold ratings, and 13.8% were Sell ratings. During the month of July, the number of Buy ratings (-2.8%) declined relative to the month of June, while the number of Hold ratings (+3.6%) and Sell ratings (+1.0%) increased relative to the previous month.

In terms of Buy ratings, all ten sectors saw a decrease in Buy ratings, led by the Materials (-5%) sector. In terms of Hold ratings, eight of the ten sectors witnessed a rise in Hold ratings, led by the Energy (+11%) sector. In terms of Sell ratings, five of the ten sectors recorded a jump in Sell ratings, led by the Materials (+5%) sector.

Overall, analysts continue to be most optimistic about the Energy sector and least optimistic about the Consumer Staples sector, based on percentages of Buy ratings. The Energy sector had the highest percentage of Buy ratings (60%) of all ten sectors. Over the past twelve months, the average percentage of Buy ratings for the Energy sector has been 61%, which is the highest of all ten sectors.

On the other hand, the Consumer Staples sector continued to have the lowest percentage of Buy ratings (40%) of any sector. Over the last twelve months, the average percentage of Buy ratings for the Consumer Staples sector has been 43%, which is the lowest average of all ten sectors.

The bottom-up target price for MSCI Europe is calculated using the same methodology to calculate the price of the index, except the closing price of each company is replaced with the mean target price for each company. The mean target price for each company is then multiplied by the float shares outstanding for that company. The numbers for all the constituents are then aggregated and divided the sum by the index divisor.

At the end of July, the bottom-up target price for MSCI Europe was 1424.33 (USD), which was 12.0% above the closing price for the index of 1271.69 (USD). Over the past twelve months, the average difference between the bottom-up target price and the closing price has been 17.9%.

Over the past month, the bottom-up target price (USD) fell 3.1% (to 1424.33 from 1469.32), while the price of the index (USD) increased 1.4% (to 1271.69 from 1253.98). At the company level, 78 companies recorded an increase in their mean target price (USD), 4 companies recorded no change in their mean target price (USD), and 366 companies recorded a decline in their mean target price (USD).

At the sector-level, the Financials sector had the largest upside difference between the bottom-up target price and the closing price (+19.7%), while the Consumer Staples sector had the smallest upside difference between the bottom-up target price and the closing price (+1.7%).

 

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