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An Air Transat sign is seen on May 31, 2016, in Montreal.Paul Chiasson/The Canadian Press

Inside the Market's roundup of some of today's key analyst actions

After farm and transportation equipment provider Cervus Equipment Corp. (CERV-T) reported solid first quarter results, Laurentian Bank analyst John Chu raised his rating on the stock.

"On the back of a modest Q4 beat, the company provided a positive farmer outlook for 2018, which we believe CERV can leverage going forward. The North American outlook for truck sales is very encouraging, as per PACCAR, which should result in higher sales for Peterbilt ONT (albeit low margins) and more importantly lead to more parts and service sales (high margin) for 2019 and beyond. This combined with a pullback in the stock, our modestly higher target price leads us to upgrade to a Buy, from Hold. We believe a continued positive ag outlook, plus an improving transportation outlook (both sales and operationally) and continued sustainability at its C&I segment should prove to be catalysts for the stock in 2018," he said.

He raised his rating from "hold" to "buy and increased his price target to $17.50 from $17.

"The higher target reflects our modestly higher forecast and our valuation period moving out one quarter (to 2019 EPS); our 11 times multiple remains unchanged. The stock is trading at about 10.5 times forward P/E, which is about a 19 per cent discount to its historical average of about 13.2 times, but should move higher if the company is able to show more consistency with its results going forward," he said.

Raymond James cut its price target to $15.75 from $17 but kept its "market perform" rating.


With most of K-Bro Linen Inc.'s (KBL-T) capital expenditures dealt with, Laurentian Bank analyst Elizabeth Johnston upgraded her rating on the company.

"We are upgrading to 'Buy' (from 'Hold') and maintaining our $43 target price. This is based on 11 times 2019E EV [enterprise value]/EBITDA [earnings before interest, taxes, depreciation and amortization] (previously 11.5 times 2018E/2019E). As we move into 2018, transition costs will remain a meaningful headwind on EBITDA margin; we believe that our forecast for 2019 is more reflective of the underlying value of the company and therefore we are moving to 2019 for our valuation period. We are decreasing our valuation multiple by 0.5 times to reflect uncertainty with respect to the total transition costs," she said.

"Overall, we have adjusted our EBITDA margin (including additional seasonality within the UK segment) and we have added an additional $1-million in transition costs in 2018 (total forecast of $3.3-million). Transition costs are subject to multiple inputs, some of which are not able to be estimated in advance (ex. training costs at the new facility, which will depend on employee retention rates)."

The median target price is $48, according to Zack's Investment Research.


A ramp up in production and a refocused portfolio is a positive for Klondex Mines Ltd. (KDX-T) and as a result Clarus Securities upgrade the stock.

:Fourth quarter financial results were below our estimates as a result of higher operating cash costs and higher cash taxes paid.  While 2017 was a challenging year for KDX, we believe management's refocus on its Nevada portfolio and the ramp up of production from the Hollister mine should allow for stronger operational execution in 2018.  We have adjusted our 2018 estimates for Hollister to bring our grades more in line with the 2018 mine plan and lowered throughput.  We have also reflected a lower statutory tax rate of 21 per cent (prior 35 per cent), in line with recent U.S. federal tax changes.  These changes bolster our 2018E CFPS by >20 per cent and our project NAV [net asset value] by about 15 per cent and increase our target price to $3.25 per share (was $2.90/share).  At a 2018E multiple of 2.9 times P/CF [price to cash flow], KDX trades at a about 55 per cent discount to peers at an average of 6.5 times.  While we acknowledge the challenged performance in 2017, we believe the bad news is largely priced in.  Given the steep discount we believe the stronger execution in 2018 should see the stock re-rate toward our target price, a potential >85 per cent return," said analyst Jamie Spratt.

He upgraded his rating to "speculative buy" from "sell" and revised his target price to $3.25 from $2.90. The median price target is $4.59.


The latest results from Transat A.T. (TRZ-T) "smashed profitable 2018 winter season hopes" and were below both estimates and consensus, said Beacon Securities Ltd. analyst Ahmad Shaath.

"Most significantly, the company provided weak guidance for Q2/FY18 compared to consensus ambitious figures (indicating EBITDA loss vs consensus $16-million and our $5.2-million estimate at the time). Overall, this smashed any hope of TRZ's first non-losing winter season since FY09, which was pegged on tailwinds from positive revenue and FX [foreign exchange] environment," he said.

He cut his rating on the stock to "hold" from "buy" and cut his price target to $10.50 from $13.25. The median is $13.25.

"Our recent positive view on TRZ stemmed from FX tailwinds potentially resulting in the first profitable winter season since FY09, with long-term prospects supported by TRZ's cash position (adjusted cash of $15.15 per share) and its deployment in new hotel investments. Q1/FY18 results were a strong reality check for our expectations, and we have revised our estimates accordingly. Consequently, we are revising our target price to $10.50 utilizing about 2.5 times FY18E EBITDAR multiple, which we view to be fair in light of another disappointing Winter Season. We are moving our recommendation to HOLD (was BUY) as we await to hear from Transat's new leadership on the upcoming investor day event on April 4 th, specifically with regards to the hotel strategy."


Despite troubles at Element Fleet Management Corp. (EFN-T), Raymond James analyst Brenna Phelan is keeping her "outperform" rating on the stock, although she cut her price target.

Shares of Element Fleet Management Corp. plummeted Thursday for the second time in five weeks as the struggling Bay Street finance company said it will take a restructuring charge, cut staff and close offices as part of a recovery plan that will take the rest of 2018 to implement.

"Element Fleet is the market leader in the North American fleet management market, with operations in the steady and still sticky corporate vehicle leasing business and the faster growing, technology-enabled services business. Despite some customer attrition in 2H17 which is forecast to drive a decline in Core Fleet EPS of 3 per cent –5 per cent in 2018E, we continue to see tremendous value in this business and recent commentary, including new customer wins, reinforces our view. Meanwhile, Element's joint venture 19th Capital remains problematic, and we now see heightened risk around the expectation of return to profitability and future asset impairments. However, we believe that Element's share price is currently reflecting a material overstatement of the risk that any additional provisions or asset impairments could lead to a covenant or funding issue. Our base case assumption is that any further charges related to 19th Capital will be absorbed by available equity cushion with no impact on EFN's bank covenants. We are reiterating our Outperform rating on the stock, and see significant upside to the current share price," she said.

She cut her price target to $8.50 from $11. The median is $11.

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