Employees work on the SeaDoo assembly line at the BRP plant on June 12, 2014 in Valcourt, Que. THE CANADIAN PRESS/Ryan RemiorzThe Canadian Press
Inside the Market's roundup of some of today's key analyst actions
BRP Inc. (DOO-T) announced the results of its Dutch auction and that's led Desjardins Capital Markets to raise its price target for the ski-doo and sea-doo maker.
"Based on the preliminary count, BRP expects to take up and pay for 8.6m shares at a price of $40.70 (Canadian), representing an aggregate purchase price of $350-million and 7.7 per cent of the number of total shares. We are adjusting our model accordingly, resulting in higher EPS and a higher target price. Following the auction, BRP still has a strong balance sheet with net debt/ EBITDA [earnings before interest, taxes, depreciation and amortization) of 2.0 times (pro forma at the end of 2Q)," said analyst Benoit Poirier.
"As a result, we are increasing our adjusted EPS forecast to $2.40 in FY18 (from $2.28) and $2.63 in FY19 (from $2.49) due to the lower share count. Post the auction, we expect BRP to end 2Q FY18 with a net debt/EBITDA of 2.0 times (up from 1.4 times at the end of 1Q FY18) although FCF [free cash flow] should reduce the ratio going forward."
He kept his "buy" rating and raised his target price to $46 from $44. The consensus is $41.85, according to Thomson Reuters.
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Ahead of Del Frisco's Restaurant Group Inc. (DFRG-Q) reporting earnings on Friday, Canaccord Genuity cut its earnings per share estimate and price target on the company.
"Del Frisco's is scheduled to report Q2 earnings (12-week period) before the market open on Friday, July 21. Ahead of the print, we are trimming our EPS estimate to $0.16 (U.S.) (from $0.18) to incorporate higher than previously modelled food costs. For FY17, we are lowering our EPS estimate from $0.84 to $0.81 ($0.01 below guidance). Looking out to FY18, we are also adjusting our EPS estimate to $0.87 (from $0.89). To summarize our thoughts, we believe that DFRG has a signficant long-term opportunity to improve margins through better labour scheduling, food waste management and supply chain improvements. Further, we are encouraged by the direction of new management with an increased focus on return on capital, disciplined unit growth and menu innovation. However, given the timeline of new initiatives (mostly late '17), we believe it is still too early to recommend purchase. We are lowering our PT on DFRG to $17 (from $19), which reflects a multiple of about 8.5 times our '18 EBITDA estimate of $48.8-million," said analyst Lynne Collier.
She kept her hold rating on the stock but lowered her price target to $17 from $19. The consensus is $18.75.
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After Sabina Gold and Silver Corp. (SBB-T) received a positive recommendation in reation to its Back River project in Nunavut from the Nunavut Impact Review Board, Echelon Wealth Partners raised its target price for the miner.
"With NIRB's approval, Sabina passed a major hurdle in developing the Back River Project, in our view. As a result, we are increasing our price target to $3.20 per share ($2.40 previously). With this approval, the next step is a Project Certificate issued by the Minister of Indigenous and Northern Affairs (INAC), which is the next key milestone in advancing the project. Since it was a Ministry directive that allowed the NIRB to reconsider the project after a negative decision in June, 2016, we expect the Project Certificate to be issued by year-end," the firm said.
"Receipt of the project certificate is a major de-risking event which means Sabina can now proceed to final permitting and pre-construction, allowing it to meet its timeline for production to begin in 2021. Main areas of focus include: i) Water License; ii) Basic Engineering & Optimization Work; iii) Development Team; iv) Potential accelerated exploration program; and v) Project Financing."
"The Back River Gold Project stands out for being the highest grade undeveloped open pit gold project currently active in a public company. It also stands out for the large M&I resource of 28.2Mt grading 5.87g/t gold for 5.3Moz contained, with an additional Inferred resource of 7.75Mt grading 7.43g/t hosting an additional 1.85Moz gold. Based on the 2015 Feasibility Study, we see Back River producing 194Koz/year with operating costs of $614 (U.S.)/oz Au for 12 years, and generating a project NPV [net present value] (from start of construction) of $613-million and project IRR [internal rate of return] of 28 per cent."
Echelon kept its "speculative buy" rating on the stock and raised its target price to $3.20 from $2.40. The consensus is $2.43.
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After reports that 13 people fell ill after eating at a Chipotle Mexican Grill (CMG-N) restaurant in Sterling, Virginia, BMO Capital Markets downgraded the stock.
"We are downgrading CMG to Market Perform. While norovirus at a single location is not overly significant on the surface, we believe there is greater uncertainty now as there is a reasonable probability that media coverage will outweigh the severity of the incident and create renewed same-store sales weakness, expanding downside risk within our framework. While we await greater clarity on the sales impact before making any change to estimates, we are reducing our target to $350 (U.S.) as we apply a lower multiple to reflect the greater uncertainty," said analyst Andrew Strelzik.
He cut his rating to "market perform" from "outperform" and cut his price target to $350 from $550. The consensus is $447.78.
"We estimate that every 500 basis point decline in AUVs [average unit volume] creates up to a $4 impact on CMG's earnings power. As such, we can still derive upside to CMG's stock in the mid-$500 range, but our downside scenario falls to the $200-300 range in a scenario in which AUVs decline by an additional 5-10 per cent, and using a mid- to high-20s P/E multiple."
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Bank of America (BAC-N) beat forecasts with its latest earnings report and BMO Capital Markets boosted its target price for the financial services company.
"Following Bank of America's 2Q17 top-line and credit-driven 2 per cent beat, our forecasts remain essentially unchanged, but we raise our target price to $27 (from $24) due in part to faster expected capital-adjusted growth. Among U.S. large-cap banks and specialty finance stocks, we prefer those that 1) are still cheap even after the Trump banks rally, 2) would benefit disproportionately from the many policy changes proposed by the new administration, and 3) are more sensitive to credit trends than interest rate expectations. COF (Capital One Financial Corp.), SYF (Sunchrony Financial), MS (Morgan Stanley), and SC (Santander Consumer USA Holdings Inc.) remain our top recommendations," said analyst James Fotheringham.
He kept his "market perform" rating on the stock and raised his target price to $27 (U.S.) from $24. The consensus is $26.29.
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