Skip to main content
inside the market

Some retailers, such as Canadian Tire, are intent on finding efficiencies to avoid raising prices, aiming to steal business from rivals.MARK BLINCH/Reuters

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

Credit Suisse is upgrading Canadian Tire Corp. Ltd. (CTC.A-T) on a pullback in its stock price.

Credit Suisse upgraded Canadian Tire to "neutral" from "underperform" and raised its target price to $116 from $115 "to reflect rollover of our target multiple onto 2017 financials." The consensus is $146.

It updated its 2015, 2016, 2017 earnings per share estimates to $7.82, $8.42, and $9.24 from $7.80, $8.43, $9.05, respectively, due to lower assumed buyback price, offset in part by higher capital spending and capex and depreciation and amortization. It also updated its 2016/2017 capex to $825-million/$650-million versus $625-million/$625-million, previously.

"The stock has pulled back about 17 per cent from stock highs in April 2015 to below our target price. Market fund flows, and a correction in valuation appear to be the drivers, in our view. A more restrictive economic environment, renewed market interest in the materials sectors, and a lack of near-term operational catalysts pose near-term risks/headwinds. Mergers and acquisitions is a positive/negative risk: attractiveness of potential targets is questionable."

======

With ongoing challenges in facing the rig moving market, Beacon Securities Ltd. is downgrading Aveda Transportation and Energy Services Inc. (AVE-X) as the risks are increasing for the company as rig counts shrink.

"With rig activity levels down more than 50 per cent in both WCSB [the Western Canadian Sedimentary Basin] and in the U.S., there is tremendous pressure on pricing. Aveda's management described 'competitors creating unsustainable pricing pressures for the industry and pricing services at levels which would generate negative gross profit margins,' " analyst Michael Mills said.

"Given the financial guidance provided for the third quarter, it is clear that Aveda is facing negative gross margins. Aveda expects sales of $22- to $24-million, but has seen adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] loss of $3.3-million in the first two months of the quarter with further losses anticipated in September. We are revising our third-quarter EBITDA estimate from -$1.7-million to -$4.5-million," Mr. Mills said.

While the company has reduced $5-million in costs annually by cutting 51 jobs, closing two branch locations and consolidating executives from Houston to Calgary, it is also losing CEO Kevin Roycraft as of Nov. 6 with executive chairman David Werklund stepping in as interim CEO.

"With no signs of recovery in the oil and gas sector, we are reducing our estimates not only for the second half of 2015 but also for 2016. With little in the way of near-term cash flow, we remain concerned around debt levels (around $70-million end of the second quarter). Though there are no current covenants due to credit availability (more than $25-million), we do see bank debt/TTM EBITDA moving above 4 times as of the end of the third quarter," Mr. Mills said.

"With a lack of visibility towards an improved operating environment," Mr. Mills dropped his rating to "hold" from "buy" and lowered his 12-month target to $1.75 from $3. Consensus is $3.60, according to Thomson Reuters.

======

Dundee Capital Markets is changing its ratings and price targets on a number of forestry stocks after the sector has been hit hard so far this year, saying it's a buying opportunity.

To date, the Canadian Paper and Forest Products Index is down 29.8 per cent compared to a 13.9-per-cent drop for the Energy sector and 4.7-per-cent fall for the TSX. Similarly, the U.S. paper and forest products sector is down 17.4 per cent compared to a drop of 14.4 per cent in the Energy Sector, said Dundee Securities analyst Stephen Atkinson.

"Considering the strong balance sheets and excellent free cash flow for most of the firms in our coverage, we believe the sell-off presents a buying opportunity. Our one caution is that we are well below the third-quarter Mean for the lumber stocks we follow," the analyst said.

Prices of lumber have fallen with increased production from the U.S. south, and they're expected to remain under pressure in the coming months, the analyst said.

He reduced his rating on Cascades Inc. (CAS-T) to "neutral" but raised his 12-month target to $10 per share from $9.50. Consensus is $9.60.

"We believe management have done a superb job turning the company around but the stock is up 60.5 per cent in the past year. Furthermore, the outlook for North American containerboard has been clouded by continued recycled conversions.

Dundee also lowered its rating on Plum Creek to "neutral" from "buy" owing to share price appreciation.

Dundee said its preferred investments in the industry are lumber companies West Fraser Timber Co. (WFT-T), Canfor Corp. (CFP-T), and Interfor Corp. (IFP-T) . It also recommends Canfor Pulp Products (CFX-T) and Acadian Timber (ADN-T).

In the U.S., Dundee recommends Domtar (UFS-T;UFS-N), International Paper (IP-N), KapStone Paper and Packaging (KS-N), WestRock Co. (WRK-N), Weyerhaeuser (WY-N), for their attractive dividend, low cost structure and high cash flow generation.

Dundee kept its "sell" recommendation on Louisiana-Pacific (LPX-N), and has "neutral" recommendations for Cascades, Norbord Inc. (NBD-T), Packaging Corp. of America (PKG-N) and Plum Creek Timber (PCL-N).

======

With Aecon Group Inc.'s (ARE-T) strong backlog -- particularly the Eglinton Crosstown LRT project -- TD Securities is raising its estimates and target price for the construction group.

"We have increased our 2016 revenue estimate to $3.103-billion (up 4 per cent), while our 2016 EBITDA estimate increases to $170.1-million (up 9 per cent)," said TD Securities analyst Michael Tupholme.

"We believe that our revised revenue estimate is well-supported by the significantly higher backlog that we expect Aecon to report in the third quarter and carry into next year. As a reminder, Aecon will book the previously announced Eglinton Crosstown LRT project award (largest in the company's history) into backlog in the third quarter," he said.

"Our upwardly revised 2016 EBITDA estimate reflects our increased revenue forecast and a marginal increase in our margin expectation for next year. Our 2016 revenue and EBITDA estimates are now about 6 per cent and about 1 per cent, respectively, above consensus.

He kept his "buy" rating on  the stock but increased his target price to $18 from $16.50, "driven by our higher 2016 EBITDA forecast." Consensus is $16.55.

======

First Majestic Silver Corp. (FR-T;AG-N) reported lower than expected silver production in the third quarter, and that has led Dundee Capital Markets to cut its price target for its stock.

First Majestic reported silver production of 2.6-million ounces in the third quarter, and that was 9 per cent lower than Dundee's expectations due to an 8 per cent lower grade and 3 per cent lower throughput.

"First Majestic plans to adjust its mine plans to target lower cost ounces, a prudent move given its cost structure," Dundee analyst Matthew O'Keefe said.

"This likely results in a cut to 2015 guidance when third quarter financials are reported Nov. 16, which is as expected as we had already been forecasting production at the below guidance due to weaker La Encantada grades.

"We now expect annual production of 11.3 million ounces of silver 16.1-million ounces of silver equivalent ...versus most recent guidance of 11.8 to 13.2 million ounces of silver and 15.3 to 17.1 million ounces of silver equivalent."

Dundee kept its "neutral" rating on the stock but lowered its price target to $6 (Canadian) from $6.50. Consensus is $12.34.

======

In other analyst actions:

ACE Ltd. (ACE US) was rated new "Overweight" at Piper Jaffray by equity analyst Daniel Farrell. The 12-month target price is $125.00 per share.

ALLETE Inc. (ALE US) was rated new "Market Perform" at Wells Fargo by equity analyst Sarah Akers.

Allstate Corp. (ALL US) was rated new "Overweight" at Piper Jaffray by equity analyst Daniel Farrell. The 12-month target price is $71 (U.S) per share.

American Water Works Co. Inc. (AWK US) was downgraded to "Neutral" from "Buy" at Ladenburg Thalmann by equity analyst Richard Verdi. The 12-month target price is $62 (U.S) per share.

Basic Energy Services Inc. (BAS US) was downgraded to "Market Perform" from "Outperform" at Cowen by equity analyst Marc Bianchi. The target price is $5 (U.S) per share.

BofI Holding Inc. (BOFI US) was raised to "Buy" from "Hold" at Sandler O'Neill by equity analyst Andrew Liesch. The 12-month target price is $130 (U.S) per share.

CEVA Inc. (CEVA US) was rated new "Neutral" at Ladenburg Thalmann by equity analyst Daniel Amir. The 12-month target price is $22 (U.S) per share.

Calfrac Well Services Ltd. (CFW CN) was downgraded to "Market Perform" from "Outperform" at Cowen by equity analyst Marc Bianchi. The target price is $4 (Canadian) per share.

Dunkin' Brands Group Inc. (DNKN US) was downgraded to "Hold" from "Buy" at Argus by equity analyst John Staszak.

Diana Shipping Inc. (DSX US) was rated new "Neutral" at JPMorgan by equity analyst Noah Parquette. The target price is $7 (U.S) per share.

DexCom Inc. (DXCM US) was raised to "Outperform" from "Market Perform" at Leerink Partners by equity analyst Danielle Antalffy. The 12-month target price is $100 (U.S) per share.

Facebook Inc. (FB US) was raised to "Buy" from "Hold" at Argus by equity analyst Joseph Bonner. The target price is $115 (U.S) per share.

Franklin Electric Co. Inc. (FELE US) was rated new "Neutral" at Boenning & Scattergood by equity analyst Ryan Connors.

Golden Ocean Group Ltd. (GOGL US) was rated new "Neutral" at JPMorgan by equity analyst Noah Parquette.

Imprivata Inc. (IMPR US) was downgraded to "Market Perform" from "Outperform" at William Blair by equity analyst Ryan Daniels. The stock was also downgraded to "Neutral" from "Overweight" at JPMorgan by equity analyst Sterling Auty. The 18-month target price is $19 (U.S) per share.

Koppers Holdings Inc. (KOP US) was downgraded to "Equal-weight" from "Overweight" at First Analysis by equity analyst Steven Schwartz.

Laredo Petroleum Inc. (LPI US) was downgraded to "Reduce" from "Hold" at KLR Group by equity analyst John Gerdes. The target price is $10 (U.S) per share.

Marcus Corp. (MCS US) was rated new "Buy" at Gabelli & Co. by equity analyst Spencer Markby.

Mead Johnson Nutrition Co. (MJN US) was raised to "Outperform" from "Market Perform" at BMO Capital Markets by equity analyst Amit Sharma. The target price is $89 (U.S) per share.

Matador Resources Co. (MTDR US) was downgraded to "Reduce" from "Hold" at KLR Group by equity analyst John Gerdes. The target price is $22 (U.S) per share.

Manitowoc Co. Inc. (MTW US) was downgraded to "Neutral" from "Outperform" at Robert Baird by equity analyst Mircea Dobre. The 12-month target price is $15 (U.S) per share.

NewBridge Bancorp (NBBC US) was raised to "Buy" from "Hold" at Sandler O'Neill by equity analyst Stephen Scouten. The 12-month target price is $12.50 (U.S) per share.

Navios Maritime Holdings Inc. (NM US) was rated new "Overweight" at JPMorgan by equity analyst Noah Parquette.

Navios Maritime Partners LP (NMM US) was rated new "Underweight" at JPMorgan by equity analyst Noah Parquette. The target price is $5 (U.S) per share.

Penn Virginia Corp. (PVA US) was downgraded to "Hold" from "Buy" at KLR Group by equity analyst Gail Nicholson. The target price is $1 (U.S) per share.

Scorpio Bulkers Inc. (SALT US) was rated new "Neutral" at JPMorgan by equity analyst Noah Parquette.

Star Bulk Carriers Corp. (SBLK US) was rated new "Overweight" at JPMorgan by equity analyst Noah Parquette.

Solera Holdings Inc. (SLH US) was downgraded to "Underperform" from "Outperform" at Raymond James by equity analyst C. Gregory Peters.

Sanchez Energy Corp. (SN US) was downgraded to "Accumulate" from "Buy" at KLR Group by equity analyst John Gerdes. The target price is $9 (U.S) per share.

Superior Energy Services Inc. (SPN US) was raised to "Outperform" from "Market Perform" at Cowen by equity analyst Marc Bianchi. The target price is $20 (U.S) per share.

Sensata Technologies Holding NV (ST US) was rated new "Overweight" at JPMorgan by equity analyst Samik Chatterjee. The 12-month target price is $62 (U.S) per share.

Telesta Therapeutics Inc. (TST CN) was rated new "Buy" at Ladenburg Thalmann by equity analyst Kevin Degeeter. The 12-month target price is $1 (Canadian) per share.

Unitil Corp. (UTL US) was downgraded to "Neutral" from "Buy" at Janney Montgomery by equity analyst Michael Gaugler. The 12-month target price is $37 (U.S) per share.

Voya Financial Inc. (VOYA US) was rated new "Hold" at Sandler O'Neill by equity analyst John Barnidge. The 12-month target price is $42 (U.S) per share.

With files from Bloomberg News