0332 GMT - The market is underestimating the extent to which Xero's free cashflow will improve, following its recently announced pivot toward improved profitability, UBS analyst Lucy Huang says in a note. She tells clients that Xero's costs are elevated relative to global peers and sees scope for the cloud-accounting software provider to lift free-cashflow margins by 15% by FY 2026. Huang reckons the market currently values Xero at 9x sales on a two-year forward basis, which represents a 7% discount to its Australian tech peers despite Xero's higher sales growth. UBS lifts its target price by 20% to A$109.00 and raises its rating to buy from hold. Shares are up 1.3% at A$93.60. (stuart.condie@wsj.com; @StuartLCondie)

0053 GMT - Fortescue Metals did a good job controlling what it can in 3Q, but it's what comes next that concerns UBS. In a note, analyst Lachlan Shaw points out that Fortescue Future Industries, the company's renewable-energy arm, is likely to disclose its first projects by the end of this year, along with their economics. Uncertainty over these projects contributes to UBS retaining a sell call on Fortescue's stock, along with the likelihood that iron-ore prices will fall from here on out. UBS estimates an iron-ore price of US$100/ton in 1H of FY 2024, down from a forecast US$123/ton in 2H of FY 2023. The bank drops its price target on the stock by 12% to A$17.40. Fortescue is down 2.5% at A$20.25. (david.winning@wsj.com; @dwinningWSJ)

0039 GMT - Megaport's key metrics in 3Q should improve modestly from 2Q despite the disruption from senior management changes at the Australian communications-services networker, Citi analysts say. They tell clients in a note that repricing and cost cuts should support monthly recurring revenue growth and margin improvement for the March quarter. Yet weak macro conditions will continue to weigh on the sale of new so-called ports and services, they say. Citi has a last-published neutral rating and A$7.05 target price on the stock, which is down 1.9% at A$4.15 and 34% lower so far in 2023. (stuart.condie@wsj.com; @StuartLCondie)

0027 GMT - Australian communication-services networker Megaport may need a cash injection if growth doesn't accelerate, Jefferies analyst Roger Samuel says in a note. Samuel tells clients that the stock looks cheap at 3.6X sales revenue but is concerned about the impact of increased competition from rivals including PCCW's Console Connect. A management overhaul that has left Megaport with a new CEO and in search of a CFO could cause disruption in its sales force, Samuel adds. He cuts his revenue forecast for FY23 by 3% and for FY24 by 8%. Jefferies lowers the stock's target price 22% to A$4.80, primarily on higher capital expenditure forecasts. It stays neutral on the stock, which is down 2.6% at A$4.12. (stuart.condie@wsj.com; @StuartLCondie)

0016 GMT - Telstra's mobile price rises look larger than those previously anticipated by Goldman Sachs analysts, who reiterate their buy rating on the stock. Significant recent price rises across Telstra's prepaid and JB Hi-Fi branded services suggest to GS that the telecommunications provider is likely to tie its postpaid prices to inflation. This could raise plan pricing by A$4-A$6 a month, compared with a prior GS forecast of A$2-A$3. The analysts tell clients in a note that market expectations for Telstra's FY 2024 mobile revenues look conservative. They lift target price by 2.2% to A$4.70. Shares are down 0.1% at A$4.295. (stuart.condie@wsj.com; @StuartLCondie)

2353 GMT - News Corp's 3Q earnings will likely fall 25% on year on worsening ad volumes, Macquarie analysts say. They tell clients in a note that the soft ad-market conditions that hit News Corp's 2Q likely deteriorated in 3Q. They expect that ad-market facing businesses across News Corp's Dow Jones, News Media and subscription video to show on-year ad-revenue declines of between 10% and 15% for the quarter. There is potential valuation upside if News Corp opts to offload some assets but the Macquarie analysts see no evidence that this is being pursued. Macquarie stays neutral on the stock but cuts its target price 32% to A$23.00 on the lower chances of an asset selldown. Shares last traded at A$26.06. News Corp owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal. (stuart.condie@wsj.com; @StuartLCondie)

2349 GMT - Citi takes a more bullish view of BlueScope Steel's earnings outlook following the company's improved guidance for FY 2023. In a note, analyst Paul McTaggart says the bank has lifted group Ebit forecasts by 26% to A$1.65 billion in FY 2023 and by 11% to A$1.05 billion in FY 2024, driving a 15% increase to its target price to A$23.50/share. "We expect China to force steel production cuts in 2H of 2023 given low steel profits as it did in 2021 -- and this will be a positive for regional steel pricing but negative for iron-ore pricing (a key input to BlueScope's Australian costs)," Citi says. Conversely, Citi expects higher U.S. imports of steel will push down U.S. prices in FY 2024. BlueScope ended Monday at A$20.64, with Australian markets closed on Tuesday. (david.winning@wsj.com)

2334 GMT - Domain still looks a more attractive proposition than Australian real-estate advertising rival REA despite a soft listings outlook for at least the remainder of FY23, Macquarie analysts say. They tell clients in a note that they expect Domain to report a 19% fall in 3Q listings and to flag a subdued 4Q. Yet a 10% increase in prices for FY24 is a positive and Domain remains more exposed than REA to a potential upswing in residential markets, they say. Domain is also trading on a lower earnings multiple, they add. Macquarie lifts its target price 3% to A$3.20 and stays neutral on the stock, which last traded at A$3.32. REA is 61% owned by News Corp., which owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal. (stuart.condie@wsj.com; @StuartLCondie)

2326 GMT - Brambles appears to be trading at fair value to Macquarie analysts, who see the pallet supplier's revenue tailwinds moderating through FY24. Brambles last week raised its FY23 revenue guidance following its strong performance through the first nine months of the year, citing higher prices and improved pallet availability. The Macquarie analysts are cautious about how long these forces can continue as revenue drivers. They say in a note that logistics and lumber prices will fall in FY24. They also think that further improvements in pallet availability could reduce Brambles's pricing power. They lift target price 6.2% to A$13.70 and stay neutral on the stock, which last traded at A$14.18. (stuart.condie@wsj.com; @StuartLCondie)

2314 GMT - Gold Road's strong 1Q showed the benefit of not hedging its production of the precious metal, Ord Minnett analyst Paul Kaner says in a note. Gold Road's cash flow strengthened to a record A$44.2 million in the quarter as it was exposed to all the lift in gold prices. That's a point of difference to many peers as investors increasingly scrutinize miners' hedged positions. "Whilst we understand the motivation through a growth/debt cycle, most investors prefer unhedged companies given their leverage to gold price movements (and therefore margins)," Ord Minnett says. "Gold Road is unhedged and could generate a A$1,350/oz margin or A$120 million free cash flow on our numbers (2Q-4Q), if the current spot price is maintained through 2023." (david.winning@wsj.com)

2258 GMT - While Gold Road's 1Q performance was disrupted by wet weather, Jefferies notes it wasn't all doom and gloom. Analyst Mitch Ryan highlights Gold Road's milled volume of 2.47 million tons in 1Q was the highest that the company had ever achieved and suggests an annual rate of 9.87 million tons. "While this was the result of blending the lower-grade, softer oxide ores, it shows the mill's ability to process at higher throughput rates," says Jefferies. "Further improvements are still needed to increase rates to a sustainable 10 million tons/year rate at the mill, which could be realized by the installation of a third Pebble Crusher during 2023." (david.winning@wsj.com)

2227 GMT - BlueScope Steel could spend A$671 million on buying back shares in FY 2024, on top of A$500 million in the current fiscal year, says Jefferies. The revised assumptions come after BlueScope forecast 2H underlying Ebit of A$700 million-A$770 million, up from an earlier projection of A$480 million-A$550 million. In a note, analyst Simon Thackray says the bank's new forecast for share buybacks in FY 2024 is in line with BlueScope's capital management framework, which includes a stable A$0.50 dividend/share per annum. (david.winning@wsj.com)

2212 GMT - Jefferies cuts its annual net profit estimates for Ampol and Viva Energy by around 4% to reflect recent weakness in refining margins, offset somewhat by stronger profitability in their retail businesses and favorable currency swings. The revised outlook comes ahead of quarterly updates from the energy companies, which analyst Michael Simotas expects to be solid. For Ampol, Jefferies expects unaudited group Ebit of A$319 million, which would represent the company's second-highest quarterly earnings on record. "We forecast refining margins of US$14.00 and US$16.00 for Ampol and Viva Energy respectively," says Jefferies. "Regional refining margins remained strong until the end of 1Q23." (david.winning@wsj.com)

(END) Dow Jones Newswires