UBS Securities has upgraded Air Canada to “buy” from “neutral,” becoming the latest brokerage to urge investors with an appetite for risk to load up on the stock.
“We believe transformation at Air Canada is underway,” said UBS associate analyst Hilda Maraachlian.
Air Canada’s B-class shares have already risen about 50 cents since the start of September.
She cited several factors in the stock’s favour, including new labour contracts that will reduce Air Canada’s pension deficit by $1.1-billion, and a recent favourable arbitration panel ruling in a dispute over cost markups with regional partner Chorus Aviation.
“In addition, the potential extension of lower pension funding obligations further reduces Air Canada’s risk,” she said.
That’s important, because anyone familiar with investing in the cyclical and often turbulent airlines sector knows it can often be a bumpy ride.
Ms. Maraachlian emphasized that the risk-adverse may still want to stay clear. “We believe Air Canada could face increasing competition in the coming years and there are risks associated with the launch of the LCC (low-cost carrier),” scheduled to begin service in the middle of next year. “Further, Air Canada is highly levered and thus its earnings trajectory is highly sensitive to changes in macro conditions, fuel costs and RASM,” or revenue per available seat mile.
Upside: Ms. Maraachlian raised her price target to $2 from $1.10. She also raised her price target of WestJet Airlines Ltd., citing its success recently of filling its planes with paying customers.
Birchcliff Energy Ltd. has completed the phase 3 expansion of its Pouce Coupe South gas plant in Alberta one month ahead of schedule, noted CIBC World Markets analyst Arthur Grayfer. This more than doubles the plant’s capacity to 150 million cubic feet per day and will help the company support future growth, he added.
Upside: Mr. Grayfer raised his price target by $1.50 to $9.50 and reiterated a “sector performer” rating.
Given current weakness in the metallurgical coal market, it may take until the middle of next year for Cline Mining Corp. to solve its liquidity concerns and secure coal sales, commented Dundee Securities analyst Joseph Gallucci. He continues to believe that the company’s New Elk mine in colorado is an attractive long-life asset, but he downgraded Cline to “neutral” from “buy,” given risks that it won’t be able to find a buyer for its coal.
Downside: Mr. Gallucci cut his price target to 50 cents from 90 cents.
Bankrate Inc. reported a significant revenue shortfall in the third quarter, but Canaccord Genuity analyst Michael Graham is advising investors to hang in. “We conclude that Bankrate is more likely to be temporarily impaired than permanently broken,” he concluded.
Upside: Mr. Graham cut his price target to $16 from $24 (U.S.) but reiterated a “buy” rating.
While there are some signs of improved softwood inventory levels and price stability, Canaccord Genuity analyst Neal Gilmer is reiterating a “hold” rating on pulp supplier Mercer International Inc. “We remain cautious on any material price and earnings improvement over the course of the next couple of quarters,” he said.
Upside: Mr. Gilmer raised his price target by $1.50 to $7 (U.S.), “due to our view that the downside risk to prices has subsided.”
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