Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day. For breaking analyst actions prior to market open every day, read our Before the Bell morning report.
BCE Inc. is facing lower profit margins in its media division, said RBC Dominion Securities analyst Drew McReynolds, who trimmed his price target and downgraded the stock.
After outperforming the large Canadian telco stocks this year, BCE's recent share price gains, combined with a deteriorating outlook for Bell Media, warrant a rating change to "sector perform" from "outperform," and a reduction in target price to $47 (Canadian) from $48, Mr. McReynolds said.
"While we consider BCE a core holding in the Canadian telecom sector underpinned by stable fundamentals and an ongoing commitment to return excess capital to shareholders, we would look for more attractive and/or timely accumulation points," he said in a note.
At about 16 per cent of total revenues, Bell Media is much smaller than either the wireless or wireline segments. Still, the division's headwinds are significant enough to weaken the forecast for the parent company.
The challenges include the time lag between recent investments made in programming and offsetting revenue increases from renegotiated carriage agreements, the RBC analyst said. Additionally, investors should consider the "unbundling" of cable channels expected to be mandated by the Canadian Radio-television and Telecommunications Commission.
"We fail to see how this new framework can be positive for the Canadian broadcasting industry and risks becoming a meaningful revenue headwind for Bell Media," Mr. McReynolds said.
As a result, RBC said it lowered its forecast for BCE's EBITDA margin for the current fiscal year to 25.0 per cent from 28.4 per cent, and for next year to 23 per cent from 30.2 per cent.
BCE's stock, having returned about 7.3 per cent year to date, now better reflects the company's gains in market share, Mr. McReynolds said.
RBC's expected total return on Canadian telecom stocks is now at 4 per cent, compared to 9 per cent at the beginning of the year and 11 per cent one year ago.
"At this juncture, we believe the valuation risk for Canadian telecom stocks has risen and we continue to believe further multiple expansion is unlikely," he said.
An upgrade from CIBC World Markets analyst Alec Kodatsky on Newmont Mining Corp. is providing an indication why the gold miner may not be in any hurry to merge with Barrick Gold Corp.
Mr. Kodatsky raised his rating on Newmont to "sector performer" from "sector underperformer" while increasing his price target to $33 (U.S.) from $27, citing "very good" first-quarter results and the possibility that 2014 overall will be a better year than many suspected.
"With Newmont now breaking even on a cash basis at current gold prices and operations on positive footing, we see fewer downside risks to the shares," Mr. Kodatsky said in a research note. "The balance sheet remains an overhang, but costs and capex have been reined in, and with more savings likely to be delivered this year, we think these concerns have already been largely priced into the shares."
Mr. Kodatsky said Newmont is trading at one of the lowest multiples to cash flow in the senior gold sector, with a stock price of only 5.6 times estimated 2014 cash flow versus a group average of 7.1 times.
The upgrade is "based on relative valuation and what we see as a more sustainable outlook, given recent operating improvements and spending controls," he said.
Barrick said earlier today that Newmont has decided to end merger talks, as the board determined that the interests of Newmont shareholders would be best served by remaining independent. The statement from Barrick today was the first time one of the companies confirmed that they had been discussing a merger. Under the terms of their latest proposal, Barrick would have paid $13-billion in stock to buy the smaller gold producer, sources have told the Globe and Mail.
Desjardins Securities analyst Adam Melnyk upgraded Richmont Mines Inc. after some promising initial test results at the company's flagship gold mine near Wawa, Ont.
Following a site tour of the Island Gold Mine, the analyst said he has increased confidence in the project and the company's recent sampling results from the mine's "deep zones."
"We see the deep zones of Island Gold as the future of Richmont's production base," Mr. Melnyk said. He slightly increased his operating estimates on the mine, as well as the multiple applied to the company's net asset value.
Also, a recent refinancing "significantly improved" Richmont's liquidity, Mr. Melnyk said.
He raised his rating on the small-cap mining company to "buy" from "hold" and increased his price target to $2.10 (Canadian) from $1.85.
National Bank Financial downgraded its rating on Canadian Utilities Ltd. to "sector perform" from "outperform" after its first-quarter earnings per share came in at 71 cents, about a nickel below Street expectations.
But both National Bank and CIBC World Markets raised their price targets on the stock, which has steadily increased in price this year and is trading just below 52-week highs.
CIBC analyst David Noseworthy sees several potential upside catalysts for Canadian Utilities' share price, including the successful development of the 400-megawatt Heartland power project and ongoing improved investor sentiment. "We recommend Canadian Utilities as it has amongst the lowest valuations at 8.8x EV (enterprise value)/2015E EBITDA, relative to its Canadian energy infrastructure peers, and has one of the highest EPS and dividend three-year (compounded annual growth rates) of 12 per cent and 10 per cent, respectively," Mr. Noseworthy said.
CIBC - which reiterated a "sector outperformer" rating - raised its target to $44 (Canadian) from $42.50, while National Bank raised its target to $43 from $42.
Mullen Group Ltd. is well-positioned to benefit from accelerating Canadian energy exploration and production, according to CIBC World Markets analyst Jon Morrison.
"Mullen has a well-earned reputation for being one of the most conservative and well-managed oilfield services companies in Canada that has delivered strong expansion throughout industry cycles, achieved upper quartile sector returns and created long-term value for its shareholders," said Mr. Morrison in a research note.
He maintained his "sector performer" rating and increased his price target to $33 (Canadian) from $28. The analyst consensus price target over the next year is $31.23, according to Thomson Reuters.
In other analyst actions:
Raymond James cuts its price target on Mosaic Capital to $12.50 (Canadian) from $14.50 and reiterated an "outperform" rating after disappointing fourth-quarter revenues.
Raymond James raised its price target on Potash Corp. of Saskatchewan to $38.50 (U.S.) from $36 and maintained an "outperform" rating.
CIBC World Markets raised its price target on Mullen Group to $33 (Canadian) from $28 and maintained a "sector performer" rating.
RBC Dominion Securities raised its price target on Loblaw to $57 (Canadian) from $55 and maintained an "outperform" rating.
AltaCorp Capital Research raised its price target on Gear Energy to $6.50 from $5.50 and maintained an "outperform" rating.
TD Securities raised its price target on Saputo to $61 (Canadian) from $55 and maintaining a "hold" rating.
Bernstein upgraded TD Ameritrade to "outperform" from "market perform" and raised its price target to $40 (U.S.) from $29.
Credit Suisse upgraded Deckers Outdoor to "neutral" from "underperform" and raised its price target to $82 (U.S.) from $61.
Craig-Hallum upgraded Ford to "buy" from "hold" and boosted its price target to $21 (U.S.) from $16.
Barclays downgraded USG to "equalweight" from "overweight" and cut its price target to $31 (U.S.) from $37.
Pacific Crest upgraded Autodesk to "outperform" from "sector perform" with a price target of $60 (U.S.).
BMO Nesbitt Burns downgraded CenturyLink to "market perform" from "outperform" but raised its price target to $33 (U.S.) from $32.
Clarkson Capital downgraded Walter Energy to "market perform" from "outperform" and cut its target to $9 (U.S.) from $15.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities