In this Sunday, June 8, 2014 file photo, John Deere farming equipment on display for sale at a dealership in Petersburg, Ill. Deere and Co. reports quarterly financial results on Friday, Aug. 21, 2015.Seth Perlman/The Associated Press
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.
While Deere & Co. (DE-N) is in a strong position, soft farm fundamentals and weaker contruction demand will likely limit the company's outperformance for now, said RBC Capital Markets analyst Seth Weber.
"Although cost management and cash generation remain strong and DE has been active with share repurchases, we expect prospects for lower sales, negative mix, and margin pressure to weigh," he wrote in a note.
"It looks like large ag could have another challenging year as early orders for North America planters, sprayers and tillage are currently lower year over year (combines started August), used industry inventories are elevated, and U.S.
farm cash receipts projected -7 per cent in 2015 and -1 per cent in 2016."
Mr. Weber kept his "sector performer" rating for the stock, but lowered his price target to $85 (U.S.) from $90. The consensus price is $88.78, according to Thomson Reuters.
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David Hartley of Credit Suisse maintains a neutral rating and a target price of $56 (Canadian) for Alimentation Couche-Tard Inc. (ATD.B-T; ATD.A-T). "Couche Tard is well positioned to consolidate the fuel retailing/c-store business in parts of Europe; however, we believe it is fully priced into the stock. Falling normalized, long-term US fuel margins is a risk to EPS.
"The trend is merchandise SSSG across all businesses has been positive, but the merchandise gross margin trend has been positive in the US alone (fresh food growth, softness in low margin cigarettes). We expect US trends to remain flat-to-positive as ATD rolls out fresh offerings in more stores. Falling gasoline prices sustain growth in fuel volumes; however, sustaining the strong growth of Q4/15 is a big ask. Gasoline margins trends are really volatile in the US of late, but we expect longer term trends to turn negative. Canada, Europe trends appear negative."
For Q1 2016, Credit Suisse forecasts earnings per share of $0.44, from $0.42. Sales are expected to increase 0.5 per cent to $9.2-billion, "offset partly by the weaker loonie, Euro currencies and lower retail fuel prices."
Credit Suisse recently adjusted the target price from $47, raising their 2017 earnings per share P/E multiple to 23.5x from 20x.
The analyst consensus price target is $63.19
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Kinross Gold Corp. (K-T; KGC-N) has been downgraded from "sector perform" to "underperform" by RBC Dominion Securities analyst Stephen Walker as the company risks becoming a value trap for investors.
The company's production profiles is declining as reserve life also declines, said Mr. Walker. "Kinross' production and cost profiles are expected to deteriorate over the next three years as reserves decline and mines are closed or transition to mining lower-grade resources. We forecast gold production to decline by 11 per cent in 2018 and 5 per cent in 2019, and total cash costs to increase by 7 per cent from 2015 to 2020."
"With production declining and costs increasing the risk is that both valuation multiples and financial estimates decline and a value trap is created," said Mr. Walker.
As the company retains a relatively strong balance sheet, Mr. Walker recommends that Kinross make an acquisition to make up for declining reserves. "We maintain our view that Kinross needs to replace reserves with an acquisition and we now estimate that at $1,100 gold, $300–$400M in cash could be contributed toward an acquisition without straining the balance sheet."
The company's target price was reduced to $2.25 (U.S.) from $3.25. "The primary catalyst for the downgrade is our revised gold price assumptions, lowered by an average of 7% across the board. The change to our gold price assumptions decreased our NAV at 7 per cent by 32 per cent to $1.80/sh and decreased our 12-month forward Adjusted CFPS estimate by 26 per cent to $0.28, resulting in the decrease to our target price. Kinross is particularly sensitive to commodity price moves given the high operating leverage due to the above average AISC," said Mr. Walker.
The analyst consensus price target is $3.34 (U.S.).
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Killam Properties (KMP-T) recently reported solid earnings as it benefited from favourable year over year comparables helped by lower energy prices. Its net operating income came in 3 per cent above Dundee Capital Markets' estimates.
"We believe Killam possesses a strong management team who should be able to execute on their strategy, as well as a high quality portfolio. Some of the REIT's core Atlantic Canada markets, notably Halifax, are finally showing signs of improvement. In addition, year over year same-store metrics, notably in Halifax (representing 40 per cent of KMP's portfolio), were impressive in the first half of 2015," Dundee said in a note.
Dundee upgraded its stock to "buy" from "neutral" and raised its price target to $11.50 from $11. The analyst consensus is $11.50.
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Eldorado Gold Corp. (ELD-T;EGO-N) has been forced to suspend its Greek operating and development projects and that's spurred Raymond James to downgrade the stock and lower its price target.
"While we were willing to side with the company during the unfolding geopolitical uncertainty that heightened when the new Greek government came into office earlier this year, Eldorado's forced decision to suspend its Greek operating and development projects (that together comprised about 40 per cent of our net asset value), compels us, in the immediate term at least, to remove the value ascribed to those assets and lower our rating to "market perform," said analyst Phil Russo.
"We recognize that the potential exists for the landscape to evolve over the coming months, with Greek elections offering the possibility for a changing dynamic, as well as Eldorado's recourse to restart the mines through court proceedings (in the absence of the preferred negotiations with the current government)– which we note have materialized in the company's favour of late in other matters. That said, with the projects now suspended and the uncertainty of when they may be restarted, we've elected for a more cautious position today. Despite our lower rating, investors searching for deeply discounted gold names should consider Eldorado given the market has effectively removed the Greek assets from its share price, and our reduction in valuation, a approximately 20-per-cent return to our new target remains with the optionality for Greece value to come back into the name on a changing risk landscape."
Raymond James lowered its rating on Eldorado Gold to "market perform" from "outperform" and cut its price target to $4 (U.S.) from $6.75. The consensus is $5.68.
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In other analyst actions:
Abercrombie & Fitch Co. (ANF US) was raised to "Overweight" from "Neutral" at Piper Jaffray. The 12-month target price is $27 (U.S.) per share.
Airgas Inc (ARG US) was downgraded to "Neutral" from "Outperform" at Robert Baird. The 12-month target price is $111 (U.S.) per share.
Bank of America Corp (BAC US) was raised to "Outperform" from "Market Perform" at Keefe Bruyette. The 12-month target price is $20 (U.S.) per share.
Bristol-Myers Squibb Co (BMY US) was raised to "Neutral" from "Underweight" at Piper Jaffray. The 12-month target price is $61 (U.S.) per share.
Baytex Energy Corp (BTE CN) was raised to "Buy" from "Hold" at Canaccord Genuity. The 12-month target price is $12 (Canadian) per share.
Callidus Capital Corp (CBL CN) was raised to "Buy" from "Hold" at M Partners. The 12-month target price is $15 (Canadian) per share.
Crew Energy Inc. (CR CN) was rated new "Buy" at Canaccord Genuity. The 12-month target price is $7.50 (Canadian) per share.
Cervus Equipment Corp. (CVL CN) was rated new "Hold" at TD Securities. The 12-month target price is $15 (Canadian) per share.
DreamWorks Animation SKG Inc. (DWA US) was raised to "Buy" from "Neutral" at B. Riley. The 12-month target price is $26 (U.S.) per share.
EV Energy Partners LP (EVEP US) was downgraded to "Underperform" from "Neutral" at Robert Baird. The 12-month target price is $5 (U.S.) per share.
Fastenal Co (FAST US) was downgraded to "Neutral" from "Outperform" at Robert Baird. The 12-month target price is $44 (U.S.) per share.
WW Grainger Inc (GWW US) was downgraded to "Neutral" from "Outperform" at Robert Baird. The 12-month target price is $240 (U.S.) per share.
Johnson Controls Inc. (JCI US) was rated new "Neutral" at Credit Suisse. The target price is $49 (U.S.) per share.
Microchip Technology Inc. (MCHP US) was downgraded to "Hold" from "Buy" at Drexel Hamilton. The target price is $40 (U.S.) per share.
NantKwest Inc. (NK US) was rated new "Buy" at MLV & Co. The 12-month target price is $35 (U.S.) per share. The stock was rated new "Overweight" at Piper Jaffray with a 12-month target price is $38 (U.S.) per share.
Pinnacle Financial Partners Inc. (PNFP US) was rated new "Neutral" at Piper Jaffray by equity analyst Peyton Green. The 12-month target price is $53 (U.S.) per share.
SINA Corp/China (SINA US) was downgraded to "Accumulate" from "Buy" at GuoTai JunAn. The target price is $45 (U.S.) per share.
Thoratec Corp. (THOR US) was downgraded to "Market Perform" from "Outperform" at Raymond James. The stock was downgraded to "Market Perform" from "Outperform" at Leerink Partners. The 12-month target price is $63.50 (U.S.) per share.
Vital Therapies Inc (VTL US) was downgraded to "Neutral" from "Outperform" at Credit Suisse. The target price is $9 (U.S.) per share. The stock was downgraded to "Market Perform" from "Outperform" at William Blair. The 12-month target price is $6 (U.S.) per share.
vTv Therapeutics Inc (VTVT US) was rated new "Overweight" at Piper Jaffray. The 12-month target price is $24 (U.S.) per share. The stock was rated new "Buy" at Stifel. The 12-month target price is $17 (U.S.) per share.
With files from Bloomberg News