Friday'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.

Canadian Pacific Railway Ltd. reported better than expected fourth-quarter results on Thursday, but doesn't plan to have the same growth in crude-by-rail shipments because of the drop-off in oil prices.

The company said to expect 140,000 tank cars of crude would be moved in 2014, down 60,000 from its previous estimate.

However, CP's operating ratio, the key metric of a railway's efficiency, hit a record low of 59.8 per cent in the fourth quarter, and the company outlined plans to boost revenues by 7 to 8 per cent this year.

"We remain confident in CP's ongoing transition from a cost-cutting story to a top-line growth focus, which should create additional shareholder value in light of the positive outlook for the U.S. economy and the lower Canadian dollar," said Desjardins Securities analyst Benoit Poirier. "Management is taking a more conservative approach toward crude-by-rail growth in light of the short-term volatility in the price of oil, although it remains confident that it will achieve its long-term goal of more than doubling 2014 fully diluted earnings per share by 2018."

Mr. Poirier maintained his "buy" rating on the stock and hiked his price target to $262 (Canadian) from $256. The average analyst price target is $251.31.

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Manitoba Telecom Services Inc.  is coming under significant financing pressures as a result of its underfunded pension plans, Veritas Investment Research analyst Desmond Lau said in downgrading the telecom two notches to a "sell" today.

While a rise in long-term interest rates could have eliminated the pension deficit, rates have declined since the beginning of 2004.

"It is now looking almost inevitable that MBT will need to issue equity/raise debt again to tackle the recurring pension deficit problem," Mr. Lau said.

Low rates are bad for pension plans because they undercut investment returns and they raise the current measured value of the pension's liability, since discount rates are tied to long-term bond yields.

Those yields have fallen by about 130 basis points in just over a year, while the Bank of Canada's recent policy rate cut could make matters worse for Manitoba Telecom, Mr. Lau said. He estimates that the company could require more than $400-million in financing, compared to the $238-million raised in 2013.

The company now has three options: raise money to pay down the deficit, cut its dividend, or wait and see if long-term rates increase, Mr. Lau said. "We think that the wait-and-see approach is the probable option at this point, even though rates are unlikely to rise enough to eliminate the deficit in the interim."

He downgraded Manitoba Telecom's stock to "sell" from "buy" and lowered his target price on the stock to $25 (Canadian) from $31.50. The average analyst target on the stock is $29.46.

In other analyst actions

TD Securities downgraded Pengrowth Energy to "hold" from "buy" and cut its price target to $3.75 (Canadian) from $4.50.

Desjardins Securities downgraded Alamos Gold to "hold" from "buy" and placed its target – previously $10.75 (Canadian) – under review.

JPMorgan upgraded Lululemon Athletica to "overweight" from "neutral" with a price target of $75 (U.S.).

Solium Capital Inc. was raised to "buy" from "hold" at Laurentian Bank. The 12-month target price is $8.50 (Canadian) per share.

Autobytel Inc.  was raised to "buy" from "hold" at Ascendiant Capital Markets. The target price is $13.00 (U.S.) per share.

Altera Corp.  was downgraded to "market perform" from "outperform" at BMO Capital Markets.The target price is $33 (U.S.) per share.

Avon Products Inc. was downgraded to "market perform" from "outperform" at Wells Fargo.

Boston Properties Inc. was downgraded to "neutral" from "buy" at SunTrust Robinson. The target price is $150 (U.S.) per share.

Cardinal Financial Corp. was downgraded to "market perform" from "outperform" at Keefe Bruyette. The target price is $19 (U.S.) per share.

Check Point Software Technologies Ltd. was downgraded to "neutral" from "outperform" at Macquarie. The target price is $80 (U.S.) per share.

Cypress Semiconductor Corp. was raised to "neutral" from "underweight" at JPMorgan. The target price is $15 (U.S.) per share.

DreamWorks Animation SKG Inc.  was downgraded to "underperform" from "market perform" at Cowen. The target price is $14 (U.S.) per share.But Piper Jaffray raised the stock to "overweight" from "neutral" with a target price of $26 (U.S.) per share.

Kate Spade & Co. was raised to "buy" from "neutral" at Mizuho Securities USA with a target price of $33 (U.S.)per share.

Michael Kors Holdings Ltd.  was raised to "buy" from "neutral" at Mizuho Securities USA with a target price of $82 (U.S.) per share.

LinkedIn Corp. was raised to "strong buy" from "market perform" at Raymond James with a target price of $280 (U.S.) per share.

Newell Rubbermaid Inc. was downgraded to "market perform" from "outperform" at Oppenheimer with a target price of $40 (U.S.) per share.

Palo Alto Networks Inc.  was downgraded to "neutral" from "outperform" at Macquarie with a target price of $127 (U.S.) per share.