These are some of the key analyst actions on Bay Street today
Bank of Montreal and Bank of Nova Scotia both gave investors a reason to cheer in releasing higher-than-expected profits Tuesday and announcing dividend hikes - but which stock offers the best odds for returns?
Analysts, overall, are siding with Scotiabank. They have 13 buys on the stock, six holds and one sell, according to Bloomberg data. Compare that to BMO, which garners only three buy ratings, but a very large number of holds, at 13. And there are even five analysts recommending selling.
Price targets, generally a prediction for where shares will be trading a year from now, also suggest more potential for Scotiabank. The average target is $59.59, or about 12 per cent higher than the current trading price. The average BMO target is $62.60, which would represent a skinnier gain of only around 7 per cent.
Analysts on the Street were kept busy over the past 24 hours adjusting their targets on the two stocks in the wake of the earnings reports, although for the most part they were minor tweaks. RBC Dominion Securities hiked its target on Bank of Nova Scotia by $1 to $61, for instance, and CIBC World Markets raised its target on Bank of Montreal by $1 to $60, even while reiterating its “sector underperformer” rating, the equivalent of a sell. “With estimates left largely unchanged and the shares trading at peer-average multiples that leave little room for expansion relative to the group, we see more upside in other banks at this time,” commented CIBC analyst Robert Sedran.
But there were a small handful of upgrades and downgrades -- suggesting a more significant shift in analyst sentiment. Desjardins Securities upgraded Bank of Montreal to a “buy” rating from a “hold” while raising its price target by $2.50 to $71. Analyst Michael Goldberg mostly cited the dividend hike for his decision, noting that it “reflects greater confidence in the sustainability of BMO’s earnings” and signs that last year’s acquisition of Marshall & Ilsley Corp. will help diversify and improve the quality of its balance sheet.
Scotiabank also was awarded with an upgrade: National Bank analyst Peter D. Routledge moved up his rating to “outperform” with a $61 price target. But it wasn’t all fanfare for the stock; Credit Suisse analyst Gabriel Dechaine downgraded Scotiabank to “neutral” with a price target of $57, according to Bloomberg.
Bombardier's shares are “ready for takeoff,” argues CIBC World Markets analyst Kevin Chiang, who initiated coverage today with a “sector outperform” rating and $5.50 price target. “While cognizant of the execution risk associated with the launch of the C Series and of the anemic economic growth environment, we believe BBD's share price more than accounts for these risks,” he said.
He notes that share prices for aerospace original equipment manufacturers are generally pretty flat ahead of a major new product launch, such as the C Series. But they tend to break out after first flight. “Looking at a sample of platform launches, OEM share prices increased an average of 22 per cent six months after the first flight; we believe BBD’s share price will follow this trend,” Mr. Chiang said.
Meanwhile, he sees aircraft demand benefiting from re-fleeting opportunities, “improving aviation fundamentals,” and a pick up in orders from emerging markets.
And he’s also bullish on the outlook for Bombardier’s transportation division, believing it will benefit from the growing networks of high-speed rail and continued investment in urban transit.
Gildan Activewear Inc.
Gildan Activewear CEO Glenn Chamandy plans to sell 2.75 million of his shares over the next two years starting in December. While the insider selling may raise some eyebrows, National Bank Financial analyst Vishal Shreedhar notes that Mr. Chamandy will remain one of the largest investors in Gildan with about a 5.7 per cent stake, and the share disposition plan stipulates sales can only happen when an insider is not in possession of material non-public information.
Upside: Mr. Shreedhar reiterated an “outperform” rating and $36 price target.
5N Plus Inc.
Shares in high purity metals producer 5N Plus could be at rock bottom, suggests National Bank Financial analyst Rupert M. Merer. With VNP’s large, unhedged inventory, investors have been selling the stock in anticipation of further writedowns amid the drop in prices for high purity metals. But with the average price of these metals down 50 per cent from peaks in 2011, “the drop can’t continue at the same rate,” he said.
Upside: Mr. Merer reiterated an “outperform” rating with a $4 price target.
Aurcana Corp. announced a “massive” boost in resources at its La Negra mine in Mexico to about 27 million tonnes from 1.3 million tonnes, noted Stonecap Securities analyst Christos Doulis. “With a theoretical mine-life now in excess of 30 years, Aurcana can begin evaluating options to potentially increase (mill) throughput beyond 2,500 tonnes per day at La Negra,” he said.
Upside: Mr. Doulis raised his price target by 30 cents to $1.50 and maintained an “outperform” rating.