Monday’s analyst upgrades and downgrades

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Inside the Market's roundup of some of today's key analyst actions. This file will be updated often during the trading day so check back for new details.

The share price upside of Alamos Gold Inc. (AGI-T, AGI-N) is likely to be limited in the near term ahead of expected weak third-quarter production results, said Canaccord Genuity analyst Rahul Paul.

Though Mr. Paul noted the shares have outperformed the S&P/TSX Gold Index by 30 per cent since reaching a low in July, he downgraded his rating for them to "hold" from "buy" ahead of the release of the company's quarterly results on Nov. 12.

The analyst said he expects the third quarter to prove to be "seasonally weak" for Alamos, particularly at its Mulatos project in Mexico. Hurt by heavy rainfall, he expects Mulatos production to be down 8 per cent from the previous quarter with total cash costs rising 12 per cent from the same period a year ago. He said he does expect "significant" improvement in the fourth quarter with production increasing 55 per cent quarter over quarter.

"We continue to see upside over the longer term (particularly in an improved gold price environment) as Young-Davidson completes its ramp-up and as the company de-risks and advances its growth pipeline," said Mr. Paul.

He also lowered his price target for the stock to $6.50 (Canadian) from $7. Consensus is $10.50.

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BMO Nesbitt Burns analyst John Kim said the "peculiar policies" of Camden Property Trust (CPT-N) "go against the tide of consumer structural shifts (Internet shopping, cord-cutting), which may alienate some of its tenant base."

He downgraded the U.S. real estate investment trust to "underperform" from an "outperform" rating based on the news that it will no longer accept deliveries for tenants in an attempt to avoid clutter along with a "deteriorating Houston employment landscape." That moves comes despite the fact that Camden has provided a 8.7-per-cent total return thus far this year, which he pointed out has outperformed the MSCI U.S. REIT Index and the S&P 500 by 5.3 per cent and 7.3 per cent, respectively.

"[The Wall Street Journal] and NBC News reported Camden has made a nationwide policy not to accept packages for tenants, as it costs $3-million a year (0.4 per cent of revenue) to manage," said Mr. Kim "We believe taking away this amenity is a mistake, as online shopping will only grow from its 7.2-per-cent market share, and CPT already charges a 27-per-cent premium rent. Additionally, CPT is implementing a nationwide policy that all tenants must accept and pay for its cable/internet package, which contributed 20 basis point to its [second-quarter of 2015 net operating income] growth. While this is packaged at a reduced rate, the increasing number of cord-cutters and 'cord nevers' will despise this policy."

Mr. Kim also expects Houston, the company's second-largest market, to "further weaken."

He said: "September 2015 total non-farm employment declined by 1,529, bringing the total jobs shed [in the year to date] to 63,831. This data is key; historically Houston has added 10,000 jobs during September, and current forecasts of 22,900 job growth in 2015 were reliant on a seasonal pickup. Also, last week Halliburton announced it has cut 21 per cent of its workforce globally and warned that it may cut deeper if oil prices remain low. With 7.2-per-cent new apartment supply expected to be completed in 2015-17, we now forecast CPT's Houston same-store revenue and NOI at [negative] 6 per cent and [negative] 12 per cent, respectively, in 2016-17."

He maintained his $82 (U.S.) price target, compared to a consensus of $84.58, and said: "we believe CPT will trade at a discount, as many investors may choose to sit on the sidelines until they gauge the impact of Houston and CPT's policies."

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An illegal blockade by local land owners has caused Argonaut Gold Inc. (AR-T) to suspend mining operations at its flagship El Castillo mine in Mexico.

Accordingly, CIBC World Markets analyst Jeff Killeen downgraded the stock to "sector underperformer" from "sector performer" despite the fact that the company said its processing and leaching facility remain in operation.

"Argonaut has had compensation and land use agreements with local landowners (Ejido) at El Castillo in place since 2013 that run through 2025 so it would seem there is little legal basis for the blockade," said Mr. Kileen. "However, the company has stated it will engage in discussions with the group to determine a resolution so normal mining operations can restart. AR has indicated that the group is looking to renegotiate binding agreements and we expect compensation for disturbed land is a principal point of contention."

He added: "El Castillo generates the majority of AR's total production and cash flow with the mine expected to contribute [about] 63 per cent of total ounces produced in 2015 and onward based on our estimates. Argonaut has left guidance unchanged at this time and we think guidance could be maintained if the cessation is limited to a few weeks. Although we expect AR will resolve the situation and resume mining operations, a resolution timeline remains unclear. We also see potential for discussions with local landowners to have a negative impact on AR's balance sheet if compensation is adjusted upward. AR has shown limited ability to generate free cash flow at current gold prices with cash on hand effectively flat quarter-on-quarter so any increase in all-in costs could put near-term [free cash flow] at risk."

He also dropped his price target to $2.50 (Canadian) from $3. Consensus is $3.18.

"We think AR shares are likely to underperform peers until there is clarity around a mining restart at El Castillo, and potential changes to land agreements and impacts on FCF, if any, are contextualized," said Mr. Kileen.

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BMO Nesbitt Burns analyst Ben Pham said he feels it's a "high likelihood" for further downside in the energy services business in 2016 and "market conditions may not support further project activity."

Admitting he previously expected 2015 would be a "trough year" for the sector, Mr. Pham reduced his estimates for Atco Ltd. (ACO.X-T) "materially."

Atco reported third-quarter adjusted earnings per share of 57 cents, lower than both the analyst's estimate of 63 cents and the consensus of 60 cents. It was also a 17-cent drop from the same point in 2014.

"The miss to us was largely driven by lower-than-expected growth in regulated utility, partially offset by stronger-than-expected contributions from the non-regulated segments (i.e., energy, structures)," Mr. Pham said.

He added: "It appears ATCO has made significant strides in cost reductions and project success in the Structures segment. Corporate costs have been reduced and the new $470-million Site C workforce housing projects [in northeast B.C.] should support earnings over the next year. However, we note that workforce housing utilization and rental rates have declined materially (53 per cent vs. 77 per cent) and profit margins have compressed. More important, ATCO's project backlog is slowing and we remain concerned that market conditions may not support further project activity beyond the completion of Site C (mid-2016) and thus structures earnings could see another leg down in 2016."

Mr. Pham updated his EPS estimates for 2015, 2016 and 2017 to $2.65, $3.10 and $3.18, respectively, from $2.59, $3.23 and $3.35.

He also lowered his target price to $42 (Canadian) from $44. Consensus is $47.17.

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After posting "decent" third-quarter results, the management of TransForce Inc. (TFI-T) provided clarity on its strategy that reinforced Desjardins Securities analyst Benoit Poirier's confidence in the company.

"Despite the ongoing weakness in the Canadian economy, we maintain our positive view on TFI, as we expect management's effort to improve profitability across the board will translate into higher [free cash flow] and debt repayment," he said. "In addition, the value of the waste management segment should be unlocked in the near future, which should create enough cash flow to pursue further M&A opportunities in the [truckload] segment during 2016."

TransForce reported adjusted earnings per share of 60 cents, topping Mr. Poirier's estimate of 55 cents and the consensus projection of 49 cents. Revenue of $1.068-billion also beat the analyst's forecast of $1.063-billion though slighly below the consensus of $1.094-billion.

"The company also announced its plan to exit the rig-moving business and reclassified some assets as held for sale," said Mr. Poirier. "Consequently, TFI increased its 2015 EBITDA and EPS guidance to reflect the exclusion of this non-profitable business. Overall, with the expected margin improvement in 2016 and TFI's high conviction that it can divest of the waste management division by year-end, we are reiterating our buy rating."

He raised his target price for the stock to $30 (Canadian) from $28. The average analyst target, according to Bloomberg, is $29.07.

Elsewhere, Scotia Capital analyst Turan Quettawala downgraded the stock to "sector underperform" from "sector perform" while maintaining a target of $26.50.

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In other analyst actions:

Agnico Eagle Mines Ltd (AEM-N) was downgraded to "hold" from "buy" at HSBC by equity analyst Patrick Chidley. The target price is $31 (U.S.) per share.

Astoria Financial Corp (AF-N) was downgraded to "neutral" from "overweight" at Piper Jaffray by equity analyst Matthew Kelley. The 12-month target price is $17 (U.S.) per share.

athenahealth Inc (ATHN-Q) was downgraded to "hold" from "buy" at Topeka Capital by equity analyst Eugene Mannheimer. The 12-month target price is $164 (U.S.) per share.

Yamana Gold Inc (AUY-N) was downgraded to "hold" from "buy" at HSBC by equity analyst Patrick Chidley. The target price is $2.50 (U.S.) per share.

HomeAway Inc (AWAY-Q) was raised to "outperform" from "market perform" at Cowen by equity analyst Kevin Kopelman. The 12-month target price is $40 (U.S.) per share.

American Express Co (AXP-N) was downgraded to "sell" from "neutral" at UBS by equity analyst Matthew Howlett. The 12-month target price is $67 (U.S.) per share.

CMS Energy Corp (CMS-N) was downgraded to "neutral" from "buy" at UBS by equity analyst Julien Dumoulin-smith. The 12-month target price is $37 (U.S.) per share.

Costco Wholesale Corp (COST-Q) was raised to "buy" from "neutral" at UBS by equity analyst Michael Lasser. The 12-month target price is $180 (U.S.) per share.

Euromax Resources Ltd (EOX-T) was rated new "speculative buy" at Euro Pacific Canada by equity analyst Ryan Walker. The 12-month target price is 80 cents (Canadian) per share.

GoGold Resources Inc (GGD-T) was downgraded to "market perform" from "buy" at Cormark Securities by equity analyst Kyle Mcphee. The 12-month target price is $1.55 (Canadian) per share.

Gildan Activewear Inc (GIL-N) was downgraded to "neutral" from "buy" at DA Davidson by equity analyst Andrew Burns. The target price is $31 (U.S.) per share.

Randgold Resources Ltd (GOLD-Q) was downgraded to "hold" from "buy" at HSBC by equity analyst Patrick Chidley. The target price is $70.10 (U.S.) per share.

IAMGOLD Corp (IAG-N) was downgraded to "reduce" from "buy" at HSBC by equity analyst Botir Sharipov. The target price is $1.80 (U.S.) per share.

Innova Gaming Group Inc. (IGG-T) was rated a new "buy" at Dundee Capital Markets by equity analyst Eyal Ofir. The target price is $3.50 (Canadian) per share.

Michael Kors Holdings Ltd (KORS-N) was downgraded to "market perform" from "outperform" at Cowen by equity analyst Oliver Chen. The 12-month target price is $43 (U.S.) per share.

Newmont Mining Corp (NEM-N) was downgraded to "hold" from "buy" at HSBC by equity analyst Patrick Chidley. The target price is $20.20 (U.S.) per share.

Thomson Reuters Corp (TRI-N) was downgraded to "market perform" from "outperform" at FBR Capital Markets by equity analyst William Bird. The 12-month target price is $42 (U.S.) per share.

Tyson Foods Inc (TSN-N) was downgraded to "neutral" from "overweight" at JPMorgan by equity analyst Ken Goldman. The 18-month target price is $47 (U.S.) per share.

Ventas Inc (VTR-N) was downgraded to "hold" from "buy" at Evercore ISI by equity analyst Derek Bower. The 12-month target price is $59 (U.S.) per share. It was also downgraded to "neutral" from "buy" at Mizuho Securities USA by equity analyst Richard Anderson. The 12-month target price is $58 (U.S.) per share.

WEC Energy Group Inc (WEC-N) was downgraded to "sell" from "neutral" at UBS by equity analyst Julien Dumoulin-smith. The 12-month target price is $50 (U.S.) per share.

Whirlpool Corp (WHR-N) was raised to "strong buy" from "market perform" at Raymond James by equity analyst Samuel Darkatsh. The 12-month target price is $185 (U.S.)per share.

With files from Bloomberg News