Tuesday’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 often during the trading day so check back for new details.

Market analysts have been quick to applaud Apple Inc.'s impressive second-quarter results, with a 33-per-cent rise in profit off strong iPhone sales in both the United States and China.

Multiple analysts raised their price targets on Tuesday after the tech giant gained further market share while also benefiting from higher prices.

"We believe the strong results and solid guidance are consistent with our surveys and analysis indicating a record iPhone 6 upgrade cycle driven by two primary reasons. First, we believe the iPhone 6 and 6 Plus smartphones are generating very strong replacement sales from existing iPhone consumers who slowed the pace of iPhone upgrade purchases during the relatively disappointing iPhone 5 and 5s product cycles. In fact, with only 20 per cent of the iPhone installed base upgrading to the new iPhone 6/6 Plus devices by the end of Q2/F'15, we anticipate continued strong replacement sales through 2015," said Canaccord Genuity analyst T. Michael Walkley. "Second, consistent with management commentary, we anticipate continued high-end smartphone market share gains for Apple due to surveys indicating a greater mix of Android smartphone consumers switching to the new iPhones than the iPhone 5 series launches. We believe these trends should grow Apple's sticky iPhone installed base to half a billion users during 2015 and this large base bodes well for future strong iPhone replacement sales, earnings, and cash generation."

Mr. Walkley raised his price target to $155 (U.S.) from $150.

Analyst Brian White of Cantor Fitzgerald raised his target to $195 from $180. The new figure is currently the highest among analysts surveyed by Bloomberg.

"We believe Apple is in the midst of a transformational, super cycle with a notably stronger iPhone cycle and initial strength around Apple Watch," Mr. White said. "The momentum of this iPhone cycle is notably stronger compared to those in the past, which we believe is driven by the larger screen sizes of the iPhone 6/6 Plus, combined with strength in emerging markets and the growing attraction of Apple's robust digital ecosystem. At the same time, recent media reports about an "Apple Car," combined with the opportunities we see for Apple in the TV and personal robot markets speaks to longer-term innovation opportunities. At the end of the day, we believe Apple is innovating like never before."

Even analysts that stood pat with their ratings and target prices were bullish on Apple's future.

"Given high retention rates, a superior ecosystem, and multi product compute advantage, we believe such elevated levels of earnings and [free cash flow] of $72-billion per annum should be sustainable long term," said Credit Suisse analyst Kulbinder Garcha, who reiterate his "outperform" rating and $145 target price.

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According to Raymond James analyst Andrew Bradford, the market's reaction to better-than-expected quarterly results from Precision Drilling Corp. "could be described as 'curious detachment.'"

Precision reported a first-quarter earnings before interest, taxes, depreciation, and amortization of $163-million, despite $7-million in restructuring charges for payroll deductions and facility consolidation in the wake of a steep drop in drilling activities. The analyst consensus was $162-million, though Mr. Bradford notes he isn't sure how restructuring was factored into that figure.

"On the whole, PD's operating results (day margins, primarily) were better than we had anticipated, though we don't believe that 1Q15 performance will be overly indicative of 2H15 and 2016 performance," he said.

Mr. Bradford expects drilling contracts to continue to drop from the currently 110 rigs by about 26 by the fourth quarter, primarily in the United States. He notes contracts provide protection during downturns, but the quality of the fleet is a concern.

"Our analysis suggests that PD's Canadian fleet is roughly middle-of-the-pack from a competitive point of view (which is an achievement for a large incumbent contractor) but that its U.S. fleet has been making gains over the last several years, which can be measured by growing market share and concurrently growing daymargins," he said.

The analyst maintained his "market perform" rating and raised his target price to $8.75 (Canadian) from $8.25. The analyst consensus price is $9.44, according to Thomson Reuters.

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Barrick Gold Corp. has "its work cut out to get back to the future" in its quest to cut $3-billion in net debt this year, said Canaccord Genuity analyst Tony Lesiak.

Mr. Lesiak does not expect free cash flow, including dividends, for Barrick in 2015, and, accordingly, he said that debt reduction will need to come almost solely from the sale of assets. That includes its Porgera mine in Papua New Guinea and Cowal mine in Australia. He also expects Barrick to sell down a portion of its 63.9-per-cent stake in Acadia Mining Corp.  It has already announced a plan to divest a stake in the Zaldivar copper mine in Chile.

"Despite the potential for value destructive asset sales, a rapidly declining production profile, continued management alignment issues, [Barrick] shares have outperformed the senior producer group by 23 per cent in the year to date," he said.

He added: "We believe ABX should be utilizing its "royalty-esque" premium to buy high quality assets rather than pursue austerity."

On Monday, Barrick reported adjusted earnings per share of 5 cents in the first quarter, falling below Mr. Lesiak's estimate (and the consensus) of 9 cents, due largely to lower-than-forecast gold sales.

The analyst raised his target price to $12.50 from $12 (Canadian) to "reflect the improved outlook for ABX's African assets (Acacia) and reduction in sustaining capital." The consensus is $14.50.

He is maintaining his "sell" rating.

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Surge Energy Inc. announced Monday that it is entering into an agreement to sell oil-producing assets in Saskatchewan and Manitoba for $430-million.

Though the deal reduces Surge's production sharing in the region and its cash flow per share, Canaccord Genuity analyst Anthony Petrucci said it is an important transaction as it aims to trim debt.

"In our view, this was a positive step by Surge, given its balance sheet concerns and the current commodity price environment," Mr. Petrucci said. "With this move, SGY now boasts one of the stronger balance sheets in the space."

The analyst maintained his "hold" rating but raised his target price to $4.50 (Canadian) from $3.50. The analyst consensus is $3.85.

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In the wake of a disclosure from MDC Partners Inc. that it received a subpoena from the U.S. Securities and Exchange Commission in October, 2014, and is under investigation for Chief Executive Officer Miles Nadal's expenses, BMO Nesbitt Burns analyst Dan Salmon is downgrading the stock to "market perform" from "outperform."

MDC formed a special committee to perform an internal investigation, resulting in Mr. Nadal agreeing to pay back $8.6-million (U.S.) to MDC. The company expects to recognize this gain in the second quarter.

The SEC is also examining the company's accounting practices and third-party trading in MDC securities.

"Our view on MDC's fundamentals remains exactly the same and we continue to see expansion of the global client roster, growth of the media business, and divesting of the call center business as positives. However, we cannot recommend the stock until we have visibility on the investigation," said Mr. Salmon. "We have long supported CEO Nadal's vision and particularly his aggressive (and very successful) M&A strategy over the past 5-6 years. We also have defended his personal style, which we believe engenders loyalty from his top employees, even if it can rub some investors the wrong way.

"But we also recognize that MDC has faced questions about fiduciary responsibility previously … and so the investigation may resurrect doubts. We don't expect material financial impact, but we expect the stock to be range-bound until this issue is addressed"

MDC reported first-quarter revenue growth of 7.4 per cent, which was  slightly below the consensus forecast of 7.6 per cent. Its adjusted earnings before interest, taxes, depreciation, and amortization was $31.2-million, beating consensus estimates of $29-million.

Mr. Salmon lowered his target price to $26 from $30 (Canadian). The consensus price is $28.92.

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In other analyst actions:

CGI Group (GIB.A-T; GIB-N) was lowered to "hold" from "buy" at Societe Generale. The 12-month target price is $62 (Canadian) per share.

Freeport-McMoRan Inc. (FCX-N) was upgraded to "overweight" from "equal weight" at Morgan Stanley.

Newmont Mining Corp. (NEM-N)was raised to "netural" from "underperform" at Bank of America.

Calloway Real Estate Investment Trust (CWT.UN-T) was raised to "outperform" from "market Perform" at BMO Capital Markets.The 12-month target price is $33 (Canadian) per share.

Amazon.com Inc. (AMZN-Q) was downgraded to "hold" from "buy" at Argus.

IGATE Corp. (IGTE-Q) was downgraded to "hold" from "buy" at Noble Financial. The 12-month target price is $41 (U.S.) per share. The company was also downgraded to "market perform" from "outperform" at William Blair. It was also downgraded to "hold" from "buy" at Jefferies with a 12-month target price of $48 (U.S.) per share. RBC Capital also  downgraded the stock to "sector perform" from "outperform" with a target price of $48 (U.S.) per share.

Intel Corp. (INTC-Q) was rated new "buy" at Aegis Capital. The 12-month target price is $38 (U.S.) per share.

Colabor Group Inc. (GCL-T) was raised to "hold" from "reduce" at TD Securities. The 12-month target price is $1.75 (Canadian) per share.

Lucara Diamond Corp. (LUC-T) was rated new "buy" at Haywood Securities. The 12-month target price is $2.80 (Canadian) per share.

MDC Partners Inc. (MDZ.A-T; MDCA-Q) was downgraded to "neutral" from "overweight" at Piper Jaffray.The 12-month target price is $26 (U.S.) per share. RBC Capital also downgraded the stock to "sector perform" from "outperform" with a target price of $31 (U.S.) per share. BMO Capital Markets downgraded the stock to "market perform" from "outperform" with a target price of $26 (Canadian) per share.

Apache Corp (APA-N) was rated new "market perform" at Cowen by equity analyst Charles Robertson. The 12-month target price is $72 (U.S.) per share.

Brunswick Corp/DE (BC-N) was rated new "hold" at Jefferies by equity analyst Randal Konik. The 12-month target price is $55 (U.S.) per share.

Discovery Communications Inc (DISCA-Q) was downgraded to "sell" from "neutral" at UBS by equity analyst Douglas Mitchelson. The 12-month target price is $30.50 (U.S.) per share.

Pioneer Natural Resources Co (PXD-N) was rated new "outperform" at Cowen by equity analyst Charles Robertson. The 12-month target price is $216 (U.S.) per share.

Viacom Inc (VIAB-Q) was raised to "buy" from "neutral" at UBS by equity analyst Douglas Mitchelson. The 12-month target price is $81 (U.S.) per share.

Whole Foods Market Inc (WFM-Q) was rated new "sector perform" at RBC Capital by equity analyst William Kirk. The 12-month target price is $54 (U.S.) per share.

Cimarex Energy Co (XEC-N) was rated new "Outperform" at Cowen by equity analyst Charles Robertson. The 12-month target price is $154 (U.S.) per share.

With files from Bloomberg News