Market Blog's roundup of some of today's key analyst actions
Dundee Securities said it is “cautiously” upgrading Kinross Gold Corp. to a “buy.” While the market has loved to hate Kinross over the last three years, the stock has been “unquestionably” oversold, said analyst Ron Stewart. It’s been showing signs of life recently, “and we expect this will continue providing management remains committed to capital discipline,” he said.
Upside: Mr. Stewart raised his price target to $13 (Canadian) from $9.50.
Also see: Gold stocks nearly ripe for the taking
Raymond James analyst Steve Hansen, fresh from attending the company’s investor day presentation last week, believes now is the time to buy Methanex Corp. shares. Management presented a robust outlook for global methanol demand, largely underpinned by a series of new energy-based applications. Meanwhile, the company restarted production last week at its Egyptian operations. “Methanex boasts a diverse portfolio of strategic growth opportunities that should power strong earnings growth,” he said.
Upside: Mr. Hansen upgraded Methanex to “outperform” from “market perform” and raised his price target by $3 to $34 (U.S.)
TD Securities analyst Paul D’Amico downgraded Agrium Inc. to “hold” from an “action list buy” rating, largely because of the stock’s big gains this year. Other factors are also working against the fertilizer producer, he said, including higher natural gas and phosphate costs and an extended potash plant outage planned for the third quarter of 2013. “We believe consensus 2013 earnings-per-share (estimates) are too high.”
Meanwhile, Mr. Amico doesn’t think the attempt by shareholder activist Jana Partners to break up the company is reason to buy the stock. “At this time, we believe Jana’s proposal(s) lack a clear value trigger and do not necessarily provide a compelling argument against AGU’s prevailing structure and/or strategy,” he said. “It is unclear what actions, if any, are likely to result from Jana’s activist investment.”
Downside: Mr. D’Amico maintained a price target of $115 (U.S.). “We would be buyers of AGU below $97 a share,” he added.
Labrador Iron Mines Holdings Ltd. made an unexpected equity issue this week that will result in significant share dilution, noted Raymond James analyst Adam Low. The company will issue at least 30 million shares at $1 a share on a bought-deal basis, increasing the number of shares outstanding by 43 per cent. Mr. Low believes the additional funds were required because of provisional pricing adjustments to its products and the timing of payments for shipments.
Downside: Mr. Low cut his price target in half, to $1.50 (Canadian), and maintained a “market perform” rating.
RBC Dominion Securities analyst Edward Aaron believes Kraft Foods Group Inc. could be a “sleeping giant.” He initiated coverage with an “outperform” rating, seeing “solid upside potential with limited downside risk” thanks to its industry-leading dividend yield of 4.5 per cent. “While the dividend advantage can only take the stock so far on the upside, we believe Kraft’s ability to quickly leverage its strong-scale position should result in stronger earnings growth with a greater frequency of positive surprise relative to its peers.”
Separately, BMO Nesbitt Burns analyst Kenneth B. Zaslow also initiated coverage today of Kraft with an “outperform” rating, saying the company “is a unique investment vehicle balancing earnings consistency and high dividend yield with opportunities to exceed expectations.”
Upside: Mr. Aaron set a $49 (U.S.) price target while Mr. Zaslow established a target of $50.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at#eyeonequities