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A freshly produced bar of gold is cleaned at the Boroo gold mine in Boroo, Mongolian.NIR ELIAS/Reuters

Inside the Market's roundup of some of today's key analyst actions

Though Credit Suisse analyst Nick Stogdill believes a "pause may be warranted" for Canadian banks, his 12-month outlook for the sector "remains positive, as earnings visibility has improved."

"We forecast 3-per-cent upside to share prices and have increasing confidence in our 2017 estimated blue sky scenario which translates to [approximately] 11-per-cent upside," said Mr. Stogdill.

In a research report on the sector, he downgraded National Bank of Canada (NA-T) to a rating of "underperform" from "neutral" and raised Canadian Western Bank (CWB-T) to "neutral" from "underperform.

At the same time, Mr. Stogdill raised his target prices for bank stocks by an average of 4 per cent, implying a 7-per-cent total potential return.

He said: "We see a clear path to mid-single digit earnings growth in 2017 for the following reasons: (1) Credit headwinds related to low oil & gas prices are largely behind us (2-per-cent earnings per share drag in 2016); (2) Expense management remains front and centre with nearly $2-billion of cost savings expected over the next 3 years; (3) Higher interest rates, particularly for banks with U.S. platforms can boost non-Canadian earnings; and (4) The outlook for market sensitive businesses (Capital Markets & Wealth) is positive. We believe these drivers will help offset the (expected) gradual slowdown in Canadian banking."

He did say the sector's valuation remains a "key" concern, noting: "With the rise in Bank price-to-earnings multiples to the long-term average (10 per cent above short-term average) we believe there is a concern that valuations have peaked. We see potential for only modest expansion from current levels and do not see significant downside risk. On a relative basis, Canadian bank valuations remain attractive vs. U.S. banks and other Canadian yield oriented sectors (Pipes & Utilities, Telcos). Declining short interest is also another potential catalyst as it remains elevated despite declining 19 per cent from its peak in February 2016."

His target price changes were:

- Royal Bank of Canada (RY-T, outperform) to $101 from $101. The analyst consensus is $91.80, according to Thomson Reuters.

Mr. Stogdill said: "Aside from a stronger U.S. economy, higher rates and other potential changes (i.e. tax reform, halt on regulatory tightening) that would support RY's earnings outlook, we believe stock specific drivers for 2017 also include: 1) a rebound in Canadian Banking following a weak 2016 – positively, margins and credit showed signs of stabilizing into Q4 which bodes well for the outlook; and 2) better trading performance which lagged peers."

- Toronto-Dominion Bank (TD-T, outperform) to $72 from $69. Consensus is $66.87.

Mr. Stogdill said: "Although TD continues to trade at a premium valuation, we believe it is supported by upside in U.S. Retail, while any improvement in Canadian Retail would be an added tailwind."

- Bank of Nova Scotia (BNS-T, neutral) to $80 from $78. Consensus is $79.48.

Mr. Stogdill said: "Valuation remains attractive relative to historical levels but we continue to believe a Neutral rating is warranted. We prefer to wait for clarity on potential macro risks pertaining to BNS's International business from the changing U.S. political / economic landscape. Execution risk is higher given the favourable outlook we highlight above and there were a few signs of slowing momentum in Q4 in International Banking."

- Bank of Montreal (BMO-T, neutral) to $100 from $93. Consensus is $97.44.

Mr. Stogdill said: "BMO is trading at a 3-per-cent premium to its Big-6 peers, and 3 per cent above its average relative valuation; this reflects their favourable business mix but does not generate a sufficient return to target to warrant an Outperform rating."

- National Bank of Canada (NA-T, underperform) to $54 from $51. Consensus is $56.31.

Mr. Stogdill said: "We see higher execution risk in 2017. In our view, the positive catalysts for NA are priced-in. The stock has outperformed peers by 370 basis points since Q4/16 results and relative valuation is above average. A few of the catalysts we believe may be priced-in include: potential release of the energy sectoral in 2017 ($204-million as of Q4/16 or 20 bps CET1 capital), achievement of a 10.5-per-cent CET1 ratio by mid-2017, slightly higher dividend growth and disclosure of a fourth business segment – U.S. Specialty Finance and International."

- Canadian Western Bank (CWB-T, neutral) to $32 from $27. Consensus is $29.90.

Mr. Stogdill said: "We believe a Neutral rating is more appropriate for the following reasons: (1) the economic outlook for Western Canada is improving and has become less negative; (2) Our 2017 EPS estimates incorporate an element of conservatism in our view, limiting downside earnings risk; (3) CWB's CET1 ratio of 9.2 per cent is at an all-time high positioning the bank to deploy capital if opportunities arise or manage through additional PCLs if the environment remains weak."

- Laurentian Bank of Canada (LB-T, underperform) to $57 from $52. Consensus is $58.09.

Mr. Stogdill said: "With LB trading at 1.2 times [price to book], its highest absolute valuation in over 5-years we believe the market is already embedding achievement of medium-term objectives, including higher ROE. We see limited upside to current valuations."

- Canadian Imperial Bank of Commerce (CM-T, underperform) remains $112. Consensus is $113.

Mr. Stogdill said: "We continue to see an overhang from the pending [PrivateBancorp Inc.] acquisition … We do not see upwards re-rating as a near-term outcome. We also see additional headwinds: 1) Canadian residential mortgage lending – growth is expected to moderate to 6-7 per cent in 2017 (from 11 per cent% in 2016), which is still above average, thus a slower than expected housing market would weigh more on CM than peers; 2) Capital Markets earning risk – we forecast a 1% decline in 2017E earnings, which incorporates mitigating actions to offset run-off of the Total Return Swap business in H2/17."

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In reaction to the release of its fourth-quarter 2016 production results and 2017 guidance, Canaccord Genuity analyst Rahul Paul downgraded his rating for Centerra Gold Inc. (CG-T).

Lowering the stock to "hold" from "buy," Mr. Paul said the Toronto-based company's results and guidance for its Kumtor mine in Kyrgyzstan exceeded his projections, while its Mt. Milligan facility in British Columbia fell below expectations.

"At Mt. Milligan, FY2017 gold production was 5 per cent lower than we had forecast at 107-per-cent higher all-in sustaining costs (our forecasts were based on the January 2015 technical report issued by Thomson Creek Metals)," said Mr. Paul. "While not much detail was provided, guidance appears to suggest a slower-than-expected ramp-up to the nameplate 62,500 tpd [tonnes per day] with Cu [copper] grades also lower. The biggest impact was from Au [gold] and Cu recoveries which were materially lower than those suggested in the last technical report – Au recoveries for 2017 are expected to be 62.5 per cent (versus 73.3 per cent in the technical report) and Cu recoveries are budgeted at 75.5 per cent (versus the 84.6 per cent in the technical report). Management believes that recoveries should improve following upgrades to the circuit and a new geo-metallurgical model. However, given the lack of firm guidance (and timelines for improvement), we have lowered our LOM recoveries to 67.5-per-cent Au and 80-per-cent Cu (vs. 72.5-per-cent Au and 84.2-per-cent Cu previously) which largely explains the reduction in our target price."

Mr. Paul said the company's 2017 production guidance of 715,000 to 795,000 ounces was in line with his projections. However, its consolidated AISC guidance of $743-$824 was 12 per cent higher than his expectations, due largely to lower-than-estimated gold production.

"The restrictions on cash withdrawal from the Kyrgyz subsidiary remain in place," he said. "While we remain optimistic that the issues will be resolved eventually, timelines remain uncertain. Even if the Kyrgyz situation were to be resolved in the short term, we believe the lack of clarity on the Mt. Milligan LOM [life-of-mine] plan could remain an overhang on the stock (the acquisition would be even harder to justify if LOM recoveries are lower than estimated in the 2015 technical report)."

Mr. Paul lowered his 2016, 2017 and 2018 earnings per share estimates to 20 cents (U.S.), 74 cents and 46 cents, respectively, from 64 cents, 91 cents and 57 cents.

He also dropped his target price for the stock to $7.50 from $8.50 due largely to lowered projections for Mt. Milligan. The analyst consensus price target is $8.29.

"Centerra Gold currently trades at 0.61 times P/NAV [price to net asset value], representing an 18-per-cent discount to the large-cap producer average," he said. "We see limited re-rating potential in the near term in light of the weaker-than-expected performance from Mt. Milligan. As such, we are downgrading the stock."

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Goldcorp Inc. (G-T, GG-N) is displaying "quality" growth, but many questions remain, according to Canaccord Genuity analyst Tony Lesiak.

On Monday, a day ahead of its investor day, Goldcorp announced preliminary gold production for the fourth quarter and full year of 2016 of 761,000 ounces and 2,873,000 ounces, respectively. The company said all-in sustaining costs (AISC) for full-year 2016 are likely to end up at the low end of the original guidance range of between $850 and $925 per ounce. Goldcorp's 2016 financial results will be released on Feb. 15, 2017.

The Vancouver-based company is scheduled to release its 2016 results on Feb. 15.

At the same time, Goldcorp release its "long-anticipated" 5-year guidance.

"Production guidance highlights a path to 3-million ounces of gold production by 2020, a 20-per-cent growth profile from 2017," said Mr. Lesiak. "The growth profile is supported by the ramp-up of Eleonore and Cerro Negro, improving grade profile at Penasquito following the large stripping campaign, completion of the pyrite leach project at Penasquito, materials handling project at Musselwhite and the Coffee and Borden projects. The profile excludes Dome Century and Nuevaunion, which should be viewed as long-term optionality, and the potential impact from Cochenour and HG Young at Red Lake."

Mr. Lesiak said the company's preliminary 2016 production of 2.873-million ounces largely met his estimates, while 2017 guidance of 2.5-million ounces falls 4 per cent beneath his projections.

"The remainder of the 5-year gold production profile came in [approximately] 4 per cent lower than our previous estimates, but we note that guidance likely represents a base-case with potential for future improvement," the analyst said. "The key surprise was at Penasquito where the medium-term grade profile was much weaker than previously guided with the grade rebound now not expected until 2020, a delay of one year. On the cost front, the 5-year guidance came in as expected and highlights a 20-per-cent decrease in cash costs. Management has identified greater than 60 per cent of their $250-million annual cost savings target by 2018, for which we already provide full benefit."

With the announcement, Mr. Lesiak lowered his earnings per share projections to 18 cents (U.S.), 26 cents and 28 cents, respectively, from 19 cents, 32 cents and 43 cents.

He maintained a "buy" rating for the stock, but his target price fell to $23.50 from $25. Consensus is $27.31.

"Overall, Goldcorp appears well positioned with a solid balance sheet, low cost structure and enviable growth platform," he said. "The exploration potential remains very robust with further meaningful upside noted by Goldcorp, particularly at Hoyle Pond, Cerro Negro, Musselwhite, Borden and Coffee. Unfortunately, based on the Investor Day presentation and the new 5-year plan we are left with many important questions unanswered. Why are long-term sustaining capital costs so high? 2017 guidance was 27 per cent higher than ours and the LT spend rate was 40 per cent higher. What are the sustainable mining rates and LT cost structures at both Eleonore (smaller stope sizes and new mine plan in the works) and Penasquito (water issue resolved so what is the LT expected mill throughput)? Management's tone on Cochenour and HG appears to have changed; at Cochenour the focus is now on a starter mine at Upper Cochenour while HG Young is being treated as an advanced exploration target and will they be ready for when the Red Lake HGZ depletes? Why was there no mention of Camino Rojo oxides after the expected completion of a PFS at YE16? Perhaps we will get answers to some of these questions from management at the Investor Day. In the interim, we have conservatively moved Camino Rojo to an option value and adjusted our LT capital forecasts higher which comprise the majority of the 7-per-cent reduction in our NAV."

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RBC Dominion Securities analyst Walter Spracklin lowered his estimates and 2017 guidance expectations for Canadian Pacific Railway Ltd. (CP-T, CP-N) in reaction to weaker-than-expected fourth-quarter grain volumes.

Mr. Spracklin adjusted his fourth-quarter earnings per share projection to $3.11 from $3.20, due largely to "delayed movement of the Grain harvest resulting in actual volumes coming in below our prior estimate."

He added: "Though we have adjusted our Q4 estimate lower, we continue to believe that movement of the Grain harvest will carry forward into 2017. Management may take a more conservative approach to 2017 guidance than we are forecasting. Given that Q4 Grain volumes underwhelmed, we believe the incoming management team may take this opportunity to announce conservative 2017 EPS guidance with growth centering more around the high-single digit range. This would be below consensus, which is currently calling for 2017 EPS growth of 14 per cent year over year. And though we have adjusted our 2017 estimates lower, we are still forecasting for double-digit 2017 EPS growth."

Mr. Spracklin's 2017 EPS estimate is now $11.45, down from $12.29. His 2018 estimated moved to $12.64 from $13.53.

With those changes, his target price for the stock fell to $224 from $239, which he notes is a implied return of 16 per cent. Consensus is $218.92.

"Valuation is still attractive," Mr. Spracklin said. "We see the delayed movement of the Grain harvest as a transitory factor weighing on earnings. More central in our view, is that CP's book of business is best positioned for commodities showing the favourable trends and the operating team is one of the best in the group. Despite these competitive advantages, based on our new estimates the 2018 price to earnings of 15.4 times is a 1.9-point discount to its closest peer and a 1.4-point discount to U.S. peers. As such, we continue to see the shares as undervalued at these levels and reiterate our outperform rating."

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Canaccord Genuity analyst Scott Chan raised his target price for stock of Gluskin Sheff + Associates Inc. (GS-T) after its December assets under management (AUM) and performance fees exceeded his expectations.

On Monday, the Toronto-based wealth management company reported performance fees of $37-million, which "significantly outpaced" Mr. Chan's estimate of $17-million. He pointed to support from "strong Q4 equity, credit, and high yield markets (benefiting GS' Portfolios)."

"In particular, we believe the Blair Franklin Global Credit Fund was the largest contributor to year-end performance fees, followed by Income Strategies (i.e., Enhanced Yield). Further, Hedge Funds and certain Equity Portfolios likely contributed more than we were anticipating," he said. "We believe the board of directors will likely retain the cash portion versus distributing out via special dividend. Pro forma, we estimate GS' cash position at [approximately] $57-million. In our model, we have a base case scenario of an arbitration impact of $40-million (or $1.16 per share). GS' balance sheet has a nice buffer if the ruling comes in above our base case outcome."

Assets under management came in at $8.7-billion, up 2.4 per cent from the previous quarter, with "modest" net redemptions of $5-million.

"This was a much better result compared to the average net outflows of $60-million over the past two quarters," said Mr. Chan. "Over the NTM [next 12 months], we forecast net redemptions of $100-million (unchanged). We remind investors that quarterly flows at GS are historically lumpy. We continue to feel that GS could revert back to net redemptions over the next few quarters. HNW could be impacted by the ongoing private arbitration, and Institutional has headwinds mainly related to higher fees (this segment less of a focus for firm). That said, continued net flow traction could support a multiple re-rating. From our perspective, we feel that one improved quarter does not represent a trend."

With the results, Mr. Chan bumped his 2017 and 2018 earnings per share estimates to $1.34 and $1.25, respectively, from $1.05 and $1.20.

He kept his "hold" rating for the stock and raised his target to $18 from $16. Consensus is $18.94.

"The next meeting for the private arbitration is scheduled in early spring, with an expected decision by the end of June/17," he said. "At current levels, we believe this will act as a stock overhang until the arbitration is complete. For mid-cap asset managers, we prefer Fiera Capital (FSZ) and Guardian Capital (GCG.A)."

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Exploration at its Madsen mines will "will drive enhanced project economics and a larger scale production profile" for Pure Gold Mining Inc. (PGM-X), said Raymond James analyst Tara Hassan.

She initiated coverage of the Vancouver-based exploration and development company with an "outperform" rating.

"With Canadian gold assets at all stages in the spotlight, and Pure Gold's valuation attractive relative to peers, we believe it could garner increased multiples as it advances Madsen in 2017," she said.

"Although Madsen has had a very successful production history that saw more than 2.5 million ounces in gold recovered, Pure Gold's recent exploration efforts have showcased the potential for the mine's operating record to be extended. Since acquiring the project in 2013, Pure Gold has focused on developing an improved geological interpretation for the Madsen project through mapping, drilling, and geochemistry. Although these efforts took some time as the company navigated a challenging equity market and reviewed and incorporated historic data, in 2015, Pure Gold developed a revised interpretation that suggested mineralization at Madsen is controlled by the intersection of gold bearing structures and preferred host rock lithologies. Based on this, mineralization in the McVeigh horizon is interpreted to plunge in the opposite direction to the Austin horizon and Pure Gold believes the McVeigh horizon has the potential to host similar tonnages and grades to the Austin horizon which saw an estimated 95 per cent of the historic drilling and production activity."

Given the infrastructure already in place, Ms. Hassan said the lone significant capital investments required at the facility prior to recommencement of production involves mill refurbishment, the development of ramp and surface and the installation of new ventilation and pumping systems. She called these capital costs, estimated to be $20.1-million, "minimal."

"The combination of low capital costs and a high grade resource drives compelling economics at Madsen, however the PEA [preliminary economic assessment] considers a relatively small scale operation based only on a small portion of the current resource," said Ms. Hassan. "With a successful 78,800 metre 2016 drill complete, we expect that the potentially mineable resource at Madsen will grow, allowing for consideration of both increased throughput and/or an extended mine life. With permits in place for the mill and tailings facility allowing for operation of a 1,089 tonnes per day operation, Pure Gold could easily accelerate a larger scale operation if it can define a larger resource at the project. Consideration of a larger operation would require expansion of the existing mill facilities and capital for additional tailings capacity, increasing capital costs from the PEA estimate, however some of this capital could be spent once the mine is already generating revenue. Our valuation suggests that when these options are evaluated project economics could improve by as much as 50 per cent."

Ms. Hassan set a price target of 90 cents for the stock. Consensus is 98 cents.

"Over the last 4 years, more than 40 per cent of the acquisitions completed on the TSX/TSXV have been of companies with assets in Canada," she said. "This acquisition spree has reduced the Canadian assets available for sale, particularly those with high-grade resources. Madsen ranks in the top 12 per cent amongst Canadian development on grade and in the top 50 per cent on scale. With Pure Gold's project ranking well against peers and its valuation falling inline (0.61 times net asset value and $44 U.S. per ounce versus North American peers trading at 0.59 times and $40/oz), we believe it could be an acquisition target as it advances Madsen."

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JPMorgan Chase & Co. (JPM-N) is "setting the bar high" for U.S. banks, said Credit Suisse analyst Susan Roth Katzke.

She called the company's fourth-quarter results, released Jan. 13, "impressive as always" and raised her target price for its stock.

"We continue to recommend purchase," said Ms. Katzke. "Sustained share price outperformance relies on above average and improving ROE [return on equity] prospects— consistent with what we've now observed in fourth quarter and full year 2016 results."

JPMorgan reported earnings per share of $1.71 (U.S.), including a tax benefit of 13 cents, well above Ms. Katzke's projection of $1.40 and the consensus of $1.43.

"Bottom line: solid results driven by the combination of revenue upside, operating leverage and lower credit costs; 14-per-cent ROTCE [return on tangible common shareholders equity] ought to again prove well above the peer group average," said Ms. Katzke.

She raised her 2017 EPS estimate to $6.50 from $6.40. Her 2018 projection rose to $7.40 from $7.20.

"Base case estimate risk/sensitivity is driven by more or less movement in interest rates (we're assuming one 25 basis points rate hike in each of 2017 and 2018, impacting the fourth quarters of each year with the 10-year Treasury hovering 2.50 per cent), commercial credit trends (later in the cycle), and capital markets conditions," she said.

With an "outperform" rating, she increased her target price to $94 from $88. Consensus is $87.43.

"Management remains reasonably optimistic about the macroeconomic outlook — not counting on more Fed tightening or tax reform, but positioned to make the most of the current environment, and any upside," she said. "At present, market-related activity remains quite healthy (cyclical support in place) with what sounds like a solid investment banking pipeline. JPMorgan remains well positioned and determined to continue to gain share across its business, with discipline along the way; note the realistic reduction in forecast loan growth, to 10 per cent (down from 10-15 per cent last year). More detail to be shared at Investor Day in late February; what we've seen and what we've heard indicates that estimates should continue to have an upward bias, if the current macro environment/outlook ."

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In other analyst actions:

UBS downgraded Twitter Inc. (TWTR-N) to "neutral" from "buy," saying the company faces a number of operating challenges.

Netflix Inc. (NFLX-Q) was upgraded to "buy" from "neutral" at Mizuho, with the price target increased to $152 per share from $112. Mizuho points to the possibility of material growth for Netflix in international markets.

Walt Disney Co. (DIS-N) was upgraded to "buy" from "neutral" at Goldman Sachs, citing optimism about Disney's 2018 film offerings among other factors.

Nordstrom Inc. (JWN-N) was downgraded to "hold" from "buy" at Stifel Nicolaus, with Stifel expecting weaker-than-anticipated holiday season results for the retailer.

Chipotle Mexican Grill Inc. (CMG-N) was downgraded from "overweight" to "neutral," citing labour challenges for Chipotle and other restaurants in the fast-casual category, as well as an oversupplied market.

Editor's note: In an earlier version of this story, Raymond James analyst Nick Stogdill was incorrectly identified.

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