A pedestrian is reflected in the window of a Telus store while using a mobile phone in Ottawa.© Chris Wattie / Reuters
Inside the Market's roundup of some of today's key analyst actions:
Canaccord Genuity says Telus Corp. (T-T) is its telecom pick for 2017, and raised its rating and price target for the stock.
Western Canadian-based stocks are likely to do better this year as they were showing strength at the end of 2016, there's less promotional activity in the West, and Internet resellers are less of a factor in Western Canada, the analysts said.
"We have opted for Telus as our pick for 2017 and are thus upgrading it to a 'buy.' With respect to the factors discussed above, Telus emerges as the favourite on most of them. First, its wireless heavy asset mix ensures it benefits from stronger fundamentals in the space. Second its Western exposure could facilitate some year over year strength as Alberta rebounds. Third, it still boasts the strongest dividend growth rate in the sector at 10 per cent versus BCE's 5 per cent and 0 per cent for Shaw and Rogers," analysts Aravinda Galappatthige and Sharath Toopran.
In addition to the upgrade to "buy" from "hold," the analysts raised their price target to $47 from $45. The consensus target price is $44.47, according to Thomson Reuters.
They currently rate:
BCE Inc. (BCE-T) a "buy" with a price target of $64.
"We are a little more cautious on the name going into 2017 due to tough competitive conditions in wireline."
Cogeco Communications (CCA-T) a "buy" with a price target of $72.
Quebecor Inc. (QBR.A-T) as a "buy" with a price target of $42.
Rogers Communications Inc. (RCI.B-T) as a "hold" with a price target of $58.
"We believe that it is prudent to remain on the sidelines through this period of leadership transition. In our view, this introduces risks in terms of high level strategy, market approach, executive turnover etc., considering that many of the initiatives launched by Rogers in recent times were originated by previous leadership. Hence investors are better off revisiting RCI post this transition period."
Shaw Communications Inc. (SJR.B-T) as a "hold" with a price target of $26.
"While many view Shaw as the 'Dark Horse' in the sector that can potentially surprise to the upside longer term, we see little reason to jump in in the near term."
**
After Encana Corp.'s (ECA-N) announcement that it expects to exceed production and profit-margin forecasts in 2017, CIBC has boosed its price target for the company's stock.
"Following the announcement that Encana expects year-over-year core four growth in Q4/17 to be about 20 per cent and the corporate netback to be about $10.00 per barrel of oil equivalent (Boe) assuming $55 (U.S.) per barrel and $3 (U.S.) per Mcf [thousand cubic feet of natural gas], we have revised our estimates to incorporate our 'best guess' as to what 2017 will look like (guidance will be formally provided on Feb. 16). The conclusion we arrive to is that Q4/16 results have the potential to be a positive catalyst on two fronts," CIBC wrote in a report.
Fourth quarter results "are set to beat consensus due primarily to higher gas prices" and "2018 consensus estimates are likely too low."
CIBC maintained its "neutral" rating on the stock and boosted its price target to $14 (U.S.) from $12. The consensus is $13.49.
**
Canaccord Genuity expects Superior Plus Corp. (SPB-T) to report solid fourth quarter results and believe that potential acquisitions could boost its stock price.
"Looking ahead, we assume divisional EBITDA [earnings before interest, taxes, depreciation and amoritization] remains flat in 2017 and 2018. We believe potential improvement in industrial volumes as oil and gas (O&G) activity levels recover can drive upside to our estimates. Furthermore, the division is actively looking to pursue both large and tuck-in acquisitions in Canada and U.S. with about $400-million in capital availability," analyst Raveel Afzaal wrote in a note.
Calgary-based energy infrastructure company Gibson Energy (GEI-T) announced plans to sell Western Canada's second-largest propane supplier in the summer and said it was taking "final" bids in December, with an eye to revealing a buyer early this year.
"We believe Superior remains well positioned to compete for these assets," the analyst said. "We would view successful acquisition of Gibson's assets for below 10-times EV [enterprise value]/EBITDA as an important valuation catalyst for Superior."
As a result, he kept his "buy" rating on Superior Plus and boosted his price target to $14.25 from $13.25. The consensus is $12.90.
**
Raymond James says Kelt Exploration Ltd. (KEL-T) has shifted toward "an aggressive growth model" from "an exploration/land acquisition model" and with the sale of its Karr property for $100-million "we believe that Kelt will accelerate that transition."
"The strong metrics on a non-core disposition immediately set Kelt's balance sheet up for faster growth in the second half of 2017 (beyond the current guidance) and removes the overhang of an equity financing. With a strong operational update out of its BC and Pounce Coupe Alberta Montney assets – and with meaningful room to go with pad drilling and higher intensity completions – we reiterate our belief that Kelt is likely to outperform guidance in 2017 as growth and profitability metrics improve substantially," wrote analysts Jeremy McCrea and Michael Shaw.
"With the strong metrics on the disposition and a faster pace of development in its core areas, our NAV [net asset value] plus risked upside increases to $9.90 per share."
The analysts upgraded the stock to "strong buy" from "outperform" and raised the target price to $10 from $9. The consensus is $7.67.
Clarus Securities Inc. reiterated its "buy" rating on Kelt and its $7.75 target price.
**
Goldman Sachs maintained a "neutral" rating on Macy's (M-N), even after it reported disappointing holiday sales, but cut its price target to $39 (U.S.) from $44. The consensus is $42.75.
Analyst Lindsay Drucker Mann wrote to clients saying "weakness in handbags and traditional watches overwhelmed other brighter spots in the business. Beyond the sales update, Macy's updated its restructuring plans, including a $550-million savings initiative for 2017 (including savings from store closures) as well as specifics on store closures."
**
FBR Capital boosted its price target on Hilton Worldwide (HLT-N) to $64 (U.S.) from $31 after adjusting its estimates for the spinoff of its Park Hotels & Resorts and its Hilton Grand Vacations. . It maintained its "outperform" rating for the shares. FBR's new adjusted EBITDA (earning before interest, taxes, depreciation and amortization) for 20107 is $1.88-billion, down from $3.1-billion, with an earnings per share estimate of $1.73, up from 94 cents. For 2018, FBR estimates EBITDA of $2.03-billion, down from $3.29-billion, and EPS of $2.02 from $1.02.
"We are also adjusting our Hilton price target to $64 (from $31), which accounts for both the spin-offs and the 1:3 reverse split of Hilton shares. In short, we continue to believe that Hilton is well positioned to benefit from its significant development pipeline (~300,000 rooms), which should drive earnings growth in 2017 and 2018. We think a key component to this growth, particularly in 2018 and beyond, will be its new "Tru by Hilton" brand, which will start to see the first hotels open in 1H17," stated analyst Bryan Maher.
Goldman Sachs initiated coverage on Hilton Worldwide with a "buy" rating and a price target of $68. The consensus is $93.30.
**
In other analyst actions:
Citi downgraded drugmaker Mylan's (MYL-Q) stock to "neutral" from "buy," and cut its price target to $44 from $59. Citi said it sees "limited upside" on the stock.
**
RBC upgraded Mastercard's (MA-N) stock to "top pick" from "outperform" and hiked its price target to $130 from $115. The analysts cited a possible pickup in earnings and a re-acceleration in sales while operation expenditures slow, among others.
**
Pacific Crest upgraded Twilio (TWLO-N) shares to "overweight" from "sector weight," citing an "underappreciated growth potential inherent in a usage-based model similar to [Amazon Web Services]." Twilio's stock rose more than 3 per cent in premarket trading.
**
BMO upgraded California-based Western Digital's (WDC-Q) stock to "outperform" from "market perform," and raised its price target to $90 from $66. BMO also said it expects organic revenue growth to return in fiscal 2017.
**
Jefferies cut its price target on Kohl's Corp. (KSS-N) to $54 from $57 but kept its "buy" rating even after the retailer slashed its earnings guidance for 2017.
**