Today's analyst upgrades and downgrades

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Inside the Market's roundup of some of today's key analyst actions. This post will be updated with more analyst commentary during the trading day. For breaking analyst actions prior to market open every day, read our Before the Bell morning report.

RBC Dominion Securities modestly reduced its price targets on both BCE Inc. and Bell Aliant Inc. as it speculated on a possible future merger of the two companies.

Once BCE fully digests its acquisition of Astral, RBC believes BCE will once again look for potential acquisitions that could boost free cash flow and support dividend growth. One possibility is for BCE to acquire the remaining 56 per cent stake in Bell Aliant that it does not already own. The probability and timing of such a deal is uncertain and RBC analysts see both benefits and risks.

"A transaction could be done on a free cash flow-accretive basis in the low- to mid-single digits," RBC analysts said in a research note. "Importantly, a free cash flow-accretive transaction is not contingent on BCE and Bell Aliant shares achieving valuation parity, 100 per cent debt financing and/or realizing significant cost synergies. Therefore, we believe the decision by BCE to actively pursue a transaction is largely a function of balance sheet strength, other strategic priorities and gaining sufficient visibility on the long-term free cash flow outlook for Bell Aliant."

While the timing of such a potential transaction is not imminent, "the conditions that are likely required for a BCE-Bell Aliant transaction to be consummated could become more supportive beginning in 2015," the note said. "Specifically: (i) Bell's net debt/EBITDA is expected to decline to below 2.0x (into the company's target range of 1.5x-2.0x); (ii) the 700 MHz auction will have taken place; (iii) Bell's preliminary FTTN expansion should be largely completed; (iv) Bell Aliant's FTTH rollout should be largely completed (easing capex); (v) revenue growth at Bell Aliant could be positive on a sustainable basis; and (vi) bond yields could have risen materially, which would lower Bell Aliant's pension solvency exposure."

Targets: RBC cut its price target on BCE to $47 from $48 and on Bell Aliant to $26 from $27. It rates BCE as "outperform" and Bell Aliant as "sector perform." The average target on Aliant is $26.95.

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The differential between West Texas Intermediate crude oil prices and the heavier crude grade Western Canadian Select will soon narrow, making Canadian Natural Resources Ltd. an attractive stock for investors - especially given its recent underperformance against many peers, said Canaccord Genuity analyst Phil Skolnick.

He upgraded Canadian Natural today to a "buy" rating and raised his price target.

Mr. Skolnick also believes cash flows at Canadian Natural Resources will be able to benefit from an expected upturn in prices for natural gas. The company is the second largest producer of that commodity in Canada.

The market is focused for now on the reliability of Canadian Natural's Horizon oil sands project. This morning, the company said the latest phase of the project, which is targeted to increase production capacity to 250,000 barrels per day of synthetic crude oil, was about 30 per cent complete as of the third quarter, with costs continuing to trend slightly below corporate estimates.

The progress on Horizon comes at a good time, given revisions in Canaccord's commodity forecasts this morning. It raised its 2014 West Texas Intermediate forecast to $97.25 (U.S.) from $90, while leaving its long-term forecast unchanged at $90 a barrel. Canaccord narrowed its outlook for the Western Canadian Select differential for 2014 and beyond by between 75 cents and $1.25 per barrel, now predicting a differential of $16.75 a barrel in 2014 and 2015. It cited improved export capacity out of Western Canada over the next three quarters, as well as improved access to end markets, for the revisions in its forecasts.

"As such, we remain bullish on heavy oil producers, and are upgrading CNQ to a buy as we believe this will be a go-to name once investors take note that increased heavy oil demand and improved transportation capacity is just around the corner," Canaccord said.

Mr. Skolnick notes that on a valuation basis, Canadian Natural trades at one of the lowest valuations among senior energy producers in Canada, based on 2014 enterprise value to debt-adjusted cash flow.

Target: Mr. Skolnick raised his price target by $2 to $39 (Canadian). The average analyst target is $38.74, according to Bloomberg data.

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RBC Dominion Securities has begun coverage on Catamaran Corp. with an "outperform" rating, pointing to the company's rapid growth and the plunge in its stock price.

Shares in the Illinois-based company that sells pension and benefits software have fallen by 18 per cent since August, amid news of IBM and other companies shifting their employees to privately run health-care plans.

Analyst Frank Morgan said investors overreacted and that the market for Catamaran looks stable as health-care reforms roll out. "Private exchanges are not new. And recently publicized movements by a few employers is largely unique and explainable and, in our opinion, not indicative of the employer market," he wrote in a research note.

Target: Mr. Morgan set a price target of $60 (U.S.). The average target is $67.

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RBC Dominion securities analyst Paul Treiber raised his share price target for Sierra Wireless Inc., citing the company's potential for growth amid the rising number of devices connected to the Internet.

"We see more room for upside and believe Sierra's leadership warrants a multiple towards the mid-point of [machine to machine] peers," he wrote in a research note.

Machine-to-machine refers to wireless transmission of data between a range of devices. Lately, this has included cars and appliances, broadly referred to as the Internet of Things. Mr. Treiber said the popularity of M2M and Internet of Things has lifted the valuation for Sierra and its peers by 50 per cent to 1.8 times enterprise value per share (EV/S). Sierra is trading at 0.8 EV/S.

"We believe Sierra warrants a valuation multiple above the low-end of M2M peers, considering its M2M leadership (#1 market share), the breadth of its products, its move up the M2M stack into services and software, and operating leverage," he said, adding the Richmond, B.C.-based company has $100-million in cash for acquisitions, reducing the risk any deal would be dilutive to shareholders.

Target: Mr. Treiber raised his share price target to $20 (U.S.) from $16 and maintained an "outperform" rating. The average share price target is $15.52.

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Beacon Securities analyst Michael Mills downgraded Foraco International SA to "sell" from "hold" in response to news that chief operating officer Claude Durocher has departed the contract drilling company to pursue other opportunities.

Mr. Durocher was appointed to the position in February 2012 and was the lead senior manager in Toronto. Prior to joining Foraco, he served in senior roles at Schlumberger.

"We view this as a substantial loss to the organization, with Mr. Durocher having been viewed as a likely successor to the current Co-CEOs," he said.

The news comes amid growing evidence that the slump in drilling demand will extend into 2014, and Mr. Mills is now forecasting Foraco to post a net loss for a second consecutive year in 2014. He also thinks the company's interest costs are going to go up.

Target: Mr. Mills cut his price target to 55 cents (Canadian) from 90 cents. The average target is 89 cents.

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In other analyst actions today:

Cormark Securities downgraded Encana to "market perform" from "buy" and cut its price target to $17 (Canadian) from $21.

Stonecap Securities downgraded Carpathian Gold to "sector perform" from "outperform" and cut its price target to 15 cents from 35 cents.

Stonecap Securities initiated coverage on Endeavour Silver with an "outperform" rating and $5.25 price target.

Desjardins Securities cut its price target on Wajax to $33 (Canadian) from $36 and maintained a "hold" rating while warning its dividend is at risk following the company's third-quarter profit warning.

Roth Capital initiated coverage on Iamgold with a "buy" rating and $5.50 (U.S.) price target.

CIBC World Markets cut its price target on Russel Metals to $29 (Canadian) from $31 and reiterated an "sector outperformer" rating.

CIBC World Markets raised its price target on Exfo to $4.50 (U.S.) from $4 and maintained a "sector performer" rating.

Jefferies cut its price target on Yum Brands to $63 (U.S.) from $67 and maintained a "hold" rating.

UBS upgraded Adtran to "neutral" from "sell" and raised its price target to $24 (U.S.) from $18.

Credit Suisse cut its price target on Ariad Pharmaceuticals to $6 (U.S.) from $20 and maintained a "neutral" rating.

BMO Nesbitt Burns raised its price target of Family Dollar Stores to $68 (U.S.) from $59 and maintained a "market perform" rating.

BMO Nesbitt Burns raised its target on Applied Micro Circuits to $18 (U.S.) from $12 and maintained an "outperform" rating.

Canaccord Genuity raised its price target on Nike to $72 (U.S.) from $69 and maintained a "hold" rating.

Canaccord Genuity initiated coverage on Boeing with a "buy" rating and $140 (U.S.) price target.

Canaccord Genuity initiated coverage on Precision Castparts with a "buy" rating and $264 (U.S.) price target.

Needham & Co initiated coverage on Netflix with a "buy" rating and $425 (U.S.) price target.

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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities