Shoppers and pedestrians pass in front of a <strong>Foot</strong> <strong>Locker</strong> Inc. store on the Third Street Promenade in Santa Monica, California, U.S., on Tuesday, Aug. 16, 2016.Patrick T. Fallon/Bloomberg
Inside the Market's roundup of some of today's key analyst actions
Footwear and apparel retailer Foot Locker (FL-N) had strong second quarter results and "solidly beat expectations," says Canaccord Genuity analyst Camilo Lyon. In addition to the 4.7-per-cent growth despite the negative impact from the temporary closure of the company's flagship store in New York, Mr. Lyon said basketball "made a strong rebound" following a decline in the first quarter, and "the category remains robust."
He also says this "coupled with ongoing momentum in lifestyle running" and casual/classics shoes "create an incrementally favourable outlook" for Foot Locker and the company "continues to adapt to the changing dynamics in the women's apparel business."
"We continue to believe it presents a long-term growth opportunity that it should capture as the assortment improves."
Mr. Lyon notes the company's strategy of store remodels also appears "to be contributing nicely to growth as Champs saw growth in all its categories," resulting in his reiteration of his "buy" rating and his price target raise to $79 (U.S.) from $75. The consensus is $71.89, according to Thomson Reuters.
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"More of the same Is not a bad thing" with gold mining company Barrick Gold (ABX-T) as it continues to pay down debt, says RBC Capital Markets analyst Stephen Walker. "Debt repayment continues with potential for $3.2-billion (U.S.) in non-core asset sales. Following $126-million in debt repayments in the second quarter, ABX has $2.4-billion in cash, $9-billion of debt, and debt to total cap (ratio) of 48 per cent, down from 51 per cent at year-end 2015."
While Mr. Walker forecasts production to decline over 2018 to 2020, "before new projects contribute," he notes "potential non-core asset sales include the 64-per-cent stake in Acacia (~$2.1 billion), the 50-per-cent stake in Porgera ($505-million) and the 50-per-cent stake in KCGM ($728-million) at $1,350 gold @ 5 per cent."
Mr. Walker's price target increases to $25 (U.S.) from $24. The consensus is $22.92. His "sector perform" rating remains unchanged.
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Discount retailer Dollarama Inc. (DOL-T) has "sector-leading earnings growth visibility and runway, predictability, and the relative defensiveness of the company's revenue base," making it "the leading retailer in our universe of coverage," says RBC Capital Markets analyst Irene Nattel. She expects "another sector leading quarter" when the company reports its results on Sept. 1, "with forecasted EPS growth of 17.5 per cent to $0.87/share (consensus $0.84, range $0.81-$0.87), driven by EBITDA growth of 12.3 per cent and consistent progress on share buyback."
"While valuations of staples and staple-like names are at a premium to historical levels, they remain well supported in our view, underpinning our valuation multiples on DOL. With an economic backdrop that we believe will continue to favour value retailers, and as DOL continues to gain share of consumer wallet in Canada, we would expect DOL to sustain its premium valuation relative to the group average."
Her price target increased to $120 from $111 due to what Ms. Nattel says is "sector-leading earnings growth visibility." The consensus is $101.67.
She maintained her "outperform" rating.
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Engineering and construction company Fluor Corp. (FLR-N) is "an industry leader with a forward thinking management team and excellent long-term EPS [earnings per share] growth prospects," says Canaccord Genuity analyst Yuri Lynk.
The reasons for the "hold" recommendation include the company's "record backlog," "excellent near-term bookings momentum," "end-market diversity," "mega-project execution capabilities," and "unique integrated solutions," which allow Fluor "to secure out-sized new awards market share." However, Mr. Lynk says "slower than typical backlog burn, a fairly 'young' backlog that might not meaningfully drive margin until 2018, and an execution [hiccup] that could pressure near-term EPS keep us from outright recommending the stock."
Mr. Lynk increased his price target to $54 from $52. The consensus is $54.29, according to Thomson Reuters.
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Australia-based gold mining and exploration company OceanaGold (OGC-T) has "continued strength in operations and progress at Haile, which provides low-cost production growth starting in 2017," says RBC Capital Markets analyst Sam Crittenden. "A successful ramp-up of the Haile gold mine in South Carolina represents a chance to re-rate to higher multiples while this is also the biggest near-term risk. Haile adds a third low-cost mine to the company's production profile, and we model annual production of 215,000 ounces of gold at low cash costs of $520 (U.S.) per ounce. We also believe significant exploration upside exists at Haile, and an optimization study on the underground operations is expected to be completed in the second quarter of 2017." The company's strong operations were also "anchored by the low-cost Didipio mine, delivering production of 225,000 ounces gold and 12,000 tonnes of copper with low cash costs on a consolidated basis."
The analyst increased the rating to "outperform" from "sector perform" and raised the price target to $6.50 (Australian) from $5.40. The analyst has also added a Canadian price target of $6.50 (Canadian). The consensus for the latter is $5.11.
In other analyst actions:
Brokerage Jefferies has cut its price target on Estee Lauder (EL-N) after the company reported lower than expected sales, but earnings that met Street expectations. Its price target is down to $95 (U.S.) from $98 but it maintained its "hold" rating on the stock.
Avondale Partners has downgraded Monster Worldwide (MWW-N) to "underperform" from "market perform" with a price target of $3.40 (U.S.).
Raymond James has downgraded Garmin Ltd. (GRMN-Q) to "market perform" from "outperform" and removed its price target, which had previously been $57 (U.S.).
American International Group's (AIG-N) sale of United Guaranty Corp. to Arch will help improve AIG's earnings profile in 2017, says BMO Capital analyst Charles Sebaski. As a result he has boosted his price target to $64 (U.S.).
Credit Suisse upgraded Hormel Foods (HRL-N) to "outperform" from "neutral" with a price target of $43 (U.S.), up from $38.
RBC Capital boosted its price target on HP Inc. (HPQ-N) to $14 and reiterated its "sector perform" rating on the stock.
Longbow Research downgraded Stanley Black & Decker (SWK-N) to "neutral" from "buy."