A truck hauls a load at Teck Resources Coal Mountain operation near Sparwood, B.C. in a handout photo.HO, Teck Resources/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.
Target Corp.'s exit from the Canadian market removes an anchor from the company's earnings, according to BMO Nesbitt Burns.
Analyst Wayne Hood boosted his estimate for earnings per share in 2015, citing the elimination of this drag.
"Management can now turn its attention solely to the company's U.S. operations and look for further sales and margin improvement into 2015 and beyond," he said. "We expect the stock's 16 times price-to-earnings multiple to be maintained as management delivers on its objectives."
The analyst sees Target buying back $8.3-billion in stock from 2015 to 2018.
Mr. Hood raised his price target on the stock to $82 (U.S.) from $75 while maintaining an "outperform" rating. The average analyst price target is $74.76.
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Income investors should turn their attention to Enbridge Income Fund Holdings Inc., which is to receive several prime assets from its parent company – Enbridge Inc. – in a restructuring announced last December, said RBC Dominion Securities analyst Robert Kwan.
"Focus on what ENF will be, not what it was," Mr. Kwan said. "We continue to believe that ENF needs to be on the radar screen for investors, in particular those seeking higher yields more comparable with our midstream coverage universe."
The reorganization will move, among other assets, Enbridge's Canadian portion of its oil pipeline network to ENF. The change will take the company's organic growth rate from about 1 per cent to about 10 per cent annually, Mr. Kwan said.
"ENF will take on $15-billion of contractually secured growth projects that, combined with the...return profile from the acquired assets, are expected to underpin a roughly 10 per cent annual dividend growth profile," he said.
He raised his target price on the stock to $41 (Canadian) from $37, and maintained a "sector perform" rating. The average analyst target price on the stock is $36.61.
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Easyhome Ltd. should benefit from an acceleration of growth of easyfinancial, its consumer finance business, after announcing a deal to purchase the lease rights and obligations for up to 47 retail locations from The Cash Store, Raymond James analyst Frederic Bastien said.
"What we know is that easyfinancial carefully selected the best locations out of nearly 200 available to match its unfilled targeted geography," Mr. Bastien said. As a result of the deal, management is raising its projections for new store openings and is increasing its loan book target for the year.
"The deal … is consistent with the firm's decision to grow easyfinancial, focus its resources on the Canadian market, and make the leasing business more profitable," he said.
He raised his target price on the stock to $32 (Canadian) from $26, and maintained an "outperform" rating. The average analyst target price on the stock is $30.45.
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After a meeting with Home Depot Inc.'s senior management, analysts at Credit Suisse are more optimistic about the company's prospects.
"There are a number of company specific initiatives, including upgraded associate mobile devices to improve customer service, and resizing categories within the store to lower space dedicated to those best served online, while expanding into new categories (such as Auto), brands, and in some cases price points that may increase HD's average ticket," said analyst Seth Sigman. "From an external perspective, this story also sets up well, with multiple potential drivers."
The professional market is a significant and largely untapped growth opportunity for the company, he notes.
While the stock is at the high end of its historic valuation, the analyst observes that its price-to-earnings multiple is similar to that of other large cap consumer discretionary firms.
Mr. Sigman raised his price target to $120 (U.S.) from $110 and maintained an "outperform" rating. The average analyst target is $108.12.
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Altacorp Capital analyst Thomas Matthews downgraded Lightstream Resources Ltd. to "underperform" after the company announced this week it is suspending its monthly dividend in response to plunging crude oil prices. He notes that the cash savings from the dividend cut is small relative to its large debt position, and the company's balance sheet will continue to be under pressure.
"LTS is currently in compliance with their 4x Total Debt/Trailing 12-month EBITDA debt covenant, however at current strip pricing, we forecast LTS to be in violation of the covenant by the end of Q3/15. LTS will look to renegotiate their debt covenants to be more favorable over the duration of the downturn," Mr. Matthews said in a note.
"With the dividend suspension, combined with the additional royalty fee land sale in AB and BC, we believe that the 'low-hanging fruit' has now been picked and tough decisions lie ahead. Although a Bakken sale would provide cash to reduce the overall debt position, LTS would be selling production from a free cash flow positive asset during a period where access to capital is becoming more and more limited with acquirers clearly looking for larger 'discounts'. Ultimately, with asset prices discounted, only an improvement in commodity prices will resolve balance sheet issues," he added.
Mr. Matthews, who previously rated Lightstream "sector perform," also cut his price target to $1 (Canadian) from $1.25. The consensus price target is $1.98.
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In other analyst actions:
Merrill Lynch upgraded Teck Resources to "neutral" from "underperform" but lowered its price target to $13 (U.S.) from $19.
Goldman Sachs upgraded Bank of America to "conviction buy" from "buy" with a price target of $18 (U.S.).
JMP Securities downgraded Intel to "market underperform" from "market perform" with a price target of $30 (U.S.).
HSBC upgraded First Quantum Minerals to "overweight" from "neutral" with a price target of $18 (Canadian).
Credit Suisse downgraded PulteGroup to "underperform" from "neutral" with a price target of $19 (U.S.).
Castle Mountain Mining Co Ltd. was raised to "outperform" from "neutral" at Macquarie. The target price is 70 cents (Canadian) per share.
Probe Mines Ltd. was downgraded to "neutral" from "outperform" at Macquarie. The target price is $5.30 (Canadian) per share.
Turquoise Hill Resources Ltd. was raised to "speculative buy" from "hold" at TD Securities. The target price is $4.50 (Canadian) per share.
Tiffany & Co. was raised to "outperform" from "market perform" by Wells Fargo. The consensus target price is $105.22 (U.S.)
With files from Bloomberg
Tim Shufelt