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Canadian Tire has exceeded analyst expectations in the latest reporting period and also has a history of consistent growing earnings.Jacques Boissinot/The Canadian Press

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

Believing potential catalysts have already been priced into its share price, Credit Suisse analyst David Hartley downgraded Canadian Tire Corporation Ltd. (CTC.A-T)  to "underperform" from "neutral."

"We believe options for the company to create value — growth, acquisitions, return value to shareholders — appear to be more than priced in, or the case of acquisitions, not contemplated," said Mr. Hartley, citing a recent rise in the share price as a key rationale for the rating change.

The retailer's first-quarter results largely met the analyst's expectations. EBITDA of $282-million was in line with the Street's projection and $4-million below Mr. Hartley's estimate. Retail results exceeded his forecast, while Canadian Tire Financial Services (CTFS) fell below.

"Management has made great strides in driving growth at its retail banners, and in the case of Mark's in Alberta, in particular, despite challenges to regional economies," he said. "Conventional valuation metrics versus history suggest the stock is expensive.  [Our proprietary HOLT analysis of cash flow return on investment or CFROI] driven by IBES/Street forecasts, perhaps echoed in part by CTC's more limited growth in retail ROIC, may point to limited value creation relative to the current discount rate. Valuation may continue to rely on support from the scarcity of high-quality investable assets in Canadian consumer, current fund flows and low interest rates."

Mr. Hartley is forecasting EBITDA growth of 4.0-4.7 per cent from 2016 through 2018 as well as "significant" share repurchases of $400-million to $440-million per year.

"We believe CTC is limited in using its balance sheet to buy back shares owing to its current corporate aggregate balance sheet exposure (net 2.8 times normalized) and targeted BBB+ rating (despite being in a net cash position at retail if the REIT and CTFS were factored out)," he said. "We believe balance sheet constraints support our valuation methodology for the stock — one that factors in debt at the REIT in a SOTP [sum-of-the-parts valuation]."

Mr. Hartley did raise his target price by a loonie to $128, "based on increase in REIT price in our valuation model." The analyst average is $154.69, according to Bloomberg.

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The near-term outlook for Stantec Inc. (STN-T, STN-N) remains mixed, according to Raymond James analyst Ben Cherniavsky, who expects several quarters to be "bumpy."

However, he said he now views the company's "glass as being half full," and, accordingly, he upgraded his rating for the Edmonton-based company to "outperform" from "market perform."

"Although this upgrade is at a higher price than where we downgraded the stock just 2½ months ago … we believe there has been a sufficient change in the fact pattern to reconsider our view," said Mr. Cherniavsky.

The analyst said the recently announced $793-million (U.S.) acquisition of MWH Global Inc. improves visibility for Stantec into 2017 and "provides an exciting international growth platform beyond that timeline." Though he said he views the deal as positive, he admitted concern that the stock rose too quickly following the deal's announcement. A more recent retreat now provides more upside to his target price of $35.

"Our prior caution on Stantec was also founded on concerns that 1Q16 results might disappoint and that management's organic growth target of a 2-per-cent increase for 2016 was too ambitious," said Mr. Cherniavsky. "In [Thursday's first-quarter earnings] report, the company matched EPS consensus, but growth guidance for the year was managed down to a decline of 2 per cent (which is what we already assumed). With this development now behind the company — and, in our view, largely responsible for yesterday's $1.12 correction — we believe the story has been modestly de-risked.

"Finally, we believe the macro environment has improved marginally from late February. We are not trying to call a bottom here, and we know there is still a long way to go before the energy markets get back on their feet. However, today's $47 WTI is much closer to being 'in the money' than February's $27 WTI. We are also encouraged by the resilience of Stantec's U.S. platform (up less than 4 per cent organically) and its buildings and infrastructure segments."

He maintained his $35 target. The analyst average is $35.80, according to Bloomberg.

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The first-quarter results for Boardwalk Real Estate Investment Trust (BEI.UN-T) were "not terrible, but not great," said BMO Nesbitt Burns analyst Heather Kirk.

Citing recent strength in its unit price, weaker-than-expected results and a reduction in 2016 guidance, Ms. Kirk downgraded her rating for the REIT to "market perform" from "outperform."

On Thursday, Boardwalk reported funds from operations (FFO) per unit, excluding one-time items, of 79 cents, a decline of six cents year over year. The result also fell below Ms. Kirk's 83-cent projection and the consensus of 82 cents.

While occupancy levels stayed steady, same-property net operating income (SPNOI) fell 3.8 per cent, with declines throughout the country with the exception of Ontario.

The company dropped its full-year SPNOI guidance to negative 6 per cent from negative 3 per cent. Its FFO guidance fell to $3.40-$3.55 from $3.40-3.60.

Ms. Kirk maintained her target price of $55 per unit. The analyst average is $58.45.

"We continue to view BEI as a core REIT holding with a strong, well-aligned management team and a track record of value creation," she said.

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In reaction to new financing, Desjardins Securities analyst Michael Parkin upgraded his rating for First Majestic Silver Corp. (FR-T, AG-N) to "hold" from "sell."

The company closed a financing deal on Thursday which saw it issue 5.25 million shares at $10.95 each, bringing in gross proceeds of $57.5-million.

Incorporating the deal into his model for the company, Mr. Parkin's share count rose by 4.3 per cent and his net cash estimate rose to 35 cents per share from negative 56 cents per share. His net asset value (NAV) per share estimate rose by 1.5 per cent to $3.34.

"The company indicated that it would use the proceeds of the financing to expand the mill and mine at La Guitarra to 1,000 tpd [tonnes per day], advance the roasting project at La Encantada, and increase development and exploration across its operating assets," said Mr. Parkin. "We note that the company had been underinvesting in mine development across its asset portfolio in the face of weak silver prices. However, with the recent rise in silver prices and the influx of cash, the company is now financially comfortable to resume development and exploration work. Our published financial estimates for First Majestic are based on our base-case price deck used for our entire coverage universe, which was set to spot prices for the near term as of the end of March, 2016."

Mr. Parkin also raised his target price for the stock to $14 from $7.25. The analyst consensus price target is $17.36, according to Thomson Reuters.

"We derive our $14.00 target from a 12.0-times (was 11.5 times) NTM EV/EBITDA [next 12 months enterprise value to EBITDA multiple] on a 100-per-cent basis using a silver price of $20.17 (U.S.) per ounce," he said. "This price was derived based on an analysis of gold-to-silver ratio trends over the past 20 years following peak multiple periods, which have all occurred around 80 times; the most recent peak occurred this past February. We believe the market is valuing First Majestic based on expectations of further gold-to-silver ratio erosion (currently 73 times) and base our target on the average ratio one year from a peak period, which is 63.3 times. With potential further gold price strength, we could see further upside in First Majestic's share price."

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Though RMP Energy Inc.'s (RMP-T) 2016 production guidance is "underwhelming," the sell-off of the stock has been overdone, said Canaccord Genuity analyst Anthony Petrucci.

Suggesting the market has ignored the potential of its Gold Creek exploration well in Alberta, Mr. Petrucci upgraded his rating for the stock to "buy" from "hold."

On Thursday, RMP, a crude oil and natural gas company based in Calgary, reported first-quarter results that largely met expectations.

"With the release RMP announced full-year guidance, which shows the company limiting spending, giving way to production declines through the year. As a result we have lowered our production and cash-flow expectations for 2016 and 2017."

He added: "RMP's net debt is down to $96-million, with a bankline of $150-million. The company is entering its spring bankline review, and we anticipate its line is likely to be pulled back similar to what we have seen with peers. Still, with a 2016 estimated D/CF [debt to cash flow] of 2.3 times, RMP's balance sheet remains in a strong position versus peers at 4.5 times."

Mr. Petrucci maintained his $2 target. Consensus is $2.04.

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Given higher debt levels and lower 2017 projections, CIBC World Markets analyst Jacob Bout downgraded AGT Food and Ingredients Inc. (AGT-T)  to "sector performer" from "sector outperformer."

On Wednesday, the Regina-based company reported first-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $31.4-million, topping both the consensus projection of $29.9-million and Mr. Bout's estimate of $30.6-million.

"This was a low-quality beat as it came from higher revenues and margins from the legacy pulse and grain processing division, with segment EBITDA of $24-million compared to our estimate of $16.9-million," the analyst said. "However, the food ingredients division fell short, with EBITDA coming in at $9.2-million compared to our estimates of $11.6-million."

Mr. Bout raised his 2016 EBITDA estimate to $131.6-million from $128.2-million after incorporating the quarterly results and adjusting his legacy business margins. He reduced his 2017 estimate to $138.2-million from $142-million on lower growth assumptions for revenue from its food ingredients division.

He also lowered his price target to $41 from $45. Consensus is $43.21.

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Beacon Securities analyst Gabriel Leung upgraded Celestica Inc. (CLS-N, CLS-T) "due to an improved risk-return profile vis-à-vis its peer group."

In moving his rating to "buy" from "hold," Mr. Leung noted Celestica shares have declined almost 12 per cent after hitting a high of $14.40 after the release of its first-quarter results on April 21.

"From a valuation stand-point, Celestica is now trading at EV/EBITDA  [enterprise value to EBITDA] multiple of 4.5 times this year's estimates versus the group at 5.7x, representing a discount of 21 per cent," the analyst said. "On a P/E [price to earnings] basis, the stock is trading at 8.8x versus the group at 11.7x, which represents a discount of 25 per cent."

He kept his target price of $11.50 (U.S.). Consensus is $11.35.

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Despite better-than-expected third-quarter 2016 results, CIBC World Markets analyst Todd Coupland downgraded Vecima Networks Inc. (VCM-T) on slowing growth.

The Victoria-based company reported sales of $31.8-million, ahead of Mr. Coupland's $26-million projection.  Earnings per share of 27 cents also topped his estimate (21 cents).

"The company also called out a drop in sales for Q4 based on customers digesting inventory, and flat sales for 2017 [fiscal]," the analyst said. "While it expects that demand for certain Terrace products will recover from Q4, it won't fully. During 2017, sales will be lumpy prior to new DOCSIS 3.1 products being introduced sometime in [the second half] of 2017."

He added: "Our takeaway is that this outlook means slowing growth in F2017. As a result, we have lowered our forecast and rating … Slowing growth will be the case for a few quarters prior to new products being released. Volumes are expected to drop significantly in the fourth quarter of 2016. After dropping, they should rebound some as the company's lead customer returns to its lower level run rate sales. We have reduced our forecast and target to reflect these dynamics."

Mr. Coupland's rating moved to "sector performer" from "sector outperformer." His target fell by a dollar to $13, compared to a consensus of $13.93.

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Beacon Securities analyst George Trapkov downgraded Chorus Aviation Inc. (CHR.B-T) after its first-quarter results fell below his expectations.

On Friday, Chorus reported revenue of $321-million, compared to Mr. Trapkov's $336-million projection. Its adjusted EBITDA of $50.9-million was below the analyst's $55.7-million estimate.

He moved his rating to "hold" from "buy" and left his target price at $6.50. Consensus is $6.96.

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In other analyst actions:

Alamos Gold Inc. (AGI-T) was downgraded to "hold" from "buy" at Mackie Research Capital by equity analyst Ryan Hanley. The target price is $8.50 (Canadian) per share.

Carrizo Oil & Gas Inc. (CRZO-Q) was raised to "overweight" from "neutral" at JPMorgan by equity analyst Michael Glick. The 9-month target price is $40 (U.S.) per share.

Delphi Energy Corp. (DEE-T) was raised to "outperform" from "speculative" at Alta Corp Capital by equity analyst Patrick O'rourke. The 12-month target price is $1.50 (Canadian) per share.

Energen Corp. (EGN-N) was raised to "overweight" from "neutral" at JPMorgan by equity analyst Michael Glick. The 9-month target price is $51 (U.S.) per share.

Lockheed Martin Corp. (LMT-N) was downgraded to "hold" from "buy" at Stifel by equity analyst Joseph Denardi.

Laredo Petroleum Inc. (LPI-N) was raised to "neutral" from "underweight" at JPMorgan by equity analyst Michael Glick. The 9-month target price is $12 (U.S.) per share.

Plaza Retail REIT (PLZ.UN-T) was downgraded to "hold" from "buy" at Laurentian Bank by equity analyst Nelson Mah. The 12-month target price is $5 (Canadian) per share.

With files from Bloomberg News

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