In this Friday, April 4, 2014, file photo, GrubHub CEO Matthew Maloney, third from right, is applauded as he rings the New York Stock Exchange opening bell.Richard Drew/The Associated Press
Inside the Market's roundup of some of today's key analyst actions
After Granite Real Estate Investment Trust (GRT.UN-T; GRP.UN-N) announced Friday that it had bought three new industrial properties in the U.S., Desjardins Capital Markets boosted its target price on the REIT.
"After market close on Sept. 15, GRT announced (1) a $123-million (U.S.) acquisition of three modern industrial properties in the U.S., and (2) a 0.2msf [thousand square feet] lease for a 20-year term at a 0.3msf property recently vacated by Magna. The positive contributions from these announcements (partially offset by recent currency fluctuations) have driven an approximately 4 -per-cent increase in our 2018–19 FFO [funds flow from operations]/unit estimates," wrote analyst Michael Markidis.
He kept his rating at "hold" but boosted his target to $51.50 (Canadian) from $51.
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Recent deals made by Grubhub (GRUB-N), a Chicago-based online food ordering system, has led Canaccord Genuity analyst Michael Graham to boost his price target on the stock.
"Over the past few months, Grubhub has signed important deals with Foodler (acquiring this regional player with strength in the Boston area and about 6,000 to 7,000 daily orders), OrderUp/Groupon (for an operating agreement with Groupon and acquiring certain markets from OrderUp with exposure to important tier 2 markets and about 6,000 daily orders), and Yelp/Eat24 (acquiring Eat24 for 1/2 of GRUB's multiple of GFS, bringing in >50,000 daily orders). While these deals have yet to close (and therefore our published estimates remain unchanged), we present a pro-forma scenario wherein we project an incremental $108-million and $23-million in 2018 revenue and EBITDA [earnings before interest taxes depreciation and amortization] respectively (and, we note that in the case of Eat24, 2018 will still not be a full run-rate year, so there should be a growth tailwind into 2019 as well). We continue to believe Grubhub is mid-stride in executing on a long-term strategy to change the way U.S. consumers order takeout food, and the Yelp deal absorbs one of the 3-4 significant (potential) competitors left in the market (Uber, Amazon, Google)," said Mr. Graham.
As a result, the analyst raised his target price to $60 (U.S.) from $50 and kept his "buy" rating.
"We raise our price target from $50 (U.S.) to $60. Our new price target is based on 19 times our pro-forma 2018 EBITDA estimate of $256-million (relative to our published, pre-closing, EBITDA estimate of $233-million). We acknowledge that the stock now appears to be reflecting a good amount of upside with a premium valuation. However, we still view the stock favourably, especially on dips, given the large untapped opportunity and the prospect of rolling over to 2019-based valuation soon."
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After Paramount Resources Ltd.'s (POU-T) Apache acquisition, Raymond James analyst Kurt Molnar boosted his price target on the company.
"We are updating our Paramount forecasts post the Apache acquisition (about $460-million), the Trilogy merger (about $1.3-billion), and our coming off of research restriction. Since we last commented on the stock, Paramount also reported their second quarter 2017 results that handily beat our prior estimates, with production from the Karr Montney project continuing to be some of the very best in the Basin," he wrote.
"Prior to the Apache or Trilogy deals, we believe Paramount was doing very well on its own right, while holding a very large cash balance. This allowed Paramount to simultaneously pursue the Apache and Trilogy transactions, as each was seen as compelling in its own right, wherein the capture of both at effectively the same time offered great future operational synergies due the land and infrastructure overlaps between Apache and Trilogy," the analyst wrote.
"The new Paramount is now a large intermediate (north of 90,000 Boed [barrels of oil equivalent per day]) that is already 35 per cent levered to liquids, but where that liquids ratio can grow aggressively going forward, in our view, as legacy Apache gas assets are allowed to naturally decline at the same time that the new Paramount will focus on drilling in: Karr condensate rich Montney ; North Kaybob Montney oil; Wapiti condensate rich Montney; and Condensate rich Duvernay at South Kaybob and Smoky."
He kept his "strong buy" recommendation but raised his price target to $31 from $26.
"In our view there are many others pieces to the model that will also be value-adds in the future, but these are the things we think investors should focus on in the near-term. Finally, we expect offsetting operators to the Paramount lands to also continue to impress with their own results from the field providing a derivative source of value-add for the Paramount shareholder. We reiterate our Strong Buy recommendation while adding Paramount to our RJL Analyst Current Favourites list. At the same time, our target increases from $26 to $31 on the back of the accretive nature of the Apache and Trilogy transactions, along with the bigger liquids rich drilling program that follows with it. Our target comes from our standard sum-of-parts valuation."
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Macquarie Research boosted its rating on RMP Energy (RMP-T) after "a closer look at recent developments in the Elmworth region," wrote analyst Tom Hems.
"We are upgrading RMP to Outperform (from Neutral) following a closer look at recent developments in the Elmworth region. In this report we provide further insight into Elmworth land sales, recent Montney rates, a range of valuation scenarios, some notes on new management, and update our RENAV to reflect our new Elmworth type curve. Recent meetings with the new management team support our positive outlook," he said.
He noted that recent land sales results have been positive. "Regional land sales have averaged about $500/acre since the beginning of 2016 with some recent packages going in the $1,600 - $3,125/acre near some of RMP's land. Based on the average land sale metric, we believe there is little upside potential being priced into the stock today."
And the company's well rates have also been positive, he noted. "Our prior thesis was hinged on the relatively small well data set providing limited confidence in the productivity of the play. With new July geoSCOUT data available last week, some recent well rates offsetting RMP's land help support our new Elmworth type curve (including a 1,142boe/d Velvet well). Given new management's experience drilling hundreds of wells, we feel comfortable in the ability to replicate some of these results."
He boosted his rating to "outperform" from "neutral" and raised his price target to 85 cents from 65 cents.
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Credit Suisse Equity Research boosted its target price on McCormick & Co. (MKC-N) " to reflect our view that the acquired RB Foods business and McCormick's core business will exceed expectations over the next 18 months," said analyst Robert Moskow.
He boosted his target price to $112 (U.S.) a share, up from $108. "We are raising our FY 17 EPS estimate to $4.12 and raising our FY 18 above consensus to $4.65," he added. He maintained his "outperform" rating.
"The premium price paid for RB Food (19.5 times EBITDA) raised concerns among investors. Many investors worry that management might have lost its capital allocation discipline or had slowing trends in its core spice and seasonings business. Indeed, the $4.2-billion price tag exceeded our estimate by $0.7-billion (or $5/share) and we are one of only three outperform ratings on the stock," he said.
"Digging deeper, we found plenty of room for positive revisions to estimates. The highly complementary nature of the RB Foods business offers opportunities for revenue synergies that go above and beyond management's $50-million estimate for cost synergies. We expect the core spice and seasonings business to continue to benefit from favorable demand trends in the category and market share improvements," he said. "Risks that would cause us to revise our estimates or rating: 1) missteps or negative revisions during the RB integration; 2) a resurgence of market share losses to private label or slowing growth in the core business."
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