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A BlackBerry logo hangs behind a Canadian flag at their offices in this file photo.© Mark Blinch / Reuters

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

The turnaround for BlackBerry Ltd. (BBRY-Q, BB-T) "remains elusive," said CIBC World Markets analyst Todd Coupland.

On Thursday, the Canadian tech company reported "break-even" adjusted earnings per share, including $557-million (U.S.) in impairment charges. Adjusted earnings before interest, taxes, depreciation and amortization of $58-million narrowly topped Mr. Coupland's estimate of $57-million.

"These results affirm our view that a Blackberry turnaround is unlikely," the analyst said. "SAF revenue declines accelerated to 26 per cent quarter over quarter from 17 per cent the last four quarters and is expected to decline by 20 per cent in FQ2. We forecast SAF [service access fee] revenue of $310-million in the 2017 fiscal year versus FQ4/16 run rate sales of $570-million. The addition of Good Technology we believe is the primary driver in BB recognizing 30-per-cent growth in software and service."

Mr. Coupland maintained his "sector underperformer" rating for the stock, and he lowered his price target to $7 (U.S.) from $7.25. The analyst average is $7.56, according to Bloomberg.

"The company has a book value of $4.89, down from $6.61 last quarter," he said. "Full value for Good could be achieved if revenue growth materializes (up 25 per cent) and they successfully meet the expense reduction program. A revision to our current view would be positive data points supporting Blackberry and Good materially stepping up their combined growth rate. That needs to happen in order to offset the services decline. It also would be required to support a higher valuation on its enterprise software business segment. We need to see a viable path to a stabilization of service revenue. Our view is it will take time and clear evidence that this has happened to bring back a broader group of investors, other than very deep value investors, to Blackberry."


On the heels of "mixed" third-quarter 2016 results, Credit Suisse analyst Charles Brennan downgraded Accenture PLC (ACN-N) based on valuation.

Noting its recent strong share price performance that has it trading on multi-year absolute and relative valuation highs, he moved his rating for the U.S. management consulting, technology and outsourcing services company to "neutral" from "outperform."

"While 10-per-cent revenue growth is a decent performance, we note that unbilled services increased 17 per cent," the analyst said. "It is hard to know how an extra day's trading in May impacted this, but the increase in unbilled services accounts for 2 per cent of the reported constant currency revenue growth. Unbilled revenues puts pressure on cash flow and the company indicates that DSOs [days sales outstanding] increased to 41 days up from 37 days in 3Q15. As a result, operating cash flow in the nine months to May 16 is 3 per cent lower year-on-year, ie. cash flow (normally a strength for Accenture) is lagging the revenue profile."

Mr. Brennan maintained a price target of $120 (U.S.). Consensus is $122.15.

"Given Accenture's market leading position, we assume that Accenture can hold this current valuation," he said. "However, we see limited scope for multiple expansion."


Buckingham analyst James Ratcliffe downgraded AT&T Inc. (T-N) on valuation, citing its highest price-to-earnings multiple in almost four years.

Saying the U.S. giant is unlikely to see multiple expansion, he noted its 2017 P/E multiple is 14 times, compared to an average of 12.3x since 2009.

As well, the company share price has risen 21.7 per cent, versus a 3.4-per-cent rise for the S&P 500. Accordingly, he moved his rating to "neutral" from "buy."

Mr. Ratcliffe maintained a target price of $41 (U.S.). The analyst average is $40.62.


Shares of Whiting Petroleum Corp. (WLL-N) "look better on multiple fronts post the debt swap," said Morgan Stanley analyst Drew Venker.

He said investors are likely to see the probability of a credit event as low or remote. Accordingly, he upgraded the oil and gas company to "equal-weight" from "underweight."

On Wednesday, Whiting announced plans to exchange $1.06-billion (U.S.) in debt, saying it will exchange $377-million of non-convertible notes and $688-million of convertible notes for new mandatory convertible notes.

Mr. Venker said the debt swap improves the company's debt-to-EBITDA multiple to 3.9 times and 3.6 times for year-end 2016 and 2017, respectively, a decline from 5.3 times and 5.0 times.

He maintained a $13 (U.S.) price target. The average is $14.21.


BMO Nesbitt Burns analyst Phillip Jungwirth raised his target for Marathon Oil Corp. (MRO-N) in reaction to its $888-million proposed acquisition of PayRock Energy Holdings Inc.

Mr. Jungwirth said the deal expands Marathon's footprint "in one of the most active U.S. unconventional plays (Stack) and counties (Kingfisher)."

He said: "We compared Marathon's acquisition of PayRock to Devon's $1.9-billion purchase of Felix, which was announced in December 2015. We think most would view Felix's acreage as core of the core and more delineated than PayRock's, but our analysis shows Marathon paid about 40 per cent less across key valuation metrics. Thus, the purchase price appears attractive and type curve metrics … and well productivity …  presented by Marathon suggest wellhead economics are competitive with the best of Stack.

"If they are demonstrated to be repeatable across the majority of PayRock's acreage position, this would make the relatively attractive purchase price all the more compelling. We expect the Street to focus on delineation results in the southeast and northeast portions of the acreage block, and Newfield subsequently disclosed four successful eastern SXL wells nearby, of which PayRock has an interest in several of these wells. Upside also exists in terms of spacing with Marathon assuming six wells per section. Devon recently completed its first staggered spacing pilot, which tested 400' spacing between two intervals (170' vertical) in the over-pressured oil window, in addition to testing up to eight wells per section in the primary interval and six in the secondary. Newfield, Continental, and Cimarex are also conducting spacing pilots. Bottom line, we think Stack play momentum continues, and we like that Marathon was able to expand its footprint at a reasonable valuation.

He kept his "market perform" rating and raised his target to $20 (U.S.) from $15. The average is $16.77.


With files from Bloomberg News