AN AFTERNOON rally may have seen the Iseq index of Irish shares finish in the black but the market is down more than 5 per cent since the beginning of the week.

A raft of downgradings from Merrion Stockbrokers is likely to add further pressure to hard-pressed Irish stocks.

Following the decision by Credit Suisse to cut its price target on CRH, Merrion has followed suit by reducing its forecasts for the stock.

Merrion is reducing earnings per share (EPS) forecasts for CRH by 8 per cent for 2008 to 239 cent from 259 cent and by 28 per cent for 2009. Forecasts for other construction stocks are also being downgraded, the stockbroker said.

“We are now assuming that the steep downturn continues into 2009 in our earnings forecasts for the sector. This significantly impacts our 2009 EPS forecasts, with less dramatic revisions to our 2008 estimates reflecting the ongoing deterioration in conditions,” Merrion said.

It is also reducing its 2009 EPS forecast for Kingspan by 15 per cent to 68 cent from 80 cent, while it is reducing EPS forecasts for Grafton by 10 per cent for 2008 and by 33 per cent for 2009.

“We are significantly reducing our Readymix forecasts for 2008 and 2009 and now expect the company to be loss making at the both the operating and the pre-tax profit level in both years,” it said.

For 2008, it expects the company’s revenues to be down 40 per cent year on year €130 million and for the company to make an operating loss of €5 million compared to its previous expectation for a €5 million profit. EPS forecasts for the stock are for -2.3 cent in 2008 and -3.5 cent in 2009.

With the Irish and international economic environment continuing to deteriorate, Merrion said it was cutting its earnings forecasts for banks 5 per cent for 2008 and 9 per cent for 2009.

In light of the weakened macro environment, particularly in the UK, Merrion has downgraded its EPS forecasts for industrial and distribution group DCC by 3 per cent in for the full year 2009 to 165.2 cent and by 4.6 per cent in 2010 to 173.7 cent. “The key driver of our downgrade is a reduced growth expectation in the group’s IT division,” Merrion said.

A weaker economic environment across Independent News Media’s Irish, UK and Australasian divisions is leading to Merrion reducing its forecasts for that stock. “We have downgraded our adjusted EPS forecasts for Independent News and Media by -4 per cent in FY08 and -5.5 per cent in FY09,” it said.