Friday's analyst upgrades and downgrades

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Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.

At least two analysts are warming up to Shaw Communications Inc. after the company reported quarterly financial results Thursday that were largely better than expected.

Canaccord Genuity's Dvai Ghose upgraded his rating to "hold" from "sell" and hiked his price target to $26 (Canadian) from $24. TD Securities analyst Vince Valentini upgraded the stock as well, to "buy" from "hold", and raised his target to $30 from $29.

Mr. Ghose cited improving cable fundamentals for his upgrade, but also expressed some reservations. "We are upgrading our rating to hold from sell due to 1) two consecutive quarters of better than expected cable subscriber results; 2) solid cable free cash flow; and 3) increased fiscal 2014 free cash flow guidance. However, we are not raising our rating to a buy due to 1) weakening satellite and media fundamentals; 2) what we consider unrealistic RCI (Rogers Communications) take-out speculation; 3) lack of wireless exposure; 4) a high dividend payout; and 5) valuation."

Shaw reported it lost 12,075 basic cable subscribers in the quarter, but that was only about half of the losses many analysts were expecting. The company lost more satellite users than the Street was expecting, however, and media revenues remained weak.

"We were impressed with the underlying trends in the company's Q3/14 results," said TD's Mr. Valentini, who slightly raised his EBITDA, earnings per share and free cash flow forecasts. "Our buy rating takes into account that most of Shaw's cable/telecom peers are also trading at somewhat rich valuation multiples, and on a relative basis we continue to like the long-term risk/reward dynamic for SJR.B shares."

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Analysts are cheering loudly over Perpetual Energy Inc.'s deal announced this week to form a joint venture that will significantly accelerate its production and funds flow growth from its East Edson property.

TD Securities upgraded Perpetual Energy to "buy" from "hold" and hiked its price target to $3 (Canadian) from $2. RBC Dominion Securities also raised its rating to "outperform" from "sector perform" and increased its target to $2.50 (Canadian) from $2. CIBC World Markets upgraded Perpetual to "sector outperformer" from "sector performer" and raised its price target to $2.35 (Canadian) from $2.

"The capital injection from the joint venture positions Perpetual to get its East Edson Wilrich development off the ground and reach a self funded status by late 2015," noted RBC analyst Shailender Randhawa. "We believe Perpetual's near-term self funded per share growth profile is very compelling and should translate into relative multiple expansion."

"Our revised rating and price target reflects our belief that Perpetual can execute its near-term growth plans, address its upcoming debt maturities, and looks for new portfolio opportunities," the RBC analyst added.

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The closure of 50 stores announced by Empire Co. Ltd. on Thursday not only improves the earnings outlook for Sobeys, but "theoretically" eases the pressure on the whole Canadian grocery market, said CIBC World Markets analyst Perry Caicco, who upgraded the stock to "sector outperformer" from "sector performer."

Mr. Caicco called the store closure announcement "refreshing" and noted it came alongside stronger-than-expected same-store sales growth at the company and $302-million in EBITDA that far exceeded his forecasts.

"Rapid square footage growth has crimped the Canadian market, and Sobeys has been the first to acknowledge that," he said in a research note. "2015 looks like it could be a better year for the industry, and Sobeys closure announcements make that more probable."

Mr. Caicco's new modeling on the company assumes that Sobeys does not allow the closed stores to be re-purposed as competitive grocery stores, such as niche-oriented ethnic grocers. He believes such a move would be a mistake.

"The mainstream grocers uniformly disallow dark stores to be re-leased to conventional competitors. But one of the biggest mistakes that the Canadian grocers have made in recent years has been allowing dark stores to go to ethnic and alternative grocers. The rapid rise of ethnic grocers in Canada (and especially in the GTA) has been enabled by established grocers assuming that they were not competitors and happily leasing them stores. This naïve approach continues to this day," he said.

Mr. Caicco raised his price target to $82 (Canadian) from $80.

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In other analyst actions:

Citibank hiked its price target on Canadian National Railway to $66 (U.S.) from $60 and maintained a "neutral" rating.

TD Securities downgraded Encana to "buy" from "action list list" - its highest rating - but raised its price target slightly to $31 (U.S.) from $30.

CIBC World Markets upgraded DragonWave to "sector outperformer" from "sector underperformer" and raised its price target to $3 (Canadian) from $1.

Raymond James downgraded Fortuna Silver Mines to "outperform" from "strong buy" but raised its price target to $6.50 (Canadian) from $6.

Barclays initiated coverage on Pacific Rubiales Energy with an "overweight" rating and $26.80 (Canadian) price target. Credit Suisse downgraded Pacific Rubiales to "underperfomer" from "neutral" and hiked its price target by $1 to $17 (Canadian).

M Partners initiated coverage on Sintana Energy with a "buy" rating and 35 cents (Canadian) price target.

Deutsche Bank upgraded HB Fuller to "buy" from "hold" and ra ised its price target to $54 (U.S.) from $53.

Bernstein upgraded Intel to "market perform" from "underperform" and raised its price target to $28 (U.S.) from $22.

Goldman Sachs upgraded MarkWest Energy to its "conviction buy" list - its highest ranking - from "buy" with a price target of $78 (U.S.).

Goldman Sachs upgraded SunCoke Energy to "conviction buy" from "buy" with a price target of $27 (U.S.).

Jefferies upgraded Manitowoc to "hold' from "underperform" and raised its price target to $33 (U.S.) from $24 after an activist group disclosed a new stake.

Sterne Agee raised its price target on Nike to $90 (U.S.) from $85 and reiterated a "buy" rating.

Credit Suisse hiked its price target on Schlumberger to $137 (U.S.) from $120 and reiterated an "outperform" rating.

UBS raised its price target on Alcoa to $15 (U.S.) from $13.50 and maintained a "neutral" rating.