A refiner pours bars of gold at Agnico-Eagle's Meadowbank mine facility in Meadowbank Mine, Nunavut on Wednesday, August 24, 2011.Sean Kilpatrick/The Canadian Press
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
Weakness in gold and silver markets should weigh on precious metals miners as they begin to report on second-quarter earnings, Canaccord Genuity said in a report on the sector.
Canaccord downgraded several mining companies after gold and silver prices declined slightly last quarter.
"The majority of the larger producers are expected to show a sequential decline in earnings," said Canaccord analyst Tony Lesiak.
The analyst downgraded two larger-cap companies from "buy" to "hold" – Eldorado Gold Corp., at a slightly higher target price of $9 (Canadian); and Tahoe Resources Inc., at an unchanged target price of $30.50.
Meanwhile, Canaccord applied the same downgrade to three small-cap precious metals mining companies -- AuRico Gold Inc. at a decreased target price of $5 from $5.50; Fortuna Silver Mines Inc., up to $7 from $6.50; and Sandstorm Gold Ltd., unchanged at $8.50.
In addition to commodity price stagnation, the sector faced a number of other headwinds in the quarter, including currency fluctuations and seasonal weakness. But the greater challenge remains the competing strength of the broader stock market, Mr. Lesiak said.
"The No. 1 headwind for gold equities in the past few years has been the strong performance of the broader equity markets. A pullback would support safe haven flows into the metals and equities.
"Furthermore, the current positive seasonality trade, strong physical demand from India and China, rising political tensions, rising oil price, and rising inflation are further positive catalysts. If we are in fact moving into an even milder version of the stagflation period of the 1970's, some portfolio protection in the form of gold and gold equities appears in order."
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Raymond James initiated coverage on a pair of related Canadian mortgage investment corporations (MICs) – a segment of the market analyst Ken Avalos calls "underappreciated and emerging."
Mr. Avalos applied an "outperform" rating to both Timbercreek Mortgage Investment Corp. and Timbercreek Senior Mortgage Investment Corp., both at a target price of $10 (Canadian).
MICs offer short-term financing to construction companies and developers, bundles the mortgages together and sells high-yield shares to investors.
Regulatory changes over the last few years have led to a spike of initial public offerings, but the sector has not yet established a "trading history/valuation pattern," Mr. Avalos said.
"Overall we think that certain operators in the sector offer attractive risk-adjusted returns, driven by sound capital allocation, defensive underwriting and a network created via a long track record of operating within the space," he said.
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CIBC World Markets analyst Kevin Chiang raised his price targets on Canada's two biggest airlines in anticipation of seasonal strength in the second half of this year.
WestJet Airlines Ltd., rated "sector outperformer," saw its price target rise to $33.25 (Canadian) from $32.50. Mr. Chiang hiked his price target more significantly on Air Canada to $14.25 (Canadian) from $11 and said the stock remains his top pick.
"The Canadian airline equities have had a great run over the past couple of years, but despite the share price move, we still see good upside from both a fundamental perspective and looking at seasonal trends, and given the valuation discount between the Canadian airlines and their peers," Mr. Chiang said in a research note.
"Airline equities have typically outperformed in the second half of the year, reflecting the earnings and traffic seasonality, with Q2/Q3 typically being the strongest quarters. We expect this trend to continue given the strong booking curves from AC.B and WJA and a better-than-expected pricing environment," he added.
He also noted that the recent rise in jet fuel costs is not out of line with where it has been in recent history, suggesting that the airline industry should be able to absorb the higher prices.
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Seven consecutive quarters of increased production at Copper Mountain Mining Corp. has Raymond James Ltd. analyst Adam Low maintaining his bullish stance on the company's shares.
The company's namesake Copper Mountain mine produced 19.9 million pounds of copper in the second quarter of 2014, a new quarterly record and an increase of 4 per cent from the previous quarter.
Mr. Low maintains his "outperform" rating and $3.25 (Canadian) target price.
Elsewhere, analysts at Mackie Research Capital downgraded Copper Mountain Mining today to "hold" from "buy" but hiked its target price to $3.10 (Canadian) from $2.70.
The analyst consensus price target over the next year is $2.96 (Canadian), according to Thomson Reuters.
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Lumber Liquidators Holdings Inc. received a ratings downgrade and a severe target price cut after posting disastrous second-quarter results.
A day after the company reported that despite opening 13 new stores, net sales were flat and same store sales decreased by 7.1 per cent, Credit Suisse analyst Gary Balter suggested that Lumber Liquidator was overly ambitious about its growth trajectory.
He said his downgrade of the stock is due to "increasing worries that the company has expanded too fast for its infrastructure and has been too ambitious in some of its vertical integration efforts."
Shares of Lumber Liquidators plunged more than 21 per cent on Thursday.
Mr. Balter downgraded Lumber Liquidators to "neutral" from "outperform" and slashed his target price to $65 (U.S.) from $100. The analyst consensus price target over the next year is $101.31, according to Thomson Reuters.
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In other analyst actions:
Raymond James downgraded Duluth Metals to "market perform" from "outperform" and cut its price target to $1 (Canadian) from $1.75.
CIBC World Markets raised its price target on Canyon Services Group to $22 (Canadian) from $19.50 and maintained a "sector performer" rating.
Merrill Lynch raised his price target on Abbott Labs to $46 (U.S.) from $39 and maintained a "neutral" rating.
Evercore Partners downgraded T. Rowe Price to "equal weight" from "overweight" with an unchanged price target of $88 (U.S.).
Jefferies downgraded UnitedHealth Group to "hold" from "buy" with a price target of $87 (U.S.).
Credit Suisse upgraded Tractor Supply to "outperform" from "neutral" but cut its price target to $70 (U.S.) from $74.
Tim Shufelt