Pedestrians pass by the Scotiabank location near Yonge and Bloor Streets in Toronto in this file photo.
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day. For breaking analyst actions prior to market open every day, read our Before the Bell morning report.
RBC Dominion Securities analyst Darko Mihelic has trimmed his price target on Bank of Nova Scotia in the wake of the company's earnings report this week, a reflection of the increased risks it faces in emerging markets and an uptick in costs.
But while cutting his target to $70 (Canadian) from $73, Mr. Mihelic still sees an attractive return to investors thanks to loan growth, margins and the bank's diversification.
"We continue to rate BNS outperform and believe the bank's international segment is poised for double digit asset and earnings growth in 2015, which should help offset a mild slowdown in Canada," Mr. Mihelic said in a research note.
"In our view, the bank can overcome recent challenges such as higher expenses and LLPs (loan loss provisions) and generate earnings growth of 13 per cent year-over-year in 2015 as long as net interest margins improve and costs remain controlled. Further, it may be that the slowdown in Canadian earnings will not be that large and we are also optimistic for the outlook in the wealth management segment. We forecast strong wealth earnings growth of 11 per cent year-over-year in 2014 and 2015."
The reduced target price reflects Mr. Mihelic lowering his 2015 price-earnings multiple target to 12 times his estimated forward earnings.
The analyst consensus price target for Scotiabank over the next year is $69.29, according to Thomson Reuters data.
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Some analysts are gently bumping up their price targets on Enbridge Inc. after the energy infrastructure giant announced this week that it has received shipper support for its $7-billion Line 3 replacement program.
Line 3 is a critical artery for moving Western Canadian crude to U.S. markets and the program will replace all remaining segments of the pipeline between Hardisty, Alberta and Superior, Wisconsin with new pipe.
The so-called L3R program will eliminate the need for Enbridge to spend $1.1-billion in capital on existing Line 3 infrastructure that would have been required by 2017.
"We view the $7 billion L3R project as an attractive extension of EPS growth in the expected 10 per cent plus range post-2017," commented RBC Dominion Securities analyst Robert Kwan as he raised his price target to $57 (Canadian) from $55 and reiterated an "outperform" rating. "Further, a manageable capital funding program where the company is 'high grading' future projects to avoid over-extending the funding plan through 2017 is a positive development in our view as it minimizes a funding overhang."
CIBC World Markets analyst Paul Lechem raised his price target to $56 from $54 and reiterated a "sector outperformer" rating.
The average analyst target is $52.63.
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Desjardins Securities analyst Doug Young initiated coverage on Intact Financial Corp. with a less-than-enthusiastic "hold" rating, believing that a handful of significant negative developments beyond management's control will dampen the insurance company's performance over the next one to two years.
One of them is Ontario's plan to slash auto insurance premiums by an average of 15 per cent, which will add a lot of uncertainty to that business segment. Meanwhile, Mr. Young warns that - contrary to the consensus estimates - personal property results could struggle over the next 12 to 24 months, driven by continued higher catastrophic losses, which have already caused about $1-billion (Canadian) in losses industry-wide in each of the past five years.
But Mr. Young applauded management's proven track record, and said Intact is "arguably one of the best-run companies" in his coverage universe. The company has been effective in executing acquisitions and more could be on the way in the next couple of years. "In addition, in a risk-averse market, Intact is a solid defensive stock with minimal sensitivity to equity markets and interest rates. Lastly, its steady dividend increase policy and NCIB (a share buyback program) provide good downside support for the stock," he said.
Mr. Young set a $68 (Canadian) stock price. The average analyst target is $74.70.
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Argent Energy Trust has been slapped with another downgrade amid the challenges it faces in improving its balance sheet and increasing cash flows.
RBC Dominion Securities analyst Shailender Randhawa lowered his rating today to "sector perform" from "outperform" and cut his price target to $7 (Canadian) from $9. This followed a similar move by CIBC World Markets analyst Adam Gill last week.
Mr. Randhawa noted that Argent's fourth-quarter results were "soft" and capital expenditures are expected to grow in 2014. But he was also disappointed by Argent shedding no light on the strategic steps required to repair its balance sheet and distribution outlook.
"We believe a lasting solution will require portfolio changes, increased cash generation and a clear financial framework," Mr. Randhawa commented.
He is also concerned that the dilution caused by its DRIP program may force a distribution cut. DRIP, or dividend reinvestment program, allows holders to reinvest their distributions automatically into the company without incurring brokerage fees.
The average analyst price target is $8.43.
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CIBC World Markets analyst Paul Holden downgraded GMP Capital Inc. to "sector underperformer" from "sector performer," doubting that the earnings momentum that helped the stock rise about 30 per cent since November is going to last. He maintained a price target on the institutional equity investment bank of $6.50 (Canadian).
Mr. Holden thinks the stock's gains are partly related to an improved outlook for Canadian investment banking activity, which benefited fourth-quarter results. "However, transaction volumes quarter-to-date suggest that earnings per share may take a step back in Q1," he cautioned. "We have lowered our Q1 and 2014 estimates."
"The stock appears overvalued relative to our expectations at 13.9x estimated 2014 earnings and 11.3x 2015 earnings vs. an historical average of 11x. Positive earnings momentum is likely needed for the stock to go higher," he said.
The average analyst price target is $7.17.
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In other analyst actions:
Desjardins Securities hiked its price target on Wajax to $38 (Canadian) from $33 and maintained a "hold" rating. M Partners upgraded its rating to "buy" from "hold" and raised its price target to $40.75 from $39.
Beacon Research raised its price target on ProMetic Life Sciences to $3.50 (Canadian) from $1.50 and maintained a "buy" rating.
Cantor Fitzgerald Canada raised its price target on Ur-Energy to $2.85 (Canadian) from $2 and maintained a "buy" rating.
BMO Nesbitt Burns upgraded 21st Century Fox to "outperform" from "market perform" and hiked its target to $40 (U.S.) from $33.
B. Riley downgraded Staples to "neutral" from "buy" and cut its price target to $15 (U.S.) from $18.
MKM Partners upgraded Pandora to "neutral" from "sell" with a price target of $39 (U.S.)
RBC Dominion Securities upgraded Ericsson to "outperform" from "sector perform" with a price target of $16 (U.S.).
Credit Suisse downgraded Dillard's to "neutral" from "outperform" and maintained a price target of $93 (U.S.).
Cowen upgraded Smith & Wesson Holding to "outperform" from "market perform" with a price target of $16 (U.S.).
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities
Darcy Keith