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Glenn Chamandy, Gildan Activewear Inc., $396-millionThe Globe and Mail

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.

The decline in share price for Gildan Activewear Inc. (GIL-T, GIL-N)  following "disappointing" second-quarter results has made its valuation "more approachable," said Desjardins Securities analyst Chase Bethel.

Mr. Bethel said the results and subsequent reduction in guidance does not change his "positive view" on the long-term fortunes of Gildan. He upgraded his rating for the stock to "buy" from "hold."

"We see Gildan as an aggressive purveyor of basic apparel capacity, with further growth runway in both its legacy printwear business and its growing branded apparel business," he said. "Beyond top-line growth, the company stands to reap the rewards of its investments in yarn spinning and other cost-saving initiatives over the next two years. Gildan is led by a talented entrepreneurial management team and has the financial means to facilitate value creation above and beyond its organic growth initiatives via acquisitions."

The apparel company reported earnings per share of 42 cents (U.S.), below the consensus of 44 cents, due largely to lower-than-projected sales, which also missed estimates ($714-million versus the consensus of $758-million).

"While reports of 'choppy' or 'uneven' retail sales trends have been fairly consistent in recent quarters, we note that one of Gildan's key competitors called out declining category sales in women's intimate apparel as well as an overall apparent deceleration of growth in other basic apparel categories," said Mr. Bethel. "Given that per capita consumption of men's underwear has been quite consistent over time, we are disinclined to be alarmed at this point. However, it does work to Gildan's favour in the short term that its sales are relatively more weighted toward men's categories. Furthermore, given that the company has expressed interest in growing into the women's bra category, current sales trends could eventually create attractive M&A opportunities for the company."

To account for account for the weaker loonie, Mr. Bethel raised his price target for the stock to $46.50 (Canadian) from $45. That target falls in line with the analyst consensus price target, according to Thomson Reuters.

In a contrasting view, Credit Suisse analyst David Hartley noted Gildan has "stumbled a few times in the past year" and this has forced him to be "more cautious" on the company in the near term. He downgraded his rating to "neutral" from "outperform" given the current stock price and what he perceives to be "limited upside potential"

He did bump his target price to $45 from $52.

"GIL has been trading at valuations above recent, and longer-term averages … The stock was richly priced prior to the Q2/15 report," said Mr. Hartley. "We expect the stock to trade in a narrow range, perhaps come under pressure over the next 3-6 months."

He added:  "We are mindful of mid-longer term growth potential owing to: capital investments in plants (Rio Nance 6, Costa Rica); cost savings ($100mm plan on track); program wins/penetration of retail (2x retail penetration by December from June); and a more favourable cotton price/cost of goods sold over next 12 months."

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A deal by Romarco Minerals Inc. (R-T) to be acquired by OceanaGold (OGC-T) in an all-share deal is a positive for shareholders, according to Raymond James analyst David Sadowski.

He said the agreement, which values Romarco at $677-million and could close in the fourth quarter, provides a "healthy" premium to recent share prices levels and net asset value per share. He did downgrade his rating for the stock to "market perform" from "outperform."

"Oceana states it is paying a discount to consensus [net asset value] estimates, we estimate the share consideration – as of Wednesday's share price – equates to 1.12x P/NAV," said Mr. Sadowski . "This value has since dropped to 0.96x. We note our NAV (5 per cent) includes a doubling of throughput in 2020 estimate – an expansion not without risk, particularly on permitting – as well as notional value of $100-million or $0.08/share for underground mining potential and exploration upside. At our base case gold price assumption of $1,150 (U.S.)/ounce, our NAVPS is $0.57 Canadian (implying 0.92x P/NAV today), while at $1,100/oz, our NAVPS is $0.48 (1.07x).

"Absent further Oceana share price weakness, we believe a higher competing bid seems unlikely as an interloper would have to (i) believe in notably higher gold prices, (ii) see greater underground/exploration upside, or (iii) be willing to pay a large premium to NAV."

He also lowered his target price to 55 cents per share from 60 cents. Consensus is 83 cents.

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FirstEnergy Corp. (FE-N) has made "material progress" in stabilizing the "company's story," said RBC Dominion Securities analyst Shelby Tucker.

He upgraded his rating for the stock to "outperform" from "sector perform."

"We believe FirstEnergy now presents a much cleaner increasingly stable story driven by regulated earnings growth; our thesis incorporates our bullish outlook on the upcoming PJM Capacity Performance (CP) auctions, as well as our view of no-to-moderate amount of equity needed to maintain its investment grade rating," said Mr. Tucker.

He added: "We believe valuations are very attractive at current levels with a favorable risk/return proposition. We expect a large part of our thesis to play out in the coming weeks with the three CP auctions, which should in large part determine both the growth outlook for the company as well as the necessity to issue equity. From a broader perspective, we believe management is pulling the right levers to create a more visible and stable earnings platform, which we believe should benefit the company longer-term."

He raised his price target to $40 (U.S.) from $38. Consensus is $36.53.

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In the wake of "solid" second-quarter results reflecting the "strength of a diversified, conservative strategy," CIBC World Markets analyst Alex Avery called Canadian Real Estate Investment Trust (REF.UN-T) "a high-quality, defensive core holding."

CREIT reported funds from operations of 76 cents a unit, above both Mr. Avery's 75-cent estimate and the 74-cent result from the same period a year ago. He pointed to higher interest income, contributions from developments and lower interest rates on refinancing.

The analyst did cut his 2015 and 2016 FFO and adjusted FFO projections by a cent and two cents per unit, respectively, in reaction to a "modestly softer" same property net operation income forecast. That is due largely to weakness in the Alberta office and industrial markets.

Keeping his "sector performer" rating, Mr. Avery lowered his price target for the REIT to $46 (Canadian) from $50, in line with his net asset value estimate. Consensus is $48.79

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It is "hard to ignore the yield" for Medical Facilities Corp. (DR-T), said Canaccord Genuity analyst Neil Maruoka.

Ahead of the company's second-quarter results on Aug. 13, he upgraded his rating to "buy" from "hold."

"As a result of a declining stock price (down 6.1 per cent since the announced sale of Dakota Plains Surgical Center), DR presents a very attractive yield of 7.9 per cent (relative to Canadian peers at approximately 6.0 per cent and U.S. peers at 5.5 per cent)," Mr. Maruoka said. "We believe that the appeal of the dividend is underscored by steady cash flows, a strong U.S. dollar (providing a buffer for U.S.-generated cash), and a payout ratio that is expected to remain below the company's 80-per-cent annual target in the near and medium-term. A strong balance sheet (to drive potential accretive acquisitions) and an active share repurchase program further offset potential operational risks, in our view."

Looking ahead to the quarterly results, the analyst said the sale of DSPC will be the primary driver of a "modest" decline in revenue year over year. That will be partially offset by expected increase in revenue at its other facilities.

Touting its "very attractive" 7.9-per-cent yield, he said: "We forecast a payout ratio of 91.1 per cent in the second quarter and 77.3 per cent for the fiscal year 2015. We note that Medical Facilities has a significant portion of its distribution hedged against F/X fluctuations, which has worked against the company in the past, but could provide a positive boost to the payout in the medium-term.

He maintained a target price of $17.25 (Canadian), which represents a price-to-earnings multiple of 23.6 times (according to his 2016 estimate) compared to its sector peers at 19.5x. He said his target implies a 29.1-per-cent annualized return, hence the upgrade of his rating. The consensus target is $18.38.

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In other analyst actions:

Industrial Alliance Securities downgraded CCL Industries (CCL.B-T) to "buy" from "strong buy" on share price appreciation. But it raised its price target to $200 (Canadian) from $195.

Alcoa Inc (AA-N) was raised to "Buy" from "Neutral" at UBS by equity analyst Brian Macarthur. The 12-month target price is $14 (U.S.) per share.

Allstate Corp (ALL-N) was downgraded to "Sector Perform" from "Outperform" at RBC Capital by equity analyst Mark Dwelle. The 12-month target price is $69 (U.S.) per share.

Interfor Corp (IFP-T) was raised to "Action List Buy" from "Buy" at TD Securities by equity analyst Sean Steuart. The 12-month target price is $23 (Canadian) per share.

Supremex Inc (SXP-T) was downgraded to "Underperform" from "Sector Perform" at National Bank by equity analyst Adam Shine. The 12-month target price is $4.50 (Canadian) per share.

Toromont Industries Ltd (TIH-T) was downgraded to "Neutral" from "Buy" at Dundee by equity analyst Maxim Sytchev. The price target was unchanged at $36 (Canadian).

With files from Bloomberg

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