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.
Desjardins Securities analyst Pierre Lacroix downgraded TransCanada Corp. to "hold" from "buy," believing that the stock's recent share price appreciation has left little additional upside for the near term.
He maintained a $52.50 (Canadian) price target.
Mr. Lacroix termed the company's first-quarter results as "largely a non-event," given that they were in line with expectations and no major new projects were announced during the quarter.
"Management continues to advance the company's $36-billion growth capital portfolio," he commented in a research note. "Although largely commercially secured, the portfolio also consists of certain large projects that require key approvals (most evident in the ongoing delay of Keystone XL pipeline).
"Thus, given marginal potential upside to our target (less than 10 per cent) following recent share price appreciation, we are moving our recommendation to hold–average risk."
The analyst consensus price target for TransCanada over the next year is $53.97, according to Thomson Reuters data.
CIBC World Markets analyst Paul Lechem downgraded SNC-Lavalin Group Inc to "sector performer" from "sector outperformer," citing new risks for the company after its sale last week of its AltaLink transmission company to Warren Buffett's Berkshire Hathaway Energy.
The sale will net SNC-Lavalin about $2.95-billion, or $19.50 per share, in cash after taxes. The key question now is what will SNC-Lavalin do with that money. It's quite likely, according to Mr. Lechem, that SNC-Lavalin will make an acquisition of an engineering, procurement and construction company. That would raise the company's risk profile when compared to owning TransAlta, a regulated utility.
"The options (for cash deployment) are: 1) a special dividend for some or all of the sales proceeds; 2) acquisition(s) of either EPC (engineering, procurement and construction) business(es) or infrastructure concession investments. Given management's prior comments and stated strategy, we do not believe a special dividend is likely, and we look for the company to redeploy the cash, likely in an EPC company acquisition (and likely in the oil and gas engineering segment)," Mr. Lechem said in a research note.
He said generating further value from reinvesting the cash from the AltaLilnk sale "is far from assured."
"We note that for SNC to add further value to the cash proceeds received from the sale would require both a reasonably priced acquisition (likely in the range of 8x EBITDA) and an improved valuation for SNC's combined EPC operations. While these outcomes are certainly possible (and we would expect management to be focused on these very issues), we foresee a certain level of risk and expect the timeframe for further clarity likely to be in 2015 rather than in the shorter term," he said.
Mr. Lechem raised his price target to $58 (Canadian) from $52 to reflect the cash that will be raised from the AltaLink sale.
The analyst consensus price target is $54.05.
Linamar Corp.'s stock, which has been on a tear the last two years, is starting to look expensive, Canaccord Genuity analyst David Tyerman said in a note.
The recovery of auto manufacturing in North America has driven Linamar's valuation to a historical peak, said Mr. Tyerman, who downgraded the stock to a "sell" while maintaining a $50 (Canadian) price target.
"Linamar's valuation has increased substantially in 2013 and 2014 as the increase in the company's share price has significantly outstripped the increase (and projected increase) in Linamar's financial results," the analyst said.
Trading multiples across the auto parts sector in general have been lifted by the resurgence of auto sales.
That's largely expected to continue, as production volumes draw strength from moderate U.S. GDP growth, rising employment and incomes, and pent up auto demand, Mr. Tyerman said. "We continue to project a good but slowing growth in North American production volumes in 2014 and beyond as the industry approaches 'normal' volumes."
As a result, Linamar's earnings growth over the next couple of years should slow, he said.
The analyst consensus price target over the next year is $56.83.
Torstar Corp. exited a tough business at a good price with the sale of Harlequin Enterprises Ltd., said CIBC World Markets analyst Robert Bek.
The $455-million sale of the romance fiction publisher to News Corp. announced last week increased Torstar's valuation and will help to strengthen the company's balance sheet, said Mr. Bek, who raised his price target to $8 (Canadian) from $6.50 while maintaining a "sector performer" rating.
"While we view the deal positively, the big question still remains – what does management do with all that cash?" Mr. Bek said. "While many investors were likely hoping for a special dividend, it's unlikely this will be the case, as the focus seems to be more towards longer-term investment opportunities."
The options aren't immediately clear for the newspaper publisher, which remains in a challenging industry facing difficult revenue trends.
Management has committed to paying down all of its outstanding debt while conducting a review of investment opportunities.
Elsewhere on the Street, Credit Suisse hiked its price target on Torstar to $6.50 from $4 and reiterated an "underperform" rating. And RBC Dominion Securities raised its price target to $9 from $7 and maintained a "sector perform" rating.
The consensus price target over the next year is $7.72.
Agnico-Eagle Mines Ltd. had a "blowout quarter" and has an improving outlook for the year, says CIBC World Markets analyst Alec Kodatsky.
Agnico's better-than-expected first-quarter results with adjusted earnings of 56 cents per share were substantially above Mr. Kodatsky's estimate of 13 cents per share and the consensus estimate of 16 cents per share. Similarly, cash flow from operations of $1.11 per share was materially better than his estimate of 66 cents per share.
"AEM continues to represent an attractive blend of low political risk, operational delivery and near-term production growth," he says, in a research note.
Mr. Kodatsky maintains his "sector outperformer" rating and $38 (U.S.) price target. The analyst consensus price target over the next year is $35.74, according to Thomson Reuters.
In other analyst actions:
Desjardins Securities upgraded Norbord to "buy" from "hold" with an unchanged $33 (Canadian) price target.
Industrial Alliance Securities upgraded Davis + Henderson to "buy" from "hold" and raised its target to $33 (Canadian) from $30.
Desjardins Securities hiked its target on Gluskin Sheff & Associates to $36 (Canadian) from $32, but kept a "hold" rating. BMO Nesbitt Burns raised its target to $34 from $31 and reiterated a "market perform" rating. Both said shares are now fairly valued. CIBC World Markets raised its target to $34.50 from $31.50 and reiterated a "sector performer" rating.
Desjardins Securities raised its target on Gildan Activewear to $75 (Canadian) from $66.50 and maintained a "buy" rating. Industrial Alliance upgraded Gildan to "top pick" from "strong buy" and kept a $74 price target.
Raymond James upgraded Western Energy Services to "strong buy" from "outperform" and raised its price target to $13.50 (Canadian) from $12.
National Bank Financial downgraded TVA Group to "underperform" from "sector perform" and cut its price target to $8.50 (Canadian) from $10.50.
Raymond James raised its price target on Brookfield Renewable Energy Partners to $33 (U.S.) from $30.50 and reiterated an "outperform" rating.
Canaccord Genuity started coverage on TransAlta Renewables with a "buy" rating and $12.25 (Canadiain) target, citing its low risk and "attractive and sustainable dividend yield."
Clarus Securities initiated coverage on Guyana Goldfields with a "buy" rating and $4 (Canadian) price target.
Bernstein upgraded Oracle to "outperform" from "market perform" and raised its price target to $49 (U.S.) from $40.
Canaccord Genuity downgraded Swift Energy to "hold" from "buy" and cut its price target to $12.50 (U.S.) from $14.50.
Credit Suisse upgrades BB&T to "outperform" from "neutral" and hikes price target to $46.50 (U.S.) from $43.
Topeka Capital upgraded Walt Disney to "buy" from "hold" with a price target of $91 (U.S.).
Stifel Nicolaus upgraded Bill Barrett to "buy" from "hold" with a price target of $30 (U.S.).
Raymond James upgraded Chipotle Mexican Grill to "outperform" from "market perform" with a price target of $560 (U.S.).
SunTrust Robinson Humphrey downgraded Host Hotels to "neutral" from "buy" with an unchanged price target of $22 (U.S.).