Friday’s analyst upgrades and downgrades

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Inside the Market's roundup of some of today's key analyst actions. This file will be updated often during the trading day so check back for new details.

Canadian Tire Corp. (CTC.A-T; CTC-T) got off to "a very good start," delivering strong first-quarter results that emphasized "solid momentum" across its operating segments, said RBC Dominion Securities analyst Irene Nattel.

Ms. Nattel upgraded the stock to "top pick" from "outperform." She said the change was made to reflect: strong operating momentum; multiple re-rating potential and the possibility of a stepped-up buyback, stronger dividend growth and acquisitions.

The company reported a 2.23-per-cent decline in revenue year over year, due largely to lower gas prices. Excluding petroleum, it was a 2.2-per cent increase. Diluted earnings per share was 88 cents in the quarter, flat compared to the same period in 2014.

It saw retail sales gain 4.5 per cent and same-store sales rise 4.7 per cent year over year, an increase that impressed Ms. Nattel given "tepid consumer spending and a highly competitive/promotional backdrop" during the quarter.

She added:  "The key take-away from the CTC results is that the simultaneous re-positioning and remerchandising of key retail categories across all banners and focus on productivity is enabling CTC to deliver sector-leading performance. Results underscore solid momentum in all operating segments and reinforce our constructive view on the stock," she said.

Ms. Nattel also raised her price target to $164 from $159 (Canadian). The analyst consensus price target is $143.67.

She said: "CTC continues to trade at the low end of its long-term valuation band and remains one of the cheapest discretionary retailers in North America, as investors remain lukewarm on the outlook. The sequence of value creation initiatives since November of 2012 has begun to drive multiple re-rating, but favourable evolution of the balance sheet and a clearer articulation of strategy could potentially give rise to multiple re-rating."

The stock was also raised to "action list buy" from "buy" at TD Securities with a target price of $160 (Canadian) per share.

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Following a strong quarter that validated the company's intellectual property strategy, RBC Dominion Securities analyst Haran Posner upgraded DHX Media Ltd. (DHX.B-T) from "sector performer" to "outperform."

The company's first-quarter revenue of $86-million and earnings before interest, taxes, depreciation and amortization of $28-million beat both Mr. Posner's forecasts ($66-million and $23-million) and the consensus view ($69-million and $23-million). They also represented a year-over-year increase of 195 per cent and 209 per cent respectively, reflecting, according to Mr. Posner, strong organic growth and recent acquisitions (including Family Channel, Epitome Pictures and Nerd Corps Entertainment Inc.). Distribution revenue of $31-million beat the consensus estimate of $16-million due largely to a $13-million contribution from the Degrassi franchise, which is now streaming on Amazon.

The analyst noted he downgraded DHX in September of 2014 due to relatively modest returns despite being bullish on its content business, feeling the stock was "ahead of itself." He wanted to see stronger organic revenue growth rather than margin expansion, and he said that has since been achieved. 

Mr. Posner said: "We continue to see strong industry fundamentals fueled by the expansion and proliferation of digital services, and DHX remains well positioned to capitalized on these trends with: (i) a solid production pipeline and a growing opportunity with respect to over-the-top originals/co-productions (e.g., Gadget on Netflix); (ii) the addition of several slate/library anchors in the last couple of years (e.g., Degrassi, Cloudy with a Chance of Meatballs); (iii) solid licensing momentum across both [subscription video on demand ] (Netflix, Amazon) and [ad supported video on demand] (Hulu, YouTube) platforms; (iv) meaningful M&L potential over the next few years (Teletubbies, Twirlywoos, Make it Pop, Slugterra); and (v) the likelihood of accretive acquisitions.``

He raised his price target to $11 from $9.50 (Canadian). The analyst consensus mean price target is $9.01.

Elsewhere, Canaccord Genuity analyst Aravinda Galappatthige maintained a ``buy" rating but raised his target price to $11.50 from $11, while Euro Pacific analyst Rob Goff raised his target to $13 from $12 with an unchanged "buy" rating.

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Given the uncertainty surrounding the economic prospects for Alberta following the election victory of the New Democratic Party, Canadian Western Bank (CWB-T) has been downgraded to "underperform" from "neutral" by Credit Suisse analyst Kevin Choquette.

Referring to a May 12 article in The Globe and Mail about the appointment of veteran NDP strategist Brian Topp as incoming premier Rachel Notley's chief of staff, Mr. Choquette suggests the addition could have a negative effect on business confidence in the province. The new chief of staff has deep roots with the federal NDP but is a newcomer to Alberta. This may be negative for business confidence in Alberta, he says.

"CWB is very much reliant on loan growth (Alberta economy & confidence) and net interest margin to drive earnings," the analyst said. "Loan growth could slow dramatically, and the net interest margin may be under pressure and not fully respond positively in the event of higher rates if the broker CD market becomes more competitive or if consumers are more rate sensitive; hence, too much earnings risk, at least to growth. Our earnings estimates are 4 per cent below consensus on 2016, so we expect lower loan growth guidance from CWB and perhaps lower earnings guidance"

Based on the near-term uncertainty, Mr. Choquette reduced his price target to $32 (Canadian) from $35. The analyst consensus is $31.42.

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Western Forest Products Inc. (WEF-T) is likely to see a "dichotomy" in its markets for the remainder of 2015, according to CIBC World Markets analyst Mark Kennedy, with improvements in the North American repair and renovation sector while the export markets in Japan and China struggle.

Mr. Kennedy touted the company's strong balance sheet and forecasted it to be debt free by the fourth quarter of this year, upgrading the stock from "sector performer" to "sector outperformer." He expects the company to maintain its annual 8-cent dividend in the near term, but he said an increase could come in 2016 as its discretionary capital program will be further advanced with greater visibility to the North American and export markets.

The company reported  first-quarter earnings before interest, taxes, depreciation and amortization of $29.6-million and net income of $27.6-million or 7 cents per share. Those results beat his estimates of $23.6-million, $15-million and 4 cents per share, respectively.

Though he warned that China's market woes will have "greatest negative impact on 2015 results," he maintained his price target of $2.80 (Canadian), compared to the consensus of $2.84. He expects a 46-per-cent total return on his target price over the next year.

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Though he expects the pace of internal growth for Crombie Real Estate Investment Trust (CRR.UN-T) to accelerate in 2016, Canaccord Genuity analyst Mark Rothschild forecasted relatively flat net operating income through the current year, causing him to downgrade the stock from "buy" to "hold."

For the first quarter, Crombie reported funds from operations per diluted unit of 27 cents, a  decline of a cent from the same period in 2014 and missing the consensus forecast by a penny. Excluding a write-off of deferred financial charges, funds from operations was "essentially flat." Same–property cash net operating income rose 0.3 per cent year over year.

Mr. Rothschild said: "Though positive, internal growth has decelerated for the past four quarters, and it is likely going to take a few more quarters for growth to resume."

Crombie is actively seeking tenants for three since-vacated Target stores, which the analyst expects to be occupied by next year. Coupled with occupancy increases in its redeveloped Terminal Centre project in Moncton, he predicted better results next year.

However, given a possible decline in net operating income in the near term, he dropped his price target to $13.50 from $14 (Canadian). The analyst consensus is $14.72.

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In other analyst actions:

Cequence Energy Ltd. (CQE-T) was raised to "buy" from "hold" at TD Securities. The 12-month target price is $1.55 (Canadian) per share.

Concordia Healthcare Corp. (CXR-T) was downgraded to "hold" from "buy" at Mackie Research Capital. The target price is $93 (Canadian) per share.

Encana Corp. (ECA-T; ECA-N) was downgraded to "market perform" from "outperform" at FirstEnergy Capital. The 12-month target price is $14.50 (U.S.) per share.

Pure Technologies Ltd. (PUR-T) was rated new "Outperform" at Boenning & Scattergood. The 12-month target price is $10 (Canadian) per share.

Canaccord Genuity upgraded McCoy Global (MCB-T) to "buy" from "hold" and raised its price target to $5.50 (Canadian) from $4.50.

RBC Dominion Securities upgraded DHX Media (DHX.B-T; DHX.A-T) to "outperform" from "sector perform" and raised its price target to $11 (Canadian) from $9.50.

Raymond James downgraded Cervus Equipment (CVL-T) to "market perform" from "outperform" and cut its price target to $18 (Canadian) from $21.50.

BMO Nesbitt Burns upgraded Boardwalk REIT (BEI.UN-T) to "outperform" and raised its price target to $68.50 (Canadian).

JPMorgan downgraded Deere & Co. (DE-N) to "underweight" and cut its price target to $84 (U.S.) from $90.

BMO Nesbitt Burns upgraded J.C. Penney (JCP-N) to "market perform" and raised its price target to $8 (U.S.)

Adobe Systems Inc. (ADBE-Q) was rated new "overweight" at JPMorgan. The target price is $91 (U.S.) per share.

Advaxis Inc. (ADXS-Q) was rated new "Buy" at Jefferies. The 12-month target price is $27 (U.S.) per share.

Five Prime Therapeutics Inc. (FPRX-Q) was rated new "outperform" at Oppenheimer. The 12-month target price is $45 (U.S.) per share.

Tribune Publishing Co. (TPUB-N) was rated new "underperform" at Macquarie. The 12-month target price is $14 (U.S.) per share.

Trillium Therapeutics Inc. (TRIL-Q; TR-T) was rated new "outperform" at Oppenheimer. The 18-month target price is $32 (U.S.) per share.

Union Pacific Corp. (UNP-N) was raised to "buy" from "hold" at TD Securities. The 12-month target price is $120 (U.S.) per share.

Yum! Brands Inc. (YUM-N) was raised to "overweight" from "neutral" at JPMorgan. The 9-month target price is $108 (U.S.) per share.

AGT Food & Ingredients Inc. (AGT-T) was raised to "outperform" from "sector perform" at Alta Corp Capital. The 12-month target price is $34 (Canadian) per share.

Anika Therapeutics Inc. (ANIK-Q) was rated new "outperform" at Northland Securities. The target price is $56 (U.S.)  per share.

Canamax Energy Ltd. (CAC-X) was rated new "speculative buy" at Clarus Securities. The 12-month target price is 75 cents (Canadian) per share.

Conifex Timber Inc. (CFF-T) was raised to "sector outperform" from "sector perform" at CIBC. The 12-month target price is $12 (Canadian) per share.

Kohl's Corp. (KSS-N) was downgraded to "neutral" from "buy" at Sterne Agee CRT. The 12-month target price is $70 (U.S.)  per share.

NuVasive Inc. (NUVA-Q) was rated new "market perform" at Northland Securities. The target price is $46 (U.S.)  per share.

Pacific Rubiales Energy Corp. (PRE-T) was downgraded to "reduce" from "hold" at TD Securities. The 12-month target price is $5.50 (Canadian) per share.

Rubicon Minerals Corp. (RMX-T; RBY-A) was raised to "speculative outperform" from "market perform" at BMO Capital Markets. The 12-month target price is $2 (Canadian) per share.

Smith & Nephew PLC (SNN-N) was rated new "outperform" at Northland Securities. The target price is $45 (U.S.)  per share.

Stryker Corp. (SYK-N) was rated new "outperform" at Northland Securities. The target price is $109 (U.S.)  per share.

TORC Oil & Gas Ltd. (TOG-T) was raised to "buy" from "neutral" at Dundee. The 12-month target price is $11.25 (Canadian) per share.

Whiting Petroleum Corp. (WLL-N) was downgraded to "neutral" from "buy" at Tigress Financial.

Wright Medical Group Inc. (WMGI-Q) was rated new "outperform" at Northland Securities. The target price is $32 (U.S.)  per share.

Zimmer Holdings Inc. (ZMH-N) was rated new "outperform" at Northland Securities. The target price is $130 (U.S.)  per share.

With files from Bloomberg News