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.

Canaccord Genuity analyst David Galison initiated coverage of Pembina Pipeline Corp. (PPL-T; PBA-N) with a "buy" rating, calling it his top pick in the Canadian midstream sector and touting that it has the best growth profile among its peers.

Backed by a "massive multi-billion, multi-year capital program," the company expects to create incremental annual growth in earnings before interest, taxes, depreciation and amortization of $700-million to $1-billion between 2015 and 2017.

"This new cash flow will open up many opportunities for the company and could be used for continued growth through acquisitions or greenfield expansions or it could allow management to make significant advancements in growing the company's annual dividend," he said.

He added: "While the current depressed energy market environment presents many significant near-term headwinds for the industry, it is providing an opportunity for Pembina to reduce its multi-billion dollar capital program by a targeted 5 per cent, or approximately $250-million, through improved competitive bidding, lower than planned camp costs, lower fuel costs as well as lower raw material costs (such as steel pipe)."

Mr. Galison set a price target of $48 (Canadian), representing a 24.2-per-cent total return including an estimated 2015 dividend of $1.80 per share. The analyst consensus price target is $48.54, according to Thomson Reuters.

"Continued growth through acquisitions or additional expansion projects, additional volume commitments and a return to historical frac-spread levels could suggest potential upside to our current valuation," he said.

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Credit Suisse analyst David Hartley dropped his target price for Hudson's Bay Company (HBC-T) , citing adjustment to real estate valuations consistent with those of Loblaw Cos. and Canadian Tire Co.

Ahead of HBC reporting first-quarter earnings on June 10, Mr. Hartley raised his earnings per share forecasts for the period to a loss of 7 cents, compared to a previous estimate of a 15-cent loss and the consensus view of a 3-cent loss.  The analyst also adjusted his EPS forecasts for 2015, 2016 and 2017 to $0.83/$0.99/$1.17 from $0.72/$0.82/$0.92 due partially to lower annual expenses based on stronger deleveraging of fixed costs.

In analyzing reports that HBC is preparing a $3.75-billion bid for the Kauthof chain in Germany, the analyst said the deal would be accretive to 15 cents per share, including synergies.

"Potential for gains from real estate … and perhaps a more advantageous tax structure, could be required to make a deal workable," said Mr. Hartley. "Does HBC have to become a serial acquirer in Europe to create enough breadth for a Euro REIT? Did shareholders sign up for this risk/reward?"

Maintaining his "neutral" rating, he lowered his price target to $27 from $30 (Canadian). The analyst consensus is $33.35.

"The markets in the developed world have been paying up for consumer stocks for some time," he said. "We have seen [price/cash flow] valuations rise to as high as 3 standard deviations from the average historical mean for some consumer stocks. HBC's limited history does not allow us a proper measurement of valuation versus its history; however, we expect that investors have been drawn to HBC's plans for growth and real estate monetization. A reversion to mean trade could be particularly negative for HBC."

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In criticizing its plan to buy chip maker Altera Corp.  (ALTR-Q) for $16.7-billion (U.S.), BMO Nesbitt Burns analyst  Ambrish Shrivastava downgraded Intel Corp. (INTC-Q) from "outperform" to "market perform."

Failing to see the "opportunity/rationale" for the deal, Mr. Shrivastava  said does not agree with the "assumption" that the acquisition will bring a 7 per cent compound annual growth rate for the business.

"We do not like the valuation that Intel is paying for Altera, especially in light of our view of the opportunity," he said. "On a stand-alone basis, we view Altera to be worth $28. We are struggling with how this deal will add value to shareholders in the long term. We were disappointed with Intel's lack of details on that front during the call.  We were looking forward to Intel providing us with a framework for how it hopes to generate a return on the approximately $1- billion investment that it is making to purchase Altera. And this is coming from an analyst who has given Intel the benefit of the doubt on the almost $1-billion loss/quarter on its mobility efforts and the 'strategic' rationale behind."

The analyst also lowered his price target to $33 from $40 (U.S.). The analyst consensus is $34.78.

"While Intel generates plenty of free cash flow, and we do not know ultimately how much debt Intel will end up issuing to finance the deal, potentially in the range of $7-billion to $12-billion, in the medium turn, it could lead to potentially reduced capital return via share repurchase, something we have lauded Intel in the past for," he said.

Meanwhile, Jefferies maintained a "buy" rating and $48 (U.S.) price target on IIntel.l. Analyst Mark Lipacis believes that the deal highlights Intel's data centre profits.

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Despite calling Interfor Corp. (IFP-T) "a core sector holding for investors seeking growth and value," Raymond James analyst Daryl Swetlishoff lowered his quarterly 2015 forecasts for the lumber producer.

Mr. Swetishoff said a number of factors are currently weighing on profitability, including: "stubbornly" low Western  Spruce-Pine-Fir and lower U.S. Southern Yellow Pine prices; higher U.S. export duties and weak Chinese markets.

He reduced his second quarter earnings per share forecast from 1 cent to a loss of 8 cents. He also adjusted his estimates for the third quarter (46 cents from 49 cents), fourth quarter (49 cents from 51 cents) and the full year (93 cents from $1.08).

The analyst maintained his price target of $27.50 (Canadian) with a "strong buy" rating. The analyst consensus is $24.31.

"As a pure play, there is high leverage to tighter expected lumber markets; however, it is the attractive returns on the strategic U.S. South expansion that has us most excited," he said. "That said, current conditions remain challenging and [second quarter] consensus estimates appear high. We acknowledge that trading liquidity is an issue and therefore advocate investors 'look over the valley' as we see strong gains during [the second half of 2015] and beyond."

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The major corporate restructuring announced by Zions Bancorp. (ZION-Q) represents "forceful action with respect to its unacceptably high efficiency ratio," said BMO Nesbitt Burns analyst Lana Chan.

After the markets closed on Monday, Zions announced it was consolidating seven bank charters into a single entity and the creation of chief banking officer position to oversee retail banking, wealth management and residential mortgages in an attempt to increase profitability. The company is aiming to lower its efficiency ratio -- to closer to 50 per cent, which is deemed optimal -- from 74.1 per cent in the first quarter to less than 70 per cent in the second half of 2015.

Ms. Chan maintained her "market perform" rating but raised her price target to $30 from $28 (U.S.). The consensus price target is $29.62.

Evercore ISI analyst John Pancari upgraded the stock from "hold" to "buy," while CLSA upgraded it from "underperform" to "buy."

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In other analyst actions:

Stifel downgraded Ctrip.com (CTRP-Q)from "Buy" to "Hold." Ctrip.com International Ltd.  was rated new "Buy" at UBS. The 12-month target price is $102 (U.S.) per share.

Jefferies initiates coverage on recent IPO Bojangles' (BOJA-Q) with a "Buy" rating and a price target of $32 (U.S.). Bank of America Merrill Lynch initiated coverage on Bojangles' with a "Neutral" rating and a price target of $30. KeyBanc initiated coverage on Bojangles' with an "Overweight" rating and a price target of $32.

Masonite International Corp. (DOOR-N) was rated new "Buy" at Thompson Research Group. The 12-month target price is $82 (U.S.) per share.

Gulfport Energy Corp. (GPOR-Q) was raised to "Outperform" from "Market Perform" at Wells Fargo.

Pioneer Natural Resources Co. (PXD-N) was raised to "Buy" from "Hold" at Topeka Capital. The 12-month target price is $190 (U.S.) per share.

Wells Fargo & Co. (WFC-N) was raised to "Strong Buy" from "Market Outperform" at Vining Sparks. The target price is $68 (U.S.) per share.

Xilinx Inc. (XLNX-Q) was raised to "Strong Buy" from "Market Perform" at Raymond James. The 12-month target price is $60 (U.S.) per share.

Barracuda Networks Inc (CUDA-N) was rated new "buy" at Guggenheim Securities by equity analyst Ryan Hutchinson. The 12-month target price is $45 (U.S.) per share.

The Descartes Systems Group Inc (DSG-T) was downgraded to "hold" from "buy" at GMP by equity analyst Michael Urlocker. The target price is $21 (Canadian) per share.

Enghouse Systems Ltd (ESL-T) was downgraded to "hold" from "buy" at GMP by equity analyst Michael Urlocker. The target price is $49 (Canadian)  per share.

First Quantum Minerals Ltd (FM-T) was rated new "outperform" at Sanford Bernstein by equity analyst Paul Gait. The 12-month target price is $23.75 (Canadian) per share.

CGI Group Inc (GIB.A-T) was downgraded to "hold" from "buy" at GMP by equity analyst Michael Urlocker. The target price is $55 (Canadian) per share.

Great Prairie Energy Services Inc (GPE-T) was downgraded to "hold" from "buy" at Mackie Research Capital by equity analyst Russell Stanley. The 12-month target price is $0.12 (Canadian) per share.

Leucrotta Exploration Inc (LXE-T) was raised to "speculative buy" from "hold" at Canaccord Genuity by equity analyst Anthony Petrucci. The 12-month target price is $1.50 (Canadian)  per share.

Palo Alto Networks Inc (PANW-N) was rated new "buy" at Guggenheim Securities by equity analyst Ryan Hutchinson. The 12-month target price is $200 (U.S.) per share.

Prudential Financial Inc (PRU-N) was rated new "overweight" at Piper Jaffray by equity analyst John Nadel. The 12-month target price is $106.00 per share.