A WestJet aircraft is pictured on the tarmac in Ottawa on Thursday July 2, 2015.Sean Kilpatrick/The Canadian 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.
AltaCorp Capital is lowering its target price to $35 (Canadian) from $42 but is maintaining its "outperform" rating on WestJet Airlines Ltd. (WJA-T; WJA.A-T)
"WestJet announced June traffic results, reporting a 7.0% increase in traffic and a 7.6% increase in capacity as compared to June 2014. The load factor at 76.9% was down marginally y/y by 50 basis points but 103 basis points above our expectations. For the quarter ended June 30, 2015, the airline reported a 5.5% increase in traffic and a 7.5% increase in capacity with schedule changes and better than expected on-time performance pushing growth about the company's top end guidance of 7.0%," AltaCorp said.
"While the airline will continue to benefit from a strong demand environment, a lower than expected RASM (Revenue Per Available Seat Mile) guidance remains a cause of concern. We note the company remains focused on margin expansion with expected y/y earnings growth. We maintain our Outperform rating and with changes to our estimates are lowering our 12-month price target to $35.00 from $42.00. Our target price is based on a blend of a 5.5x EV/EBITDAR multiple and a 12.0x P/E multiple of our FD EPS based on our estimates for the four quarters ending Q4/16.
Elsewhere, WestJet was downgraded to "Neutral" from "Outperform" at Macquarie. The 12-month target price is $27 (Canadian) per share.
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RBC Dominion Securities upgraded Plaza Retail REIT (PLZ.UN-T) to "outperform" from "sector perform," citing in part the recent pullback in the unit price. But analyst Michael Smith also raised his price target to $5 (Canadian) from $4.75, citing insider interest and a track record of successful financial metrics.
"PLZ has a long/positive track record of net asset value, funds from operations, and distribution growth per unit (12 consecutive years of distribution increases & the highest growth rate in the REIT sector). The CEO/founder owns a significant stake, has never sold a unit and continues to buy at current levels. With a robust pipeline of value-creation opportunities and the recent pullback we are upgrading to outperform," he said.
"Plaza is one of only two REITs that has increased its distribution every year for the past 12 years and Plaza's distribution growth has been by far the fastest. Indeed, Plaza's track record for returning capital to unitholders through distribution increases is the highest in the sector–a true outlier."
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RBC Capital Markets is downgrading Chorus Aviation Inc. (CHR.B-T; CHR.A-T) to "sector perform" from "outperform" and is reaffirming its target price of $7 following a lift in its share price.
"We rate Chorus Aviation sector perform as we believe the CHR share price reflects the enhanced value of the new CPA contract with Air Canada. As anticipated, management has delivered with Chorus and Air Canada developing a new framework agreement, which we believe is mutually beneficial and provides CHR with a level of earnings and FCF stability. The new arrangement removes inefficiencies inherent under the previous contract and fundamentally transforms CHR into a sustainable company."
"Furthermore, the stability of the company's cash flow stream with the new CPA provides a level of comfort that the dividend remains sustainable."
RBC says that its target price comes from discounted cash flow valuation from the new CPA contract and the acquisition of Voyageur earlier this year.
"We are downgrading CHR to Sector Perform largely as a result of valuation following a 60 per cent return in the past 12 months and now approaching our $7 price target. Management has delivered on their stated strategy and as such, we see the contract extension with Air Canada now more closely priced-in, with what we believe are limited upside catalysts in the near term to drive further share price appreciation."
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Canaccord Genuity is resuming its coverage of Cogeco Cable (CCA-T) with a"buy" rating and a $80 target price.
"Despite a lack of wireless growth drivers, we believe Cogeco is well positioned to drive strong FCF [free cash flow] at a F2014-2017E CAGR of 10%, debt deleveraging and double-digit DPS growth over the near to medium term. This is based on our positive outlook on Cogeco's U.S. cable acquisition strategy, declining Enterprise losses and a low current DPS/F2015E FCF of 24%."
Canaccord says that Cogeco's suburban Canadian cable footprint gives it a structural advantage over larger cable companies because of its "lower competitive fibre overlap." "Cogeco only faces telco IPTV competition in 33% of its Canadian cable footprint vs. 75-80% for its larger cable peers. While Cogeco's competitive fibre overlap is rising, it is only expected to reach 70% over time vs. 85-90%+ for its peers."
On the U.S. front, Canaccord says the cable company offers growth with moderate risk. "Cogeco has shown FCF accretion from the tax efficient acquisition of ABB, and we expect similar results from MetroCast. With a competitive fibre overlap of only 29%, we forecast modest U.S. cable PSU growth over the near to medium term. We view U.S. cable expansion as less risky compared to Cogeco's past European cable expansion effort."
"Our $80 target price equates to a consolidated EV of 6.6x F2016E consolidated EBITDA minus our F2016E year-end net debt."
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Mackie Research Capital has reiterated its "buy" recommendation for Nobilis Health Corp. (NHC-T; HLTH-N) with a 12-month price target of $12.50.
Mackie cites the appointment of Kenny Klein to the role of chief financial officer, the appointment of former CFO, Andy Chen, to the role of executive vice-presdient of Finance, and Dr. Neil Badlani as vice-president of Medical Affairs.
"We view the appointments positively, particularly the addition of Mr. Klein's post transaction integration experience, given NHC's acquisition strategy."
"We continue to view NHC as an attractively priced play on the U.S. health care market. An aging population and the prevalence of obesity are driving demand for a number of high acuity surgical procedures. Meanwhile, increasing cost sensitivity amongst healthcare payers and providers make cost-effective alternatives to traditional hospitals more attractive."
In other analyst actions:
Merus Labs International Inc. (MSL-T; MSLI-Q) was rated new "Buy" at Mackie Research Capital. The 12-month target price is $4.25 (Canadian) per share.
Nevada Copper Corp. (NCU-T) was raised to "Buy" from "Speculative Buy" at Cormark Securities. The target price is $4 (Canadian) per share.
Oryx Petroleum Corp. Ltd. (OXC-T) was rated new "Hold" at Canaccord Genuity. The 12-month target price is $4 (Canadian) per share.
Plaza Retail REIT (PLZ.UN-T) was raised to "Outperform" from "Sector Perform" at RBC Capital. The 12-month target price is $5 (Canadian) per share.
Advantage Oil & Gas Ltd. (AAV-T; AAV-N) was rated new "Buy" at Cormark Securities. The 12-month target price is $11.25 (Canadian) per share.
Alaris Royalty Corp. (AD-T) was rated new "Buy" at Haywood Securities. The 12-month target price is $39 (Canadian) per share.
ARC Resources Ltd. (ARX-T) was rated new "Buy" at Cormark Securities. The 12-month target price is $27 (Canadian) per share.
BP PLC (BP-N) was downgraded to "Sector Perform" from "Sector Outperform" at Scotia Howard Weil. The target price is $40 (U.S.) per share.
Dick's Sporting Goods Inc. (DKS-N) was raised to "Outperform" from "Inline" at Imperial Capital. The 12-month target price is $62 (U.S.) per share.
Rubicon Project Inc. (RUBI-N) was rated new "Buy" at Craig-Hallum. The 12-month target price is $24 (U.S.) per share.
With files from Bloomberg News