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Inside the Market

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Thursday’s analyst upgrades and downgrades Add to ...

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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.

Desjardins Capital Markets analyst Keith Howlett expects the majority shareholder of Sears Canada to determine its future with the troubled retailer within the next six months. 

Sears Canada reported operating earnings before interest, taxes, debt and amortization of negative $16-million in the second quarter, its ninth loss in 14 quarters as sales continued to decline.

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“Sears Canada is facing escalating competition from, among others, Target Canada in apparel and home products, and Home Depot and Lowe’s in major appliances,” says Mr. Howlett. “Our expectation is that 51% shareholder Sears Holdings will determine what it plans to do with Sears Canada within the next six months. Target’s entry into Canada and subsequent well publicized operating challenges have, in our view, negatively impacted Sears’ sales as well as made the Canadian retailing environment less alluring to large-format retailers based outside of Canada.”

Mr. Howlett maintains his "hold" rating and $15 (Canadian) price target. The analyst consensus price target is $16, according to Thomson Reuters.

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Canada’s regional banks could benefit from higher multiples on financial stocks, even as earnings growth from a strong credit environment begins to wane, Canaccord Genuity analyst Scott Chan said.

Mr. Chan applied higher targeted price-to-earnings ratios to both Canadian Western Bank and Laurentian Bank of Canada as a result of a raised multiple on the Canadian bank group of stocks. As a result, he increased his target price on Canadian Western to $44 (Canadian) from $42, and raised his target on Laurentian to $55 from $52.50. He has “buy” ratings on both stocks.

However, while credit conditions remain strong, Mr. Chan noted, “looking ahead, we are not expecting EPS upside from continued credit improvement given the progression to date and macro outlook.”

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Strong performance in Alberta has garnered Boardwalk REIT a price target hike from Raymond James analyst Ken Avalos.

Boardwalk results were in-line with Mr. Avalos’ estimates and consensus. “After an anemic (for them) first quarter, stabilized property NOI growth rebounded to a strong +4.6 per cent (vs. +0.6 per cent in 1Q14),” he says. “Alberta’s largest cities continued to be its strongest markets, with Calgary (+6.0 per cent), Edmonton (+8.5 per cent) and Red Deer (+12.0 per cent) delivering the strongest growth. Ontario continued its decline (-1.4 per cent, after posting –7.3 per cent growth in the first quarter).”

He adds that Boardwalk’s first completed development, Spruce Ridge Gardens in Calgary, is now 98 per cent occupied – well ahead of management’s 24-month target lease-up period for the 109-unit property.

Mr. Avalos maintains his “outperform” rating and is raising his target price to $73 (Canadian) from $70. The analyst consensus price target is $71.72, according to Thomson Reuters.

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A string of acquisitions have increased Whitecap Resources Inc.’s free cash flow outlook, allowing the company to increase its dividend, with further payout increases possible in the near future, Canaccord Genuity analyst Steve Toth said.

Whitecap’s recent strategic acquisitions include a $267-million deal to secure a controlling interest in the Nisku light sweet oil pool in west central Alberta, which the company announced on Wednesday. Whitecap also raised its dividend by 12 per cent.

“We anticipate [Whitecap] will continue its strategy of strategic, long life oil weighted asset acquisitions that improve its free cash flow profile and allow for subsequent dividend increases,” Mr. Toth said. He raised his target price on Whitecap’s shares to $20 (Canadian) from $17.50, while maintaining a “buy” rating. The analyst consensus price target is $18.78, according to Thomson Reuters.

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Increased imports of paper products to North America are putting pressure on domestic pulp and paper companies, Raymond James analyst Daryl Swetlishoff said.

As a result, he cut his target price on Domtar Corp. to $49 (U.S.) from $55 while maintaining an “outperform” rating.

Higher white paper prices in North America likely created an incentive for paper exporters like Indonesia and China to increase their shipments,” Mr. Swetlishoff said.

“We believe the threat of imports introduces a new element of risk into the North American white paper industry.”

Domtar’s shares, which have declined by about 36 per cent since March, reflect this industry outlook, Mr. Swelishoff said. “We see value in the company’s growing personal care segment and still-robust pulp markets, which we see offsetting potential future weakness in the paper segment.”

The analyst consensus price target for Domtar is $53.11, according to Thomson Reuters.

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In other analyst actions:

AllianceBernstein Holding LP was rated new “hold” at Jefferies by equity analyst Surinder Thind. The 12-month target price is $27.00 (U.S.) per share.

American Eagle Outfitters Inc. was upgraded to “buy” from “neutral” at Janney Montgomery by equity analyst Adrienne Tennant. The 12-month target price is $15.00 (U.S.) per share.

Cameco Corp. was downgraded to “market perform” from “outperform” at Cowen by equity analyst Daniel Scott. The 12-month target price is $20.00 (U.S.) per share.

Endeavour Mining Corp. was rated new “buy” at Haywood Securities by equity analyst Tara Hassan. The 12-month target price is $1.25 (Canadian) per share.

EXO U Inc. was rated new “speculative buy” at Mackie Research Capital by equity analyst Nikhil Thadani. The 12-month target price is $6.00 (Canadian) per share.

Federated Investors Inc. was rated new “buy” at Jefferies by equity analyst Surinder Thind. The 12-month target price is $35.00 (U.S.) per share.

Summit Hotel Properties Inc. was rated new “market outperform” at JMP Securities by equity analyst Whitney Stevenson. The 12-month target price is $12.50 (U.S.) per share.

InterMune Inc. was downgraded to “market perform” from “outperform” at Wells Fargo by equity analyst Brian Abrahams.

MDC Partners Inc. was rated new “outperform” at FBR Capital Markets by equity analyst William Bird. The 12-month target price is $29.00 (U.S.) per share.

MeetMe Inc. was rated new “market outperform” at JMP Securities by equity analyst Ronald Josey. The 12-month target price is $3.00 (U.S.) per share.

Photronics Inc. was upgraded to “buy” from “hold” at Needham & Co. by equity analyst Edwin Mok. The 12-month target price is $11.00 (U.S.) per share.

Planar Systems Inc. was downgraded to “neutral” from “buy” at B. Riley by equity analyst Ian Corydon. The 12-month target price is $4.30 (U.S.) per share.

PNM Resources Inc. was rated new “hold” at KeyBanc by equity analyst Paul Ridzon.

Rosetta Resources Inc. was upgraded to “accumulate” from “hold” at KLR Group by equity analyst John Gerdes. The target price is $59.00 (U.S.) per share.

Petro-Victory Energy Corp. was rated new “speculative buy” at Canaccord Genuity by equity analyst Christopher Brown.

The WhiteWave Foods Co. was downgraded to “neutral” from “buy” at Longbow Research by equity analyst Philip Terpolilli.

 

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