Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
Management of TransCanada Corp. should break up the company, spinning off its power business to unlock the intrinsic value of its pipeline and midstream assets, said Citigroup analyst Faisel Khan.
He upgraded TransCanada to "buy" from "neutral" and raised his price target to $61 (Canadian) from $51, as he included such a break-up scenario in his estimates for the company.
"The strategic case for breaking up TRP has three elements: 1) the current model detracts from the value of the midstream and pipeline assets, which contains indispensable North American oil and gas infrastructure; 2) TRP's diverse operations lack synergy and pose a sizeable managerial burden, particularly given regulatory uncertainties; and 3) investors can replicate a TRP-like portfolio synthetically, which we believe steers investors into more focused names and acts as a drag on the stock," Mr. Khan said in a research note.
He estimates the break-up value of the entire company would be $76 a share. His projections for the company assumes Keystone XL is given the green light after the November U.S. elections and is in service by the first quarter of 2017.
The analyst consensus price target for TransCanada over the next year is $54.68, according to Thomson Reuters data.
=======
A recent pullback in Dollarama Inc. shares has restored the appeal of the dollar store chain, Industrial Alliance analyst Neil Linsdell said.
Since hitting a new record high of $96.40 three weeks ago, Dollarama's shares have declined by about 9 per cent. As a result, Mr. Linsdell upgraded the stock to a "buy" from a "hold," while maintaining a $95 (Canadian) price target.
"The company continues to perform better than its U.S. comparables and still has significant expansion opportunities in Canada," Mr. Linsdell said.
The analyst consensus price target for Dollarama over the next year is $101.86.
=======
Although Stantec Inc.'s shares are trading near historical highs, the company's recent performance in the engineering and construction (E&C) sector warrants a premium valuation, Desjardins Securities analyst Benoit Poirier said.
"Stantec has delivered returns in the top quartile of the E&C space for three consecutive years, driven largely, in our view, by steady growth and exceptionally consistent execution," Mr. Poirier said.
He initiated coverage of Stantec with a "buy" recommendation and a $73 (Canadian) price target.
The company should be able to sustain its own growth through exposure to the oil and gas sector, which has rebounded in 2014 after a couple of tough years. Stantec's track record of successful acquisitions will also support growth in the year ahead, Mr. Poirier said.
The analyst consensus price target for Stantec over the next year is $73.04.
=======
Low metallurgical coal prices are likely to persist longer than expected, said Raymond James analyst Alex Terentiew as he trimmed his price target on producer Teck Resources Ltd. to $23 (Canadian) from $24.
While Mr. Terentiew 's lower target for Teck shares was linked to weaker coal price price assumptions, he also listed other concerns about the base metal and coal producer.
"Considering our lowered met coal price forecast, Teck's declining copper production (we estimate a drop of 6 per cent by 2016 and 13 per cent by 2018), a modestly strengthening Canadian dollar (up 3.5 per cent over the last three months), high debt load, and our view of a potential dividend reduction by year end (or a need to borrow from its $2-billion in undrawn credit facilities by late 2015), we are maintaining our market perform rating," he said in a note.
The analyst consensus price target over the next year is $28.22.
=======
RBC Dominion Securities analyst Al Stanton raised his price target on Bankers Petroleum Ltd., but cautioned investors shouldn't expect the kind of strong returns they've seen in the stock over the past year.
"Assuming no material oil price gyrations, we see the potential for steady gains through the second half of 2014 and in 2015, as the company starts the roll out of its enhanced oil recovery-led development campaign. But a further share price surge probably requires management to commit to a major new development plan that accelerates production growth," Mr. Stanton said.
He raised his price target to $7 (Canadian) from $5.50 and maintained a "sector perform" rating.
Mr. Stanton also thinks Bankers Petroleum could become a takeover target, but that will likely have to wait until the company boosts production further.
"Bankers is almost an archetypal take out play; it has a focused portfolio with a material, operated, stake in a material project, but production of about 20,000 barrels per day perhaps falls a little short of what larger buyers are seeking currently. However, output is budgeted to increase by 10-15 per cent per year, and in our base case we assume production could increase to about 40,000 barrels per day. At that stage, Bankers would make a neat bolt-on acquisition for the buyers of its crude, which include Eni, Repsol, Vitol, etc.," he said.
The analyst consensus price target over the next year is $7.56.
=======
In other analyst actions:
Industrial Alliance Securities downgraded Amaya Gaming Group to "hold" from "buy" as the stock has reached its $23 (Canadian) price target.
Barclays upgraded Canadian National Railway to "overweight" from "equalweight" and raised its price target to $72 (U.S.) from $60.
Barclays upgraded Norfolk Southern to "overweight" from "equalweight" and raised its price target to $112 (U.S.) from $100.
CIBC World Markets raised its price target on Pattern Energy Group to $34 (U.S.) from $31 and maintained a "sector outperformer" rating.
B. Riley upgraded KLA-Tencor to "buy" from "neutral" and raised its price target to $82 (U.S.) from $65.
Piper Jaffray upgraded Yahoo to "overweight" from "neutral" and raised its price target to $43 (U.S.) from $37, believing that the company's stake in Alibaba is undervalued at its current price.
Macquarie downgraded Wells Fargo to "underperform" from "neutral" with a price target of $48 (U.S.).