A Canadian National Railway train. Analysts have increased their price targets on the company's stock.
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
Canadian National Railway Co. said it expects double-digit earnings growth in 2015, after reporting a solid end to 2014, prompting several analysts to raise their targets on the stock.
The company posted fourth-quarter earnings on Tuesday, which rose by 36 per cent year-over-year, beating analyst expectations. The company also raised its quarterly dividend by 25 per cent to $1.25 per share, the company's 19th straight dividend hike. CN management also raised its target dividend payout ratio to 35 per cent from 30 per cent.
"This plays into our thesis that CN is evolving into an infrastructure-like name given the consistency in which it returns cash to shareholders," said CIBC World Markets analyst Kevin Chiang. "Add to that its strong balance sheet position and irreplaceable asset base. We believe these attributes warrant a premium valuation."
He raised his target price on the stock to $87 (Canadian) from $84 and reiterated a "sector performer" rating. BMO Nesbitt Burns raised its target to $92 from $86. Canaccord Genuity's target moved to $83 from $72 and it maintained a "hold" rating. Desjardins Securities raised its target to $93 (Canadian) from $85 and maintained a "buy" rating. The average analyst target over the next year is $87.58, according to Bloomberg.
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First Quantum Minerals Ltd. will defer capital spending to preserve its balance sheet in the face of soft copper prices, but its financial condition remains questionable, according to Canaccord Genuity.
The miner reported copper production for full-year 2014 that was shy of its initial guidance, though its outlook for the year ahead exceeded analyst Gary Lampard's estimate.
Mr. Lampard thinks the company may need to secure additional financing, which could add to its already sizeable debt load.
"Given high forecast financial debt ratios and unknown debt covenants, balance sheet risk remains high in our view," he said. "However, while we see the potential need for additional financing, we also note the potential for temporary relaxation of debt covenants through 2015."
The analyst maintained a "buy" rating on the stock but lowered his price target to $18 (Canadian) from $23.
The average analyst price target is $20.33.
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Metro Inc. has "clearly re-established" its ability to grow same-store sales but upside for the stock may be limited following gains of more than 40 per cent over the past six months, says Desjardins Securities.
On Tuesday, the grocer reported earnings that exceeded analysts' expectations and announced a dividend hike of 16.7 per cent, news which sent the shares 4 per cent higher.
The share price appreciation has analyst Keith Howlett thinking that the company's valuation is rich.
"It appears that (in a low-interest environment) investors favour growing players in stable cash flow businesses," he said. "We believe that Metro could be an acquirer or a target within the rapidly evolving Canadian retail landscape."
Mr. Howlett downgraded the stock to "hold" from "buy" while hiking his price target to $108 (Canadian) from $98.
On Monday, ahead of its earnings report, analysts at Raymond James also downgraded Metro to hold, citing valuation concerns.
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Open Text Corp.'s license revenues have disappointed in back-to-back quarter and its performance in this key segment pales in comparison to its peers, according to Credit Suisse.
The software company reported its second quarter earnings for fiscal 2015 after the market closed on Tuesday, and posted profits in-line with analysts' estimates thanks to strong cost controls. However, organic license revenue fell nearly 7 per cent year-over-year, and analyst Michael Nemeroff believes the poor sales outlook will weigh on the stock's valuation.
"We believe investors will not pay as high a multiple for OTEX shares if the company is unable to grow organic license revenue anywhere near the industry growth rate, which OTEX management has previously pegged at about 10 per cent, or at all," he said. "We recognize that the FX [foreign exchange] revenue headwind in fiscal second quarter was out of the company's control, but the sales execution issues OTEX faced in emerging market geographies in fiscal second quarter are likely to persist for at least another few quarters due to a weakening global macroeconomic outlook," he said.
Mr. Nemeroff downgraded the stock to "neutral" from "outperform" and lowered his price target to $60 (U.S.) from $65. The average analyst price target is $61.86.
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Caterpillar Inc.'s earnings miss to end fiscal 2014 and its underwhelming outlook show that things are "not going according to plan," says Raymond James.
Analyst Theoni Pilarinos said the subpar profits relative to her estimates were due to smaller than anticipated margins, and noted that the company downgraded its sales guidance due to the weakness in commodity prices and softer demand from China.
"Not to dwell too much on the past, but it is worth recalling that at MINExpo in 2012 CAT set a 2015 EPS goal in the range of $12-$18. Needless to say, things have not gone according to plan!" Ms. Pilarinos said. "The long list of headwinds that have since developed begins with the downturn in mining and extends to include — among other variables — the slowdown in China, troubles in Europe and most recently the collapse of oil prices. Just about everything that can go wrong has gone wrong, which naturally leads to the question: can things get any worse?"
She continues to rate the stock "market perform" but cut her price target to $85 (U.S.), which is the average price target amongst analysts, from $95. Caterpillar was also downgraded to "neutral" from "buy" at Longbow Research but was raised to "neutral" from "underweight" at JPMorgan with a target price is $78 (U.S.) per share.
In other analyst actions:
TD Securities downgraded Enerplus to "buy" from "action list buy" and cut its target to $13.50 (Canadian) from $15.
Canacol Energy Ltd. was raised to "sector outperform" from "sector perform" at CIBC with a target price of $5 (Canadian) per share.
Coty Inc. was downgraded to "neutral" from "overweight" at Piper Jaffray with a target price of $20 (U.S.) per share.
Crew Energy Inc. was downgraded to "hold" from "buy" at TD Securities with a target price of $6.50 (Canadian) per share.
EI du Pont de Nemours & Co. was downgraded to "neutral" from "overweight" at JPMorgan with a target price of $72 (U.S.) per share.
Applied Micro Circuits Corp. was raised to "hold" from "sell" at Craig-Hallum with a target price of $6 (U.S.) per share.
AOL Inc. was downgraded to "market perform" from "outperform" at Wells Fargo.
Freeport-McMoRan Inc. was downgraded to "hold" from "buy" at Brean Capital.
Freescale Semiconductor Ltd. was raised to "strong buy" from "buy" at Needham & Co. with a target price of$45 (U.S.) per share.
Goodyear Tire & Rubber Co. was downgraded to "neutral" from "buy" at SunTrust Robinson with a target price of $28 (U.S.) per share.
Integra Gold Corp. was rated new "speculative buy" at Laurentian Bank with a price target of 40 cents (Canadian) per share.
Iona Energy Inc. was downgraded to "hold" from "speculative buy" at TD Securities with a target price of 5 cents (Canadian) per share.
Madison Square Garden Co. was rated new "hold" at Jefferies with a target price of $85 (U.S.) per share.
NYX Gaming Group Ltd. was rated new "buy" at Canaccord Genuity with a target price of $5.50 (Canadian) per share.
RE/MAX Holdings Inc. was downgraded to "market underperform" from "market perform" at JMP Securities with a target price of $27 (U.S.) per share.
Silicon Image Inc. was downgraded to "hold" from "buy" at Needham & Co. with a target price of $7 (U.S.) per share.
South State Corp. was downgraded to "hold" from "buy" at Sandler O'Neill with a target price of $67 (U.S.) per share.
USG Corp. was raised to "outperform" from "neutral" at Macquarie with a target price of $37 (U.S.) per share.
Western Digital Corp. was raised to "buy" from "neutral" at Longbow Research with a target price of $125 (U.S.) per share.
With files from Bloomberg News
Tim Shufelt