Inside the Market's roundup of some of today's key analyst actions
JPMorgan Chase & Co. downgraded Johnson & Johnson to “neutral” from “overweight,” citing the strong run in its share price in recent months.
“Last June, J&J was trading at a 5 per cent discount to the sum-of-its-parts; now the shares trade at an 8 per cent premium after a 30 per cent run (and $54-billion in increased market cap),” said JPMorgan analyst Michael Weinstein, via Benzinga.com. “As good as pharma and consumer staples stocks have been, J&J of late has been even better; and while fundamentals have improved at J&J, at $82 we think this is much more reflected in the name.”
Target: Mr. Weinstein raised his price target to $83 (U.S.) from $77. The average price target on the Street is $79.40, according to Bloomberg data.
Several analysts cut their price targets on Reitmans (Canada) Ltd. after its fourth-quarter results came in well below expectations and the retailer announced a series of strategic initiatives that left some on the Street wanting more.
Among the initiatives were the re-branding of key banners, further development of international distribution deals and optimization of its supply chain.
RBC Dominion Securities analyst Tal Woolley was hoping for a more robust restructuring effort that would include decreasing the square footage of some of Reitmans’ stores to improve efficiency.
“In our opinion, more aggressive action is needed beyond recently announced strategic initiatives before shares outperform, so we are reducing our rating to sector perform,” said Mr. Woolley, who downgraded the stock to “sector perform” from “outperform.”
BMO Nesbitt Burns analyst John Morris also pointed out that – like other retailers – the first quarter of this year may be a rough one for Reitmans given less favourable weather conditions for spring shopping. But he added: “Longer term, we expect RET to remain a strong competitor in the women’s apparel industry, given its solid management team, diverse concepts, and above-average dividend yield,” he said.
Target: RBC maintained a $12 price target. BMO cuts its price target by $3 to $10. The average target among analysts is $11 (Canadian).
Canadian Pacific Railway Ltd. will buy back shares in 2015, as the company should have enough free cash flow by then to purchase 5 per cent of its stock annually, predicts CIBC World Markets analyst Jacob Bout.
The company’s efficiency improvements may come in better than expected by 2014, and sales growth in crude oil shipments could surprise to the upside as well, he said.
“We continue to believe that CP is tracking towards its long-term targets and would not be surprised if CP actually came in at the better end of its 2016 guidance range,” said Mr. Bout.
Target: Mr. Bout raised his price target by $5 to $120 and maintained a “sector performer” rating. The average analyst target is $120.83.
Raymond James analyst Rafi Khouri downgraded Pan Orient Energy Corp. to “market perform” from “outperform” because of disappointing exploration results at its Asian wells.
“Production has dropped considerably from the 2012 exit rate of 1,500 bbl/d, and currently sits at roughly 1,000 bbl/d after averaging 824 bbl/d for the first two months of the year. Results from the ongoing drilling campaign in Thailand have been modest, while in Indonesia both the Buana-1 (appraisal) and Shinta-1 (exploration) wells are being abandoned as dry holes,” he said.
Target: Mr. Khouri cut his price target to $3 from $4. The average target on the Street is $4.11.
After underperforming for three years, shares in Shaw Communications Inc. are up more than 25 per cent since mid-201 thanks to strong cash flow in recent quarters, less aggressive price discounting in Western Canada, and excitement over asset swaps between the company and Rogers Communications.
But Canaccord Genuity analyst Dvai Ghose advises investors not to get carried away, as Shaw still has a lack of “growth drivers” and is seeing growing market share losses.
Target: Mr. Ghose raised his price target to $23 from $19.50 and maintained a “sell” rating. The average analyst target is $23.96.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @ eyeonequities