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.

Rogers Communications Inc. (RCI.B-T) is enjoying improved financial and subscriber momentum, said Euro Pacific analyst Robert Goff.

On the heels of second-quarter results that were "modestly ahead" of expectations, Mr. Goff upgraded his rating for the stock to "buy" from "hold."

The media giant announced Thursday quarterly revenue of $3.403-billion, modestly beating the consensus forecast of $3.356-billion and an increase of 5.9 per cent from the same period a year ago. Earnings before interest, taxes, depreciation and amortization and earnings per share were $1.337-billion and 70 cents, compared to the consensus of $1.310-billion and 78 cents. Those figures represent an increase of 1.8 per cent and decline of 4.8 per cent year over year respectively.

"Wireless financials and subscriber traction appear to be strengthening," he said. "We expect the same gains for [cable television] to build through 2016 as DOCSIS 3.1 enabled 1+ Gig service, IPTV, and improved legacy video begin to gain traction"

Mr. Goff raised his target price for the stock to $50 (Canadian) from $46. The analyst consensus price target is $45.44, according to Thomson Reuters.

"With Rogers valued at roughly 7.6x 2015 EV/EBITDA and Telus at 8.1x we maintain a modest preference for TELUS reflecting its nearer-term momentum," he said. "However, the margin of preference is marginal with similar forecast returns. Our view considers Telus' relative EBITDA growth for 2015 at 4.2 per cent versus 0.6 per cent, dividend growth at 11.4 per cent versus 5.1 per cent, [normal course issuer bid] for 2.6 per cent versus none, and with full attention to its relatively stronger competitive position (versus Shaw) and lower competitive intensity in the west versus Rogers across its cable footprint.

"Our preference would swing with further evidence of Rogers' improving financial and subscriber momentum and/or evidence of heightened competitive pressures impacting Telus. We look to improving cable/broadband capabilities strengthening Rogers' competitive position while prospective challenges for Telus would include Shaw's introduction of the X1 Platform and the emergence of a fourth wireless competitor in Western Canada."

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Stock of Mullen Group Ltd. (MTL-T) is now "fairly valued" in the market, according to Raymond James analyst Andrew Bradford, who upgraded his rating for the company to "market perform" from "underperform."

Mullen reported second-quarter earnings before interest, taxes, depreciation and amortization, after adjustments for non-cash and one-time items, of $48-million, beating both the consensus estimate of $41-million and Mr. Bradford's forecast of $42-million. He noted oilfield margins were "resilient" despite a 37-per-cent drop in revenue year over year.

"MTL posted an 18.3-per-cent EBITDA margin in 2Q, only 80 [basis points] below year-ago levels. Mullen generally substitutes away from third party contract operators during periods of lower activity, essentially using them as swing capacity. The higher representation of its own fleet capacity in the revenue mix during slower periods tends to bias margins higher.

"This was evident in its 2Q results where contractors accounted for only 29 per cent of [oilfield services] revenues, the lowest level since 1Q13 (when OS margins last peaked at nearly 27%). We expect Mullen will continue to minimize its contractor utilization until general oilfield activity recovers."

The company announced it expects to maintain its $1.20-per-share dividend, which Mr. Bradford estimates will cost 65 per cent of its operating cash flow for the year. It believes that dividend will be sustainable if EBITDA stays above $200-million annually. Mr. Bradford projects it to be $228-million in 2015.

The analyst raised his target price for the stock to $20.50 from $20.00. The analyst consensus is $21.08.

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Store restructuring should help guide future results for Loblaw Companies Ltd (L-T), said BMO Nesbitt Burns analyst Pete Sklar.

On Thursday, the company announced second-quarter results which Mr. Sklar summarized as "solid." It reported a fully diluted adjusted EPS of 84 cents, compared to 74 cents in the same period in 2014. That result was in line with Mr. Sklar's forecast and a penny better than the consensus view.

Mr. Sklar pointed to three disclosures, in particular, that he feels are positive toward the company's future. They are:

1. Revised synergy guidance to slightly above $200-million by the end of the calendar year;

2. The expectation that the company will achieve its deleveraging target in the fourth quarter rather than the previously announced goal of the first quarter of 2016;

3. The plan to close 52 unprofitable stores over the next 12 months as part of its "rationalization efforts," which will drop sales annually by approximately $300-million but improve operating income by $35-40-million.

He maintained his "outperform" rating while raising his price target to $79 (Canadian) from $73. Consensus is $70.54.

"We believe Loblaw will continue to benefit from incremental synergies related to the acquisition of Shoppers Drug Mart, improvements related to the continued implementation and optimization of the SAP system, as well as normal top-line growth, which has been facilitated by FX-related grocery inflation," he said.

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A recent decline in the share price of Exco Technologies Ltd. (XTC-T) caused Canaccord Genuity analyst David Tyerman to upgrade his rating for the stock to "buy" from "hold."

"We believe investors should benefit from good [earnings per share] growth from solid sales growth and margin expansion from new facilities and improving performance [from its Automotive Leather Company subsidiary]," said Mr. Tyerman.

The company announced a third-quarter EPS of 23 cents, meeting Mr. Tyerman's forecast but short of the 24-cent consensus. However, the result was an increase of 18.5 per cent from the same period in 2014.

"EPS grew quickly year over year due to good organic sales growth, supported by good margins at mature operations," said Mr. Tyerman. "But results lagged sequentially (and came in below expectations) due to a FX drag of roughly $2-million on the Casting and Extrusion (CE) segment and a roughly $1-million temporary hit from several extrusion plants. This was partially offset by strong performance from the Automotive Solutions (AS) business. The FX drag was due to the modest Canadian dollar recovery in Q3/F15, but that has since been reversed. The extrusion plants, which were negatively impacted by reorganization/expansion initiatives, appear to be past the worst of those impacts."

The analyst also boosted his price target for the stock by a loonie to $18. Consensus is $19.

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Valeant Pharmaceuticals International Inc. (VRX-N, VRX-T) appears set for continued organic growth and is poised for further acquisitions, CIBC World markets analyst Stephanie Price.

The drugmaker reported second-quarter revenue rose to $2.73-billion (U.S.), above the consensus of $2.54-million. Cash earnings, or profit adjusted for one-time items, was $2.56 per share, above the consensus of $2.46 per share. The GAAP net loss attributable to the company was $53 million, or 15 cents per share, compared with net profit of $125.8 million, or 37 cents per share, a year earlier.

It also raised its forecasts for the coming year. It expects 2015 revenue of $10.7-billion to $11.1-billion, up from its prior guidance of $10.4-billion-$10.6-billion. It also raised its adjusted profit forecast to $11.50-$11.80 per share, from $10.90-$11.20.

"Valeant reported solid Q2 results that were ahead of consensus on all metrics," said Ms. Price. "Organic growth was above expectations, margins were strong and cash flow was robust." The only near-term headwinds are unfavourable currency impacts and competitors' developing generic versions of its drugs Xenazine and Targretin, he said.

She raised her price target on the U.S. issue of the stock to $275 (U.S.) from $250. The average analyst consensus price, according to Bloomberg, is $273.79.

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Believing the Street will overlook its strong cash yield and earnings growth potential, Credit Suisse analyst Dan Galves upgraded General Motors Corp. (GM-N) to "neutral" from "underperform."

The automaker reported second-quarter earnings per share of $1.29 (U.S.), well above Mr. Galves's estimate of $1.07 and the consensus of $1.08. The analyst attributed the result to "significantly better-than-expected" results in North America and Europe.

"China was below our expectations, but margin was flat, addressing (for now) the key concern driving recently very negative sentiment," he said.

He increased his EPS forecast for 2015 and 2016 to $4.50 and $4.70 from $4.35 and $4.65, respectively.  He maintained his $33 target price, compared to a $40.27 consensus among analysts.

"Our underlying cautious view on automakers has not changed," said Mr. Galves. "We continue to see a laundry list of risks ahead … from near-term to long-term: China margin pressure, US Pickup price competition, Japanese FX advantage, technology/regulatory cost pressure, poor industry structure, potential U.S. pricing correction, increased EV adoption, and car-sharing/autonomous vehicles. But at 7.2x P/E on 2015, in addition to a 4.5-per-cent dividend yield, we think GM stock is properly discounting these risks."

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In other analyst actions:

Alamos Gold Inc (AGI-N) was raised to "outperform" from "market perform" at Raymond James by equity analyst Phil Russo. The 12-month target price is $6 (U.S.) per share.

Amazon.com Inc (AMZN-Q) was raised to "buy" from "neutral" at B. Riley by equity analyst Scott Tilghman. The 12-month target price is $646 (U.S.) per share.

Chubb Corp (CB-N) was raised to "buy" from "neutral" at Janney Montgomery by equity analyst Larry Greenberg.

Walt Disney Co (DIS-N) was raised to "buy" from "hold" at Topeka Capital by equity analyst David Miller. The 12-month target price is $138 (U.S.) per share.

Equifax Inc (EFX-N) was downgraded to "neutral" from "outperform" at Robert Baird by equity analyst Jeffrey Meuler. The 12-month target price is $108 (U.S.) per share.

General Motors Co (GM-N) was raised to "neutral" from "underperform" at Credit Suisse by equity analyst Dan Galves. The target price is $33 (U.S.) per share.

Juniper Networks Inc (JNPR-N) was raised to "neutral" from "sell" at MKM Partners by equity analyst Michael Genovese. The 12-month target price is $28 (U.S.) per share.

Macy's Inc (M-N) was downgraded to "underweight" from "neutral" at Atlantic Equities by equity analyst Daniela Nedialkova. The 12-month target price is $64 (U.S.) per share.

SolarCity Corp (SCTY-Q) was raised to "outperform" from "neutral" at Robert Baird by equity analyst Ben Kallo. The 12-month target price is $71 (U.S.) per share.

Superior Plus Corp (SPB-T) was downgraded to "Market Perform" from "Buy" at Cormark Securities by equity analyst Sarah Hughes. The 12-month target price is $12.75 (Canadian) per share. It was raised to "Outperform" from "Market Perform" at Raymond James by equity analyst Steven Hansen with a target price of $13 per share. It was also raised to "action list buy" from "Buy" at TD Securities by equity analyst Damir Gunja with a $16.50 target per share.

Marriott Vacations Worldwide Corp (VAC-N) was raised to "buy" from "neutral" at MKM Partners by equity analyst Christopher Agnew. The 12-month target price is $100 (U.S.) per share.

Weatherford International PLC (WFT-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The 12-month target price is $15 (U.S.) per share.