Inside the Market's roundup of some of today's key analyst actions
Student Transportation was downgraded to "market perform" from "outperform" at Raymond James, which sees a higher takeover bid as unlikely.
Student Transportation announced late Tuesday that it has an agreement to be acquired by a group of investors led by Caisse de dépôt et placement du Québec for US$7.50 per share.
The deal represents a 27-per-cent premium to the 20-day volume weighted average price per common share on the Toronto Stock Exchange for the period ending Feb. 27, based on an exchange rate of $1.28 Canadian dollars per U.S. dollars, the company said.
Raymond James analyst Patrick Tyler Brown called the takeover announcement "rather surprising."
"We see limited opportunity for a topping bid," he said.
Student Transportation shares were up about 25 per cent at Wednesday's open.
Agnico Eagle Mines was raised to "buy" from "hold" at TD Securities, with its price target cut to $53 from $55.
TD analyst Greg Barnes said that 2018 will be the pivot to growth and free cash flow.
He said management has guided for gold production of 1.525 million ounces in 2018, marking what TD sees being the low-point for annual production as its Meliadine and Amaruq projects transition into production in the second half of 2019.
Bank of Montreal (BMO-T, BMO-N) reported a strong quarter but Canaccord Genuity said it views the bank's earnings beat "as lower quality relative to peers driven by much better than expected credit," said analyst Scott Chan.
However, he kept a "hold" rating on the stock but raised his price target to $104 from $103. The median target price is $107, according to Zack's Investment Research.
"On a segmented basis, we peg adjusted earnings below peers at Canadian P&C (lower personal and commercial loan growth), Capital markets (impacted by trading such as equities and structured products), and Insurance (lower market gains from high comp last year). That said, U.S. P&C improved significantly with earnings growth that tracked more in line with peers. We maintain our Hold rating and modestly increase our target price to $104 per share (from $103 per share). Our positive adjustments include credit, NCIB [normal course issuer bid] of 10 million shares, rolling forward our valuation one quarter, slightly offset by lower NII [net interest income]."
"BMO's U.S. segment lagged peers in prior quarters, so it was encouraging to see a reversal this quarter. For Q1/F18, adjusted NI [net income] (excl. loan sale loss related to Indirect Auto last year) rebounded to 14 per cent growth year over year (versus 2 per cent last quarter). Record results were driven by higher revenue growth (e.g. 2 times pace last year), supported by commercial loan growth (+7 per cent YoY), US$1.7-billion retail portfolio purchase (i.e. prime mortgages), and adjusted NIM [net interest margin] of +6 bps [basis points] quarter over quarter (excluding retail purchase). Management stated U.S. tax reform (lower corporate taxes) would benefit NI this year by US$100-million (impact only for 10 months of F2018). We believe a higher premium multiple (CG targets 2 per cent premium versus group to derive target price) will depend on achieving several consecutive strong quarters on its U.S. platform as BMO's U.S. Midwest peers trade at P/E (fwd.) of <15 times," he said.
"BMO's pro-forma CET 1 ratio is <11.6 per cent (including B2 floor adjustment). This places the bank's capital position higher than peers. On the call, management reiterated a priority for continued organic growth. Further, BMO intends to repurchase up to 20 million shares when their current NCIB expires in Apr/18. Potential acquisition activity did not appear forthcoming near term, but management cited an appetite down South (particularly for commercial and wealth management). In our model, we have incorporated 3.5 million remaining shares on its current NCIB and half (10 million shares) on their renewal (commences around end of May/18)."
Trinidad Drilling Ltd. (TDG-T) recently reported fourth quarter operating results "that topped our expectations and the consensus view," said Canaccord Genuity analyst John Bereznicki.
"With domestic growth increasingly difficult to come by and Trinidad's legacy JV [joint venture] mandates having largely wound down, we believe the U.S. holds the key to the company's 2018 growth. Fortunately, Trinidad is taking steps to re-task idle capacity into this market, with a particular focus on the Permian Basin. Given Trinidad's strong U.S. margin performance in Q4/17, we are raising our 2018 and 2019 EBITDA [earnings before interest, taxes, depreciation and amortization] expectations accordingly but note the company could be setting a high bar for itself in 2018 given the strength of this performance. With shares of Trinidad up about 9 per cent since it announced its strategic review last week, we also believe the company remains reasonably valued."
He kept his "hold" recommendation but boosted his price target to $2.20 from $2.00. The median target price is $2.52, according to Zack's Investment Research.
"We are raising our 2018E and 2019E EBITDA primarily to reflect increased U.S. pricing and margin expectations, with our EPS [earnings per share] estimates more than offset by increased depreciation assumptions. We are also raising our target to $2.20 (from $2.00) using an unchanged 6.0-times EV [enterprise value]/EBITDA multiple applied to our raised 2019 estimates."
National Bank Financial analyst Greg Colman upgraded his recommendation on Pason Systems Inc. to "outperform" from "sector perform." His price target is $22 (Canadian).
Pason now has two buys, four holds, and one sell, according to Bloomberg data.
Analysts lowered their consensus one-year target price for the stock by 2.4 per cent in the past six months. Forecasts range from $17.50 to $25.
TransAlta was upgraded to "sector outperform" at Scotiabank. The price target was kept at $9 (Canadian).
PrairieSky Royalty was upgraded to "buy" at GMP with a price target of $34 (Canadian).
With files from Bloomberg