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A board shows the name of Valeant Pharmaceuticals above the floor of the New York Stock Exchange shortly after the opening of the markets in New York Oct. 22.

Lucas Jackson/Reuters

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.

In the wake of its "successful split-off" from General Electric Co. (GE-N), the technical pressures on shares of Synchrony Financial (SYF-N) are likely to subside, said BMO Nesbitt Burns analyst James Fotheringham.

Pointing to the end of arbitage trading and flow-back from GE shareholders, Mr. Fotheringham upgraded his rating for the stock to "outperform" from "market perform."

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GE, which owns 85 per cent of the consumer-finance company, recently executed a tender offer where GE shareholders could turn in shares in exchange for Synchrony shares at a discounted price. The offer ended Nov. 16, causing a flurry of trading of GE shares.

"We recommend buying SYF shares to event-driven investors," said Mr. Fotheringham. "In addition to relief from technical pressures following its split-off from GE, we expect SYF shares to be catalyzed by sooner-than-expected capital return; contrary to management's conservative guidance, we forecast dividends and buybacks starting in [the first quarter of 2016]."

He added the stock to his "best event-driven trades" list.

"As the market's assessment of SYF shares shifts away from 'technicals,' our fundamental analyses imply 14-per-cent upside for SYF shares (target price $36)," said Mr. Fotheringham.

The analyst consensus price target, according to Thomson Reuters, is $38.68 (U.S.).

"We forecast return of excess capital to SYF shareholders in 2016 (payout ratio of approximately 20-per-cent dividends and 60 per cent buy-backs); prior to SYF's split-off from GE, the Fed prohibited any such capital return," the analyst said, touting Synchrony's strong capital position, market share development and "superior" profitability.

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Stock of Valeant Pharmaceuticals International Inc. (VRX-N, VRX-T) is unlikely to experience sustained upside, said CIBC World Markets analyst Prakash Gowd, pointing to the company's battle with short sellers, Philidor issues, the "overhang" of a government investigation and the "spectre of further headline risks."

"While we are encouraged by Valeant's recent attempts to provide more transparency, it is unfortunate that the damage control efforts have not been more timely and more forceful," he said. "The company will likely be in the stock market 'penalty box' for several months."

Mr. Gowd initiated coverage of the stock with a "sector performer" rating but slashed his price target for the U.S. issue of the stock to $90 (U.S.) from $200. The analyst consensus is $173.91.

"Valeant's stock has gone from darling to pariah of Wall Street in a matter of a short couple of months," he said. "While fundamental analysis tells us that Valeant's stock could be worth far north of $150 per share if the company continues to generate cash flows at the rate we've become accustomed to witnessing quarter over quarter, market sentiment has pummeled the stock below $100 per share recently. Therein lies the rub – will the stock continue to trade on technicals and market sentiment or will it rebound to fundamentally driven levels if the negative spotlight starts to subside. Since that is a very big if, we opted to use a market-based valuation approach and arrived at our price target of $90 per share."

He added:  "Valeant is unlikely to trade on financial fundamentals in the near term due to the lack of investor confidence and overhanging risks," he said. "Furthermore, the risk of redemptions at the funds with significant exposure to Valeant in their portfolios, combined with year-end selling, could put further downside pressure on Valeant stock. We recommend investors stay on the sidelines for now, as there is a dearth of near-term upside catalysts."

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Credit Suisse analyst David Hartley upgraded Jean Coutu Group PJC Inc. (PJC.A-T) due to a pullback to the stock's target price.

As investors weigh the effect on the company of a proposed Quebec bill that would open the bidding process for the manufacturing of generic drugs, Mr. Hartley moved his rating to "neutral" from "underperform."

He said Jean Coutu's Pro Doc unit, which operates retail pharmacies and manufactures generic drugs, would be "impacted significantly" if it is not a net winner in the tendering process. He estimated Pro Doc supplies Jean Coutu's franchisees with 80-90 per cent of its generic-drug requirements.


"We have had a negative view on PJC owing in large part to the risk of further drug reforms," he said. "Revisions to Bill 81 that proposes the implementation of a tendering process supports our view, and hence, the stock has pulled back to our $17.50 [target price]. Street [earnings per share] estimate revisions have been negative since the beginning of 2014, and PJC's return on equity/return on invested capital is projected on our numbers to fall from 22.3 per cent in 2014 to 16.7 per cent in 2018. If indeed Pro Doc's profit is to be negatively impacted by Bill 81 as suggested by the share price movement over the past two sessions, then we expect further downward EPS revisions and our ROE/ROIC will fall a further 170 basis points to 15 per cent by 2018. However, we believe that should proposals in Bill 81 not be workable in practical application, i.e. tendering, then there remains considerable risk that Pro Doc and other generic suppliers will have to fund recent cuts to dispensing fees at the independent pharmacist level via rebates. We await an attractive re-entry point."
 
He maintained his $17.50 target, compared to a $20.60 consensus.

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Waiting to see the impact of the acquisition of Amdipharm Mercury Limited (AMCo) on Concordia Healthcare Corp. (CXRX-Q), CIBC World Markets analyst Prakash Gowd said he's taking a "conservative stance for now."

He initiated coverage of the Canadian company with a "sector performer" rating.

"Concordia has a deal-driven management team that is highly capable of sourcing and executing acquisitions," he said. "Since its inception three years ago, Concordia has transformed into a diverse, fully integrated global specialty pharma company with over 200 products being sold in 100 countries.

"AMCo is Concordia's first company acquisition, and a very large one at that. The transaction only closed on Oct. 21. Given the size of the acquisition, and that we have yet to see one quarter where AMCo is included in Concordia's financials … we will wait to see how the AMCo business performs as part of Concordia, and monitor how management executes the integration and pays down debt. Management has guided for 2016 revenue of $1.02-billion to $1.06-billion and EBITDA of $610-million to $640-million. Our estimates are just slightly below the low end of the range."

Mr. Gowd said he'd like Concordia to consider more products that have "expanded market opportunity based on sensitivity to promotional spend, potential for expanded indications and possibility for greater reimbursement."

He added: "Given Concordia's highly leveraged balance sheet, its business development efforts will be constrained, and no significant acquisitions in 2016 are expected. Instead, management will likely be focused on debt reduction to reduce its net debt/EBITDA multiple to under 5.5-times. Concordia stock will largely reflect the performance of AMCo. We will re-evaluate our position once we gain more clarity on AMCo's drug portfolio, confidence on management's ability to grow a newly acquired business that operates primarily in Europe, and comfort that AMCo can provide the growth that Concordia expects."

He set a price target of $47 (U.S.). Consensus is $64.40.

"We believe Concordia has the potential to execute on promises of integrating AMCo, monetizing AMCo's value and deleveraging with internally generated cash flows over the next year," said Mr. Gowd. However, due to the lack of visibility that we have on AMCo's historical performance, its drug portfolio and management's ability to grow a newly acquired business that primarily operates in Europe, we maintain a conservative outlook. Until we have seen at least one to two quarters of post-AMCo acquisition financials, we think that Concordia should trade in line with the peer average of 10-times 2016E enterprise value/EBITDA."

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RBC Capital Markets analyst Seth Weber downgraded PACCAR Inc. (PCAR-Q) to "sector perform" from "outperform" due to a "more muted" view toward North America's demand for Class 8 trucks.

Mr. Weber's forecast for the building of that classification of trucks, which possess a gross vehicle weight rating of 33,001 pounds or greater, fell to approximately 270,000 from 285,000.

"While still healthy on a relative basis, our new estimate represents a steeper than previously expected decline from our 2015 forecast of approximately 324,000," he said. " Our 2017 outlook remains roughly 250,000."

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His earnings-per-share estimate for 2016 fell to $4.33 (U.S.) from $4.50 to reflect lower revenue and margins. His 2017 projection fell to $3.90 from $4.10.

"Our January, 2015, upgrade of PCAR shares was based in large part on the view that Class 8 demand would remain relatively resilient through 2016 (i.e., moderate decline off a strong 2015), while PCAR would also benefit from greater vertical integration/parts activity and exposure to an improving Europe truck cycle," the analyst said. "Whereas PCAR remains a best-in-class operator with significant cash/generating capability that has demonstrated strong margin execution in recent quarters, we see slowing Class 8 demand as validating peak cycle concerns and weighing on valuation/limiting upside to shares. While 2015 appears like it will come in roughly in line/a little better than our original thinking and the other expectations are playing out as well, moderating/softening North American industry metrics have resulted in a greater-than-expected slowing of Class 8 truck demand, and we see enough headwinds/questions to suggest a reacceleration in orders is unlikely to occur soon."

He lowered his price target for the stock to $57 (U.S.) from $64. Consensus is $58.50.

"We view PACCAR as a best-in-class operator with a strong financial position," said Mr. Weber. "Although we applaud recent margin progress and see opportunity for the company to benefit from an improving European truck cycle, we expect concerns over peak North American Class 8 truck cycle to weigh on investor sentiment and valuation."

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In other analyst actions:

Allegiant Travel Co. (ALGT-Q) was downgraded to "market perform" from "outperform" at Raymond James by equity analyst Savanthi Syth.

Cameron International Corp. (CAM-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $90 (U.S.) per share.

CERF Inc. (CFL-T) was downgraded to "speculative buy" from "buy" at Industrial Alliance by equity analyst Elias Foscolos. The 12-month target price is $1.70 (Canadian) per share.

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Core Laboratories NV (CLB-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $135 (U.S.) per share.

Diamond Offshore Drilling Inc. (DO-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $27 (U.S.) per share.

Dril-Quip Inc. (DRQ-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $75 (U.S.) per share.

Energold Drilling Corp. (EGD-X) was raised to "speculative buy" from "hold" at Salman Partners by equity analyst Kam Mangat. The 12-month target price is 60 cents (Canadian) per share.

Ensco PLC (ESV-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $21 (U.S.) per share.

FMC Technologies Inc. (FTI-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $45 (U.S.) per share.

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Starwood Hotels & Resorts Worldwide Inc. (HOT-N) was downgraded to "hold" from "buy" at Evercore ISI by equity analyst Richard Hightower. The target price is $75 (U.S.) per share.

Helmerich & Payne Inc. (HP-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $70 (U.S.) per share.

lululemon athletica Inc. (LULU-Q) was downgraded to "underperform" from "market perform" at FBR Capital Markets by equity analyst Susan Anderson. The 12-month target price is $42 (U.S.) per share.

Marriott International Inc. (MAR-Q) was downgraded to "hold" from "buy" at Evercore ISI by equity analyst Steve Sakwa. The target price is $79 (U.S.) per share.

Microsoft Corp. (MSFT-Q) was raised to "strong buy" from "market perform" at Raymond James by equity analyst Michael Turits. The 12-month target price is $62 (U.S.) per share.

Noble Corp PLC (NE-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $16 (U.S.) per share.

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National Oilwell Varco Inc. (NOV-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $44 (U.S.) per share.

Oceaneering International Inc. (OII-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $52 (U.S.) per share.

Prestige Brands Holdings Inc. (PBH-N) was downgraded to "underperform" from "hold" at Jefferies by equity analyst Kevin Grundy. The 12-month target price is $44 (U.S.) per share.

PACCAR Inc. (PCAR-Q) was downgraded to "sector perform" from "outperform" at RBC Capital by equity analyst Seth Weber. The 12-month target price is $57 (U.S.) per share.

Jean Coutu Group PJC Inc. (PJC.A-T) was raised to "neutral" from "underperform" at Credit Suisse by equity analyst David Hartley. The target price is $17.50 (Canadian) per share.

Prologis Inc. (PLD-N) was downgraded to "market perform" from "outperform" at Wells Fargo by equity analyst Brendan Maiorana.

Transocean Ltd. (RIG-N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $17 (U.S.) per share.

Superior Energy Services Inc. (SPN -N) was raised to "buy" from "neutral" at Guggenheim Securities by equity analyst Michael Lamotte. The target price is $20 (U.S.) per share.

Valener Inc. (VNR-T) was raised to "sector perform" from "underperform" at RBC Capital by equity analyst Robert Kwan. The 12-month target price is $18 (Canadian) per share.

Wesdome Gold Mines Ltd. (WDO-T) was rated new "buy" at Salman Partners by equity analyst Derek Macpherson. The 12-month target price is $1.60 (Canadian) per share.

Wright Medical Group NV (WMGI-Q) was raised to "buy" from "hold" at Jefferies by equity analyst Raj Denhoy. The 12-month target price is $29 (U.S.) per share.

WestRock Co. (WRK-N) was rated new "buy" at Cantor Fitzgerald by equity analyst Steve Ferazani. The 12-month target price is $62 (U.S.) per share.

Zayo Group Holdings Inc. (ZAYO-N) was raised to "outperform" from "neutral" at Macquarie by equity analyst Kevin Smithen. The 12-month target price is $30 (U.S.) per share.

With files from Bloomberg News

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