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Inside the Market Thursday’s analyst upgrades and downgrades: SNC's legal woes a 'buying opportunity'

Montreal engineering firm SNC-Lavalin says it plans to cut 4,000 jobs or 9% of its total payroll over a period of 18-months, beginning in 2015. Some cuts will be made in Canada, but most will be outside this country. Paul Bagnell has more.

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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.

Far from a disaster for investors, the sharp drop in SNC-Lavalin Group Inc.'s share price in the wake of corruption charges presents a buying opportunity, says Desjardins Capital Markets analyst Benoit Poirier.

The company was informed February 19 that it faced federal charges of corruption, mostly related to its Libyan operations. The company's shares were down 6.7 per cent by midday Thursday.

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"Overall, SNC firmly believes these charges are without merit and will vigorously defend itself and plead not guilty," says Mr. Poirier. "Most importantly, the charges do not affect the company's right and ability to bid on any public or private projects."

He adds that SNC maintains a solid financial position with no debt and $1.1-billion in cash.

"Having said that, we do not see material implications from these charges on the company's future performance (ie its bidding ability as the charges are all related to past events). As a result, we see current weakness as a buying opportunity."

Mr. Poirier maintains his "buy" rating and $56 target price. The analyst consensus price target is $56.25.

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Tourmaline Oil Corp. said its proved plus probable reserves increased by 45 per cent year-over-year and announced plans to trim its 2015 capital budget by $200-million to $1.2-billion.

The company originally planned for capital expenditures to total $1.6-billion, but reduced this to $1.4-billion in December.

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According to Desjardins Securities, the firm's "peer-leading growth and balance sheet strength will continue to be viewed positively by the market, particularly given the uncertainty around oil prices."

Analyst Kristopher Zack expects the company to post peer-leading production growth in 2015, and believes Tourmaline, unlike some of its competitors, will continue to have access to capital if need be.

"While we are somewhat cautious on the outlook for natural gas prices through the summer, we believe that there is sufficient flexibility in the 2015 spending program," he added.

Mr. Zack upgraded the stock to "buy" from "hold" and hiked his price target to $49 (Canadian) from $44. The analyst consensus price target is $47.33.

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A lack of upside after a recent share price streak makes Brookfield Infrastructure Partners LP a good candidate for a downgrade, Credit Suisse analyst Andrew Kuske said.

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The stock is up by about 13 per cent in the last three months, and there are fewer catalysts for further stock appreciation than with alternative investments, Mr. Kuske said.

"Brookfield's global reach, distress and value orientation are likely to provide M&A opportunities beyond our existing assumptions," he said. "We believe BIP's core asset base provides an attractive amount of growth, however, with less visibility than some other names in our coverage universe."

He downgraded the stock to "neutral" from "outperform" and maintained a $46 (U.S.) target price. The average analyst price target for the stock over the next year is $46.28.

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Growing export headwinds have resulted in a downgrade for Western Forest Products Inc. from CIBC World Markets analyst Mark Kennedy.

Mr. Kennedy explains that Western Forest reported fourth-quarter 2014 earnings of $0.03 per share, compared to earnings of $0.13 per share for the same quarter last year.

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"WEF is looking at a dichotomy in its markets in 2015 with improvement expected in the North American repair and renovation segment (positive for cedar and niche lumber sales) and weakness in Japanese and Chinese export markets," says Mr. Kennedy.

"WEF has a strong balance sheet and we forecast they will be net debt free by Q3/2016. However in the near term we expect the company to maintain the current $0.08 annual dividend, with any dividend increase likely to be pushed out to 2016 when WEF is further down the road on their discretionary capital program and has better visibility on both the North American and export market outlooks."

He is downgrading the stock to "sector performer" from "sector outperformer" and is lowering his price target to $2.80 (Canadian) from $3.00. The analyst consensus price target is $3.14.

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Progress on a Romarco Minerals Inc. project has bolstered Desjardins Capital Markets analyst Michael Parkin's belief that the company makes an attractive acquisition target.

Mr. Parkin explains that Romarco has the permits and financing in place to begin development of its South Carolina-based Haile Gold Mine project.

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"We believe the reserve update that is due in 1H15 could be very positive given the current reserve is based on a low gold price and does not include thousands of metres of drilling," he says. "We continue to believe there is good potential for Romarco to be an acquisition target."

Mr. Parkin maintains his "buy" rating and $0.90 (Canadian) target price. The analyst consensus price target is $1.03.

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In other analyst actions

Barrick Gold Corp. was raised to "buy" from "hold" at TD Securities by equity analyst Greg Barnes. The 12-month target price is $16.50 (U.S.) per share.

High Liner Foods Inc. was raised to "buy" from "hold" at Beacon Securities by equity analyst Michael Mills. The 12-month target price is $27.00 (Canadian) per share.

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Intelsat SA was downgraded to "underweight" from "neutral" at JPMorgan by equity analyst Philip Cusick. The 12-month target price is $12.00 (U.S.) per share.

InterXion Holding NV was raised to "outperform" from "market perform" at Wells Fargo by equity analyst Gray Powell.

iPass Inc. was downgraded to "neutral" from "buy" at Chardan Capital Markets by equity analyst James Mcilree.

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