3 ASX 200 stocks hit with downgrades following reporting season

In a previous wire, I detailed 4 ASX stocks that had been upgraded to Buys off the back of reporting season results.

But what about those that have seen the opposite?

The latest set of results have reinforced the prince and pauper dichotomy that seems to dominate reporting season these days. 

Defensive stalwarts like the big banks and miners are given the benefit of the doubt by investors, but the brokers often have other ideas.

Here are 3 ASX 200 stocks across banking and energy that have copped Sell-equivalent downgrades in recent days. 

Westpac Banking Corporation (ASX: WBC)

• Broker: JPMorgan
• Rating: Underweight (from Neutral)
• Price Target: $37.50

It was a good reporting season all round for the Big Four, with all beating expectations. Despite delivering the weakest relative result of the four, Westpac still managed to reduce costs by 5% and increase earnings estimates.

But while solid results, and their inherent defensive quality, mean investors have continued to flock to Aussie banks, stretched valuations mean the brokers are looking to be more discerning. 

JPMorgan has revised its rating on WBC to Underweight, amidst question marks over Westpac's technological transition and a push to reclaim mortgage market share leaving little room for positive shocks on margins. 

While it's actually a slight upgrade to price target, from $37.10 to $37.50, this downgrade still represents a 10% downside, and means JPMorgan joins Macquarie and Morgan Stanley in recommending an underweight (or equivalent) rating. 

Westpac remains a Strong Sell according to Market Index's Broker Consensus tool, with 2 Hold ratings and 3 Sells at a consensus price target of $37.44, suggesting 9% downside. 

Woodside Energy Group (ASX: WDS)

• Broker: Ord Minnett
• Rating: Lighten (from Hold)
• Price Target: $24

A beat to net profit and increased dividend were the highlights of Woodside's results beats.

But Ord Minnett have given it a downgrade on the back of uncertainty around its ongoing search for a new CEO and scepticism over its ability to supplement its dividend yield with its balance sheet. 

While it concedes Woodside remains "an operationally sound business with quality management", Ord Minnett sees the CEO question, a soft outlook for LNG and a focus on free cash flow over dividends as reason enough for a downward revision. 

Woodside has also received downgrades from Morgans and Jarden, with both revising previous Buy-equivalent ratings to Neutral.

Of the 9 broker ratings tracked by Market Index's Broker Consensus tool, 2 are Buys, 6 are Holds and 1 is a Sell, with a consensus price target, suggesting 11% downside.

AGL Energy Limited (ASX: AGL)

• Broker: Morgan Stanley
• Rating: Underweight (from Equal-weight)
• Price Target: $9.66 

AGL has rallied 10% since posting a solid 1H result, where profit was down 5% but 9% ahead of estimates.

But Morgan Stanley now view it as overvalued, and have downgraded the energy provider to Underweight and set a price target of $9.66, suggesting slight downside potential. 

In its note, Morgan Stanley cites potentially lower and less volatile electricity prices as a notable headwind, albeit this was before the escalation of conflict in the Middle East. 

This comes despite a consensus price target of $11.12, for 13% upside potential from the current share price. Citi and UBS believe AGL is well-positioned on forward earnings growth and NPAT, respectively, with both maintaining Buy ratings alongside Macquarie.  

Unlike the other two stocks on this list, AGL actually maintains a Buy rating on Market Index's Broker Consensus tool.

In a recent special episode of Livewire's Buy Hold Sell, First Sentier Investors' Dushko Bajic rated AGL a Sell, preferring Origin Energy, while Ausbil's David Lloyd named it a Hold, citing better opportunities elsewhere.