Monday’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.

Raymond James analyst Ben Cherniavsky said there is an "excess capacity" with Canadian airlines, leading to heavy discounting in the market.

"Until this capacity issue is addressed, we expect the returns for Canada's airlines to be compromised (despite lower oil prices) and that their stocks will, as a result, continue to trade at a discount to the peers in the U.S. where capacity discipline remains evident," he said.

Admittedly taking a "bearish view" of the sector, Mr. Cherniavksy downgraded WestJet Airlines Ltd  from "outperform" to "market perform."

Though he has revised his quarterly financial forecast upward to reflect increased profits, that was largely due to fuel prices ending below expectations. He does note that much of those gains were offset by a weaker Canadian dollar.

"We still like the company's long-term growth prospects and relative cost advantage, but believe that the current capacity dynamics will continue to weigh on its shares in the near-term," said Mr. Cherniavksy.

The analyst also lowered his target price to $31 (Canadian) from $39. The analyst consensus is $38.71

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Credit Suisse analyst Georgios Mihalos sees the potential for Global Payments Inc. to record high single digit growth in constant currency revenue, and adjusted earnings per share growth of more than 15 per cent over the next two fiscal years. His forecast factors in expected buybacks and future mergers and acquisitions activity.

"We remain very confident in our view that GPN is the best positioned payment processor in our universe to deliver intermediate-term earnings upside relative to estimates with multiple catalysts - many unique to the company - still on the horizon," Mr. Mihalos said.

He pointed to several potential catalysts for the next 12 months, including: pricing opportunities based on global interchange rate reductions; European joint venture opportunities; roll out of American Express' OptBlue program; and sustained IPO revenue growth.

Mr. Mihalos adjusted his fiscal year 2016  earnings per share estimate to $5.44 from $5.36  (U.S.) and 2017 to $6.03 from $5.94 to reflect a recent $100-million accelerated share repurchase. He said the company has about $100-million buyback capacity remaining.

He raised his price target to $111 from $104. The analyst consensus is $102.96 (U.S.).

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The exploration and development of Fortuna Silver Miners Inc.'s San Jose facility in Mexico should provide organic growth, as well as the expansion of margins through higher grades, said Raymond James analyst Chris Thompson.

Mr. Thompson is impressed with Fortuna management's ability to manage costs, particularly the ability to fully fund an expansion to San Jose. He noted a recent $40-million debt facility provides further balance-sheet flexibility.

He upgraded the company from his "outperform 2" rating to "strong buy 1" based on the recent weakness of its stock.

"For a well-funded, high margin polymetallic organic production/cash flow growth story, we believe [Fortuna] is undervalued relative to peers," he said.

He maintained a price target of $7 (Canadian). The consensus is $4.98.

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Dundee Capital Markets analyst Stephen Atkinson is lowering is earnings per share forecast for KapStone Paper and Packaging Corp. due to the higher shipping costs on the U.S. West Coast in the wake of the port strike.

Mr. Atkinson is now estimating an earnings per share of 41 cents (U.S.) from 45 cents. Coupled with the appreciation of the U.S. dollar, he also downgraded KapStone's rating to "neutral" from "buy."

The company's backlog has carried over to B.C. ports too, including Vancouver and Prince Rupert. He expects delays to continue until the second quarter of 2015 until backlogs are dealt with.

" Our forecast also assumes an allowance for lower realized prices on offshore exports to both Asia and Europe owing to U.S. dollar strength," he said.

He has dropped his price target to $32 (U.S.) from $36. The consensus is $34.63.

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Following an announcement from Precision Castparts Corp. that its earnings in the latest quarter will likely fall well below Wall Street expectations, UBS Global Research analyst David Strauss is dropping his earnings per share estimate to $12.85 (U.S.) from $13.70.

Precision expects a 25 cent to 30 cent EPS shortfall in the fourth quarter, blaming shrinking demand in its energy and power sectors.

"Results will be weighed down by further tough comps on oil and gas and relatively weak commercial aero growth as the company waits for ramp on A350/787 and re engine narrowbodies in FY17 and beyond," he said. "The potential remains that PCP could step up its balance sheet leverage to help bridge a weak FY16 to a stronger FY17 and beyond."

Mr. Strauss thinks the company's net leverage allows for $3-4-billion in debt to possibly be used to fund repurchase agreement and acquisitions.

"We believe initial FY16 guidance that is seen as achievable is most important, more so than the absolute level and whether it represents growth or not," he said.

Mr. Strauss lowered his price target to $244 (U.S.) from $250. He also reinstated a "buy" rating after placing it under review. The analyst consensus is $229.50.

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In other analyst actions:

Manitoba Telecom Services Inc. was downgraded to "underperform" from "neutral" at Macquarie. The 12-month target price is $24 (Canadian) per share.

Progressive Waste Solutions Ltd. was lowered to "sector perform" from "outperform" by RBC Dominion Securities. The 12-month target price is $31 (U.S.) per share.

Lululemon Athletica Inc. was downgraded to "underperform" from "outperform" at CLSA.

Halliburton Co. and Baker Hughes Inc. were lowered to "underperform" from "outperform" at CLSA, while Schlumberger Ltd. was downgraded to "underperform" from "buy."

Zargon Oil & Gas Ltd. was lowered to "reduce" from "hold" at TD Securities. The 12-month target price is $3.50 (Canadian) per share.

Atacama Pacific Gold Corp. was downgraded to "hold" from "speculative buy" at Canaccord Genuity. The 12-month target price is 20 cents (Canadian) per share.

Castle Mountain Mining Co. Ltd. was downgraded to "hold" from "speculative buy" at Canaccord Genuity. The 12- month target price is 35 cents (Canadian) per share.

Goldrock Mines Corp. was downgraded to "hold" from "speculative buy" at Canaccord Genuity. The 12-month target price is 25 cents (Canadian) per share.

Callaway Golf Co. was rated new "buy" at Jefferies. The 12-month target price is $16 (U.S.) per share.

Michael Kors Holdings Ltd. was downgraded to "neutral" from "buy" at Mizuho Securities USA. The 12-month target price is $70 (U.S.) per share.

Smith & Wesson Holding Corp. was rated new "sector perform" at RBC Capital. The 12-month target price is $16 (U.S.) per share.

Symantec Corp. was raised to "hold" from "underperform" at Jefferies. The 12-month target price is $21 (U.S.) per share.

Vista Outdoor Inc. was rated new "outperform" at RBC Capital. The 12-month target price is $54 (U.S.) per share.

With files from Bloomberg News