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 during the trading day.

Indications of a strong summer travel season ahead, as well as its progress in cutting costs, has given BMO Nesbitt Burns analyst Fadi Chamoun the confidence to boost his price target on Air Canada.

His target went up to $12 (Canadian) from $10 after meetings with company executives, including with CEO Calin Rovinescu, and he maintained an "outperform" rating.

The discussions with management "were generally very constructive," said Mr. Chamoun in a research note. "The demand environment is positive, with forward bookings supportive of a strong summer travel season."

Meanwhile, new 777s and Air Canada's new rouge discount airline carrier are helping to reduce costs and are performing ahead of expectations, he said. While the weaker Canadian dollar is a negative for an airline that pays for fuel and other costs in U.S. dollars, Air Canada will benefit from more dense seating of the 777s and the early retirement of some Embraer 190s.

"The capital structure has significantly improved and resulted in several debt rating upgrades and the company receiving very favourable borrowing rates" during a recent financing, Mr. Chamoun noted.

But he cautioned that with net debt still three times that of EBITDAR (earnings before interest, taxes, depreciation, amortization and rent), and with significant spending still planned to improve its fleet, Air Canada's capital structure remains "leveraged" and the company may consider issuing equity going forward.

The analyst consensus price target over the next year is $11.21, according to Thomson Reuters data.

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HudBay Minerals Inc.'s friendly deal to buy the remaining stake in Augusta Resource Corp. for $3.56 a share, or $555-million, is fair and investors should not expect a superior offer to emerge, advised Laurentian Bank Securities analyst Chris Chang.

"With the significant lock-up by Hudbay Minerals (16 per cent), Augusta insiders, and key large shareholders representing approximately 50 per cent of the company's issued and outstanding shares, we believe this transaction is likely to close as currently proposed," said Mr. Chang.

The all-stock deal announced this morning represents a 10 per cent premium to HudBay's initial bid to buy the company, based on closing share prices on Friday.

Augusta's main asset is the Rosemont copper-molybdenum-silver project near Tuscon, Arizona, which is still in development stage.

"While Augusta shareholders could potentially extract more value by waiting for a positive permitting decision, we believe the revised Hudbay offer represents a very successful conclusion for Augusta shareholders on a risk-reward basis given the uncertainty of timing for securing Rosemont's last remaining permits," said Mr. Chang. "We believe holding shares of a growing mid-tier with an attractive growth pipeline such as Hudbay Minerals provides existing Augusta shareholders with a stronger balance sheet, cash flow generation, multiple asset diversification, as well as continued exposure to the Rosemont asset."

He revised his rating on Augusta to "tender" from "speculative buy" and lowered his price target to $3.60 from $4.70 a share.

The analyst consensus price target for Augusta Resource over the next year is $4.

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The market continues to undervalue Aecon Group Inc., which is well positioned for a stock rally over the next year, Canaccord Genuity analyst Yuri Lynk said.

While the contractor historically trades at a 10-per-cent discount to its peers, the current discount of 15 per cent is unwarranted, Mr. Lynk said.

"We would be using recent underperformance in Aecon shares to establish or add to a position in anticipation of three catalysts," he said. They are: an abundance of large projects the company is pursuing, a seasonal lift to earnings in the second half of the year, and a narrowing of Aecon's valuation discount.

Mr. Lynk reiterated his "buy" recommendation on Aecon's stock and maintained a $21 (Canadian) price target.

The analyst consensus price target for Aecon Group over the next year is $21.27.

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After a recent investor day, FirstEnergy Capital analyst Michael Dunn said he's increasingly optimistic about the outlook for Canadian Natural Resources Ltd.

A review of the company's assets reiterated the strength of its production growth, free cash flow and investment opportunities, said Mr. Dunn, who raised his price target to $56 (Canadian) from $51 and reiterated his "top pick" rating.

"Investors often ask this analyst what stock I would recommend buying if I had a 5+ year time horizon, and CNQ has long been my answer, for a variety of reasons related to its asset quality, corporate culture, strategy, valuation, growth outlook, optionality, etc.," Mr. Dunn said. "The latest update reinforced this opinion."

The analyst consensus price target over the next year is $50.05, according to Thomson Reuters.

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Canyon Services Group Inc.'s acquisition of water management company Fraction Energy Services should result in a substantial lift to earnings, CIBC World Markets analyst Jon Morrison said.

The deal, which is expected to close in the third quarter, is estimated to provide a 20-per-cent increase to profit estimates, said Mr. Morrison, who raised his target price to $19.50 (Canadian) from $18.25 while maintaining a "sector performer" rating.

"Overall we view the acquisition positively given that it is highly accretive on estimates and provides the company a new growth market outside of its core fracturing business," Mr. Morrison said.

The analyst consensus price target is $21.27.

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In other analyst actions:

Evercore Partners upgraded BlackBerry to "equal weight" from "underweight" and raised its price target to $10 (U.S.) from $6.

Desjardins Securities downgraded Detour Gold to "hold" from "top pick" on valuation, and hiked its price target by 50 cents to $15.50 (Canadian).

Bernstein cut its price target on Talisman Energy to $14.50 (Canadian) from $16 and maintained an "outperform" rating.

Raymond James hiked its price target on Enerflex to $22 (Canadian) from $20 and maintained an "outperform" rating.

Canaccord Genuity raised its price target on DHX Media to $7.60 (Canadian) from $6.70 and maintained a "buy" rating.

Macquarie downgraded Nucor to "neutral" from "outperform" and cut its price target to $52 (U.S.) from $57.

Goldman Sachs upgraded Burlington Stores to "buy" from "neutral" and raised its price target to $37 (U.S.) from $33.

Goldman Sachs downgraded Nordstrom to "neutral" from "buy" with a price target of $74 (U.S.)

Goldman Sachs upgraded Darling Ingredients to "conviction buy" from "buy" and maintained a $25 (U.S.) price target.

Longbow Research downgraded Joy Global to "underperform" from "neutral" with a price target of $50 (U.S.).

(An earlier version of this item incorrectly referred to Boeing 777 aircraft as the Dreamliner)