Thursday’s analyst upgrades and downgrades

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Inside the Market's roundup of some of today's key analyst actions

National Bank of Canada analyst Gabriel Dechaine inched his price target up on Royal Bank of Canada (RY-T) to $101 from $99 following third-quarter results.

"While 5 per cent growth from its largest segment [personal and commercial banking] is not spectacular, we believe RY's performance exhibited resilience," the analyst wrote in a research note. "Assuming normalization of expense growth, moderately improving margins and stable credit performance, we believe the bank could accelerate growth from current levels."

The analyst increased his adjusted earnings estimate for fiscal 2017 to $7.58 per share, from $7.49 per share, and his estimate for fiscal 2018 to $8.08 per share, from $7.96 per share.

"We have slightly increased our forward estimates, largely as a reflection of lower PCLs [provisions for credit losses] and NIX [non-interest expenses] forecasts," the analyst wrote. "As a result, our target goes to $101 from $99, and is derived using a 12.5x multiple on our 2018 estimated earnings per share."

Elsewhere, CIBC World Markets Inc. Robert Sedran kept his $103 price target and "outperformer" rating; while Canaccord Genuity Corp. analyst Scott Chan kept his $100 target and "hold" rating; and BMO Capital Markets analyst Sohrab Movahedi kept his "market perform" rating and $100 target.

And Credit Suisse Securities Canada Inc. analyst Nick Stogdill maintained his "outperform" rating and $105 target.

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If you are a patient investor looking for a sector where pessimism reigns and therefore long-term value and opportunity may be present, then look no further than the oil sector.

"No doubt investing in the Canadian energy sector can be painful," said Raymond James analyst Jeremy McCrea, in a research note. "With an energy 'buyers strike', we have taken another look at some companies that may have been unjustifiably thrown out with the bath water."

The name the analyst has grown more positive on is Bonterra Energy Corp. (BNE-T), which is trading near its 52-week low and has underperformed the S&P/TSX composite by almost 50 per cent this year. Mr. McCrea upgraded Bonterra to "strong buy" from "outperform."

"Although some investors may initially recoil with Bonterra as a name to play a rebound or find safety in (given headline numbers), the company is one of a few names that can check most boxes on our five-point checklist," the analyst said. "With a few differentiated ways to view the energy sector, the selling seems to be overdone with BNE."

The analyst's five-point checklist includes 1) quality profitable assets 2) long-term production growth 3) high leverage but in line with peers using debt to production metrics 4) low valuation and 5) market timing.

"Like most energy investors, we've been waiting a long time for crude fundamentals to improve and it does finally appear underlying fundamentals to a rebalancing are in place," he said. "Although we always prefer to have a company reinvest capital into the business if there are profitable returns, the market is clearly not willing to pay for growth today. With Bonterra paying an 8-per-cent dividend yield to wait, the slower pace of growth does help limit infrastructure spending and allow better full-cycle economics to exist."

His price target is $26.

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Corby Spirit and Wine Ltd. (CSW.A-T) reported fourth-quarter results in line with PI Financial Corp. analyst Bob Gibson's expectations. However, the analyst lowered his price target on the stock.

The analyst also lowered his fiscal 2018 revenue estimate to $153.6-million from $155.5-million, and his earnings before interest tax depreciation and amortization (EBITDA) estimate to $46.3-million, from $49.5-million.

"We are maintaining our buy recommendation and average risk rating," the analyst wrote in a research note. "We have lowered our 12– month target price to $24.00 (previously $25.50) reflect[ing] not only the higher advertising spend but lower industry average multiples."

The stock closed Wednesday at $21.85.

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Following Lowe's Companies Inc.'s (LOW-N) disappointing fiscal second-quarter results, BMO Capital Markets analyst Wayne Hood cut his rating on the home-improvement retailer's stock to "market perform" from "outperform" and his target to $82 (U.S.) from $89. His earnings estimate for 2018 fell to $5.24 form $5.45.

"We [downgrade the stock] not because we see significant downside risk in the stock or believe that management is not taking the correct strategic path; rather, we see it as unlikely that the stock's P/E (price to earnings) multiple can expand from here without accelerating U.S. comprable-store sales growth in excess of 3.5 per cent and/or a better-than-expected operating margin outlook," the analyst wrote in a research note. "We did not hear management mention either during its second quarter conference call with analysts.

"What we heard about was decisive actions to grow and protect market share. Moreover, the second quarter results results and outlook are against a backdrop in which Home Depot continues to raise its sales and earnings outlook and further improve on most operating metrics, and yet, the multiple has modestly corrected on concerns over peaking growth since its second quarter print. Therefore, we see the stock trading at the low end of its five-year range [15.7-27.9 times earnings], and this leads us to a 12-month price target of $82 per share."

The stock closed at $73.01 in New York Wednesday.

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AltaCorp. Capital Inc. analyst Keith Carpenter inched his price target up on GreenSpace Brands Inc. (JTR-X) to $2.25 from $2.20 and maintained his "speculative buy" rating on the organic and natural food company after seeing first-quarter fiscal 2018 results.

EBITDA was higher than he estimated due to higher sales, better margins and better costs, the analyst said in a research note. He increased his fiscal 2018 revenue estimate to $57.4-million from $54.3-million, and his adjusted EBITDA estimate to $2.5-million from $2.1-million.

"We expect second quarter fiscal 2018 to improve upon the results of the first fiscal quarter, with higher seasonal sales from the Kiju brand (fiscal second quarter is the brand's top sales quarter), as well as a strong product mix, including higher margins from the Love Child brand, which all told, should provide the second quarter with the highest gross margin of the year."

The stock closed at $1.28 Wednesday on the TSX Venture Exchange.