Inside the Market’s roundup of some of today’s key analyst actions. This post will be updated with more analyst commentary during the trading day.
General Motors Co. is the new favourite of Goldman Sachs.
The Wall Street banking giant added GM to its “conviction buy” list today - the stocks that are its favourite investing ideas - as it bumped Ford Motor Co. off the list.
“Part of preference for GM over Ford is that GM has a number of meaningful near-term catalysts that don't appear to be reflected in the share price," the Goldman analysts said in a research note.
Goldman noted that General Motors should benefit from their decision to significantly increase research and development. Meanwhile, margins are poised to improve thanks to GM’s new trucks, and GM’s $28-billion global pension liability should be aided by an expected rise in interest rates.
Goldman analysts, led by Patrick Archambault, don’t think Ford has as many catalysts to propel further stock gains, despite strong growth prospects as North American demand for autos picks up.
Target: Goldman raised its price target on GM to $45 (U.S.) from $38. It also increased its target on Ford to $20 from $17 and maintained a “buy” rating.
The average analyst target on GM is $40.79, and on Ford $17.08, according to Bloomberg data.
Raymond James analyst Steve Hansen downgraded Alliance Grain Traders Inc. to “market perform,” because of the company’s stellar share price performance in recent weeks.
Its stock has risen nearly 45 per cent over the past 10 weeks, whereas the TSX composite only gained 1 per cent. While fundamentals for pulse products and its earnings outlook still look positive, Mr. Hansen thinks better buying opportunities will arise.
“We recommend that investors wait for an opportunistic pullback in AGT shares before accumulating,” he said.
Target: Mr. Hansen, who previously rated the stock as “outperform,” maintained an $18 price target. The average target is $15.05.
Raymond James analyst Luc Mageau downgraded Twin Butte Energy Inc. to “outperform” from “strong buy” following another setback at its Primate property in western Saskatchewan this week.
“Increased watercuts in wells caused production to decline to 1,400 barrels of oil equivalent per day over the last 10 days (from greater than 2,100 boe/d in June). Given that this is the second upset, we have decided to be as conservative as possible with the production outlook - we have completely removed Primate from our estimates post-2013,” Mr. Mageau said.
“Although the company expects that it will actually produce into 2014, we believe it is more prudent to be on the conservative side for now,” he added.
Target: Mr. Mageau cut his price target to $2.75 from $3.25. The average target is $2.58.
RBC Dominion Securities analyst Paul C. Quinn downgraded Tembec Inc. to "sector perform" from "outperform," citing the company's high debt levels and weakness in dissolving pulp markets.
"While we see long-term upside in Tembec given its top-3 position in specialty dissolving pulp, we suspect weakness in commodity viscose/high-yield pulp/paper markets will dampen earnings power," Mr. Quinn wrote in a note. "We are also concerned with the company's increased debt from the Temiscaming specialty cellulose project."
The Quebec project is expected to be completed in September of next year. Tembec raised its cost guidance for it by $45-million to $235-million in late April.
Target: Mr. Quinn cut his price target to $3 from $5.50. The average target is $3.19.
The recent rise in interest rates should ease investors' concerns about the pension shortfall at Resolute Forest Products Inc., while the weaker Canadian dollar will boost the company's competitiveness, said RBC Dominion Securities analyst Paul C. Quinn.
He upgraded the stock to "sector perform" from "underperform," also encouraged by an improving outlook for newsprint exports.
Target: Mr. Quinn raised his price target to $16 (U.S.) from $13. The average target is $14.88.
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