A statue of Walt Disney and Mickey Mouse sit sin front of the Magic Castle at the Walt Disney Co. Disneyland Park, part of the Disneyland Resort, in Anaheim, California, U.S., on Friday, May 24, 2013.Patrick T. Fallon/Bloomberg
Inside the Market's roundup of some of today's key analyst actions
Credit Suisse has upgraded Xerox Corp. to "outperform" from "neutral" after it split in two, spinning off its business services division from its copier and printer business, "taking into account a more focused print business, potential upside to cost savings, strong management and a well laid out long-term strategy to offset end-market decline," Credit Suisse wrote in a note Tuesday.
Credit Suisse also forecast Xerox stand-alone FY17 and FY18 earnings per share at 89 cents (U.S.), down from $1.10, and 90 cents, respectively.
"We remain cautious about overall printing spend, but believe that management is realistic and has a long-term vision of moving the business away from mature declining markets to growth segments such as graphics and Managed Print Services (MPS). While we believe the near-term revenue pressures will continue, the shifting business mix will help stabilize revenue over time. We forecast revenues of $10.3-billion (down 5 per cent year over year) to /$9.9-billion (down 3 per cent y/y) for FY17/18."
However, it cut its price target to $8 from $10. "Our target price of $8, represents about 30 per cent potential upside from current 'ex-distribution' price, and is based on 9-times our FY18 EPS. We also note that implied dividend yield on the post-split XRX is an attractive 4.3 per cent versus 2.5 per cent for Large Cap IT and 2.8 per cent for Printing peers," said Credit Suisse.
The consensus target price is $10.89 (U.S.), according to Thomson Reuters.
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Bank of Montreal has boosted its price target on Methanex (MX-T) to $53 (U.S.) from $47 as it accounts for large recent methanol price increases "(2017E EPS [earnings per share] about doubles, 2017E EBITDA [earnings before interest, taxes, depreciation and amortization] rises about 50 per cent). Some may suggest, after MEOH's H2/16 share price rebound, that if methanol prices do not continue rising, MEOH cannot rise more. However, methanol is still rising, methanol demand should outgrow supply in 2017, consensus estimates should increase dramatically, our target price implies a conservative approximately 10 per cent 2017E/18E FCF [free cash flow] yield (8 to 9 per cent seems more reasonable), spot methanol implies a $65 to $70 (U.S.) valuation, and a buyback seems imminent," BMO wrote in a note.
BMO kept its "outperform" rating.
But Raymond James downgraded Methanex to "market perform" from "outperform" but maintained its $48 (U.S.) price target.
"While global methanol markets remain extraordinarily tight and we expect Methanex's earnings power to greatly exceed current Street estimates, we also believe that methanol prices are approaching a 'fly-up' crescendo that will soon introduce a short-term headwind as they subsequently fade. As such, despite our belief that several other (non-price) catalysts are still forthcoming, we have elected to downgrade our rating to MP3 (vs. OP2 prior) in order to lock-in recent outsized share price gains," Raymond James wrote in a note.
The consensus is $47, according to Thomson Reuters.
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Algonquin Power & Utilities Corp. has closed its $3.2-billion (Canadian) acquisition of The Empire District Electric Co. on Jan. 1, and has led Desjardins Capital Markets to boost its 2017 estimates for the company.
"We believe the acquisition adds significant value to AQN's utility business, should be accretive to EPS and adjusted FCF/share, enhances AQN's overall growth profile and provides further support to AQN's ability to raise its dividend
10 per cent per year. The positive impacts of this acquisition were reflected in our target, which is unchanged; we reiterate AQN as one of our preferred names in the sector," wrote Desjardins Capital Markets analyst Bill Cabel.
"While we believed the transaction would close around Jan. 1, we had conservatively assumed an end-of-January closing. Therefore, reflecting a full 12-month contribution from EDE drives modest increases in our 2017 adjusted EBITDA and adjusted FCF/share estimates."
Desjardins raised its 2017 adjusted EBITDA to $915-million from $891-million and its adjusted free cash flow per shareto $1.22 from $1.17.
"We believe AQN has the potential to deliver sector-leading returns, and we view it as one of our preferred names. It offers long-term stable operations with significant, relatively low-risk growth, strong likelihood for continued annual dividend increases to fuel further share price appreciation and the potential to make accretive acquisitions," Desjardins wrote.
Desjardins continues to have a "buy" rating on the stock with a price target of $15.25. The consensus is $14.20.
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Innergex Renewable Energy Inc. has announced that its 150 megawatt Mesgi'g Ugju's'n wind project official reached COD (commercial operation date) on Dec. 29, which was consistent with Desjardins' late 2016 expectation.
"INE had stated along with its third-quarter results that it believed the project would COD in 2016, pending completion of turbine electrical and mechanical work and commissioning of the turbines. We were valuing the project with a 15 per cent risking; removing this risking adds about 25 cents to our target, which increases to $15.50," Desjardins analyst Bill Cabel wrote in a note.
Desjardins kept its "hold" rating.
Its previous target was $15.25. The consensus is $16.44.
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Canaccord Genuity has reduced its capital and production estimates for Valeura Energy Inc. but kept its "buy" rating and $2 (Canadian) price target.
"Valeura announced that it has received government approvals for its Banarli farm-out, West Thrace Deep Rights sale and TBNG acquisition. In our view, these are important approvals, as they are expected to trigger total payments of $18-million (U.S.) from partner Statoil. The approvals will also enable Valeura to advance its TBNG acquisition which, on closing, will provide control over JV assets and increase production by about 50 per cent," wrote analyst Kimberly Hedlin.
"Previous 2017 guidance called for 12-14 locations with a capital budget of $30-$33-million and sales volumes of 2,000-2,200 barrels of oil equivalent per day (boe/d). Due to approval and financing delays, we have reduced our capital and production estimates by about 6 per cent and 3 per cent, respectively, to $28-million and 2,050 boe/d. We have also updated our Turkish Lira assumptions, which has contributed to 7 per cent lower 2017E CFPS [cash flow per share] estimates of $0.26. While our 2017E 2P NAV [net asset value] has declined 10 per cent to $1.85/share, we are maintaining our target given the upside potential associated with Valeura's upcoming conventional and unconventional program. We continue to rate VLE a "buy" given its high gas prices, growth potential, exploration upside and about 50 per cent discount to our Base NAV."
The consensus is $2.16.
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Shares in InterContinental Hotels Group were up as much as 3.8 per cent overseas Tuesday, boosted by an upgrade to "overweight" from "equal-weight" from Barclays, sending IHG's shares to a record high.
Barclays analysts said that they expected IHG's results in February to be a positive catalyst for the stock, and see a benefit from the firm's exposure to the U.S.
The consensus target price is $42.77 (U.S.). The shares traded as high at $45.60 in New York on Tuesday.
(Reuters)
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Evercore ISI upgraded Walt Disney stock to "buy" from hold, and raised its price target on the stock to $120 from $103. Evercore cited an improving economic backdrop "and a possible, retroactive [Donald Trump/Paul Ryan] tax reform-adjusted EPS."
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Citi upgraded Verizon shares to "buy" from "neutral," and hiked its price target to $60 from $55. Citi cited an opportunity for multiple expansion "given the prospects to improve free cash flow from a combination of expanding its addressable market for revenue, benefiting from potential tax reform, and improving its strategic position through mergers and acquisitions."
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Abercrombie & Fitch's stock was downgraded to "hold" from "buy," noting its turnaround efforts are progressing at a slower pace than expected. Abercrombie's stock plummeted 55 per cent in 2016.
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Xerox's stock spiked more than 10 per cent in the premarket after JPMorgan upgraded its stock to "overweight" from "neutral," citing the spinoff of its Conduent business. Xerox shares fell 17.87 percent last year.
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Barclay's boosted Wells Fargo's price target to $65, Goldman Sach's target to $262 from $210 and kept an "equalweight" rating, and raised its target for Bank of America to $26 from $19 and kept an "equalweight" rating.
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