Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
Raymond James analyst Steve Hansen upgraded CanWel Building Materials Group Ltd. to "outperform" from "market perform" after strong second-quarter earnings raised his confidence level that CanWel's acquisition strategy is paying off.
He raised his price target to $6.50 (Canadian) from $5.50.
CanWel, a distributor of lumber and building materials in Canada, reported EBITDA of $12.6-million in the quarter, easily beating the consensus forecast of $9.2-million.
The results "offer a strong proof point, in our view, that the firm's recent lumber treatment acquisitions and internal focus on augmenting its allied products capabilities are paying off," Mr. Hansen said in a research note.
He noted the company's gross margins rose by an impressive 190 basis points in the quarter to 12.2 per cent, the highest since 2009, thanks mostly to the impact of higher margin lumber treatment acquisitions.
"We believe this clear and definitive improvement is an additional proof point that the company's lumber treatment tuck-in strategy is bearing fruit and likely foreshadows additional similar transactions in the future," he said.
The analyst consensus price target over the next year is $5.69, according to Thomson Reuters data.
Several analysts raised their price targets on Apple Inc. today after the tech giant reported better-than-expected earnings late Tuesday - even though revenues slightly disappointed the Street.
RBC Dominion Securities raised its price target on Apple to $110 (U.S.) and maintained an "outperform" rating; Macquarie raised its price target to $102 and reiterated a "outperform" rating; Nomura hiked its target to $95 with a "neutral" rating; Cowen hiked its target to $106 with an "outperform" rating; and BMO Nesbitt Burns moved up its target up to $106 from $98 while maintaining an "outperform" rating.
BMO analyst Keith Bachman raised his EPS estimates for fiscal year 2015, to $7.34 from $7.01, in anticipation of higher iPhone unit sales. "We see the following catalysts: 1) launch of larger screen iPhones, which we think will be well received in all markets, particularly China; 2) launch of a new iWatch; 3) more broadly, we think Apple can leverage its brand and customer base for new products and services; 4) rich cash flow to continue with aggressive buybacks; and 5) better performance in gross margins than guided in the September quarter, helped in the longer term by the ramp-up of the 5.5 inch iPhone," said Mr. Bachman.
Apple's gross margin rose to 39.4 per cent in the third quarter from 36.9 per cent a year earlier, and the company forecast margins of 37-38 per cent for the current quarter.
"With (gross margins) stabilizing (year-on-year) and core demand trends solid, we think investors will want to own Apple stock (going) into bigger-screen iPhone 6 and ecosystem-expanding iWatch/iBand launches," commented Evercore Group analysts.
No upgrades of Apple's ratings have been spotted yet today, but the Street is overwhelmingly upbeat on the company. Of the 53 analysts covering the stock, 43 have a "buy" or a higher rating, 9 have a "hold" and just one has a "sell" rating, according to StarMine data.
The average price target on Apple is now $105.60, according to Bloomberg data, up about $5 from prior to the earnings release.
Credit Suisse has raised its price targets on three Canadian miners, becoming the latest research firm to bolster its outlook on base metal stocks as the sector continues to show signs of recovery.
HudBay Minerals Inc. saw its price target rise to $12 (Canadian) from $11, with Credit Suisse maintaining a "neutral" rating. The bank raised its target on First Quantum Minerals Ltd. to $28.50 from $26 while maintaining an "outperform" rating. Its price target on Lundin Mining Corp. went to $7 (Canadian) from $6.75 as it reiterated an "outperform" rating.
All three of those stocks are Credit Suisse's top picks in the diversified mining sector.
"We continue to like Lundin for its conservative balance sheet and disciplined approach to capital management relative to peers," Credit Suisse analysts said in a note. "We like First Quantum Minerals as a play on the long-term upside potential in copper prices on the back of its ambitious growth plan of expansions, new project development and its strong track record as a mine builder and operator. ... Finally, we recommend HudBay for its near-term Constancia catalysts. The construction of the Tintaya-Constancia power line is expected to be completed in July, which will allow for commissioning activities to begin at the mine.
CIBC World Markets analyst Paul Holden is looking for another quarter of solid gains from Fairfax Financial Holdings Ltd.
"Bonds should be the key driver of investment performance as yields on 10-year U.S. Treasuries decreased by about 18 basis points quarter/quarter," said Mr. Holden. "We estimate small gains on the equity portfolio, net of hedging. We assume that the mark-to-market gains on the bond portfolio reverse in future quarters as yields trend up."
Fairfax faces headwinds in the form of soft pricing in property reinsurance markets, as June and July renewals are seeing declines of 5- to 20-per cent, he says.
"Fairfax is currently trading at 1.23x book value on our Q2 estimate, above the historical average of 1.05x and comps at 1.09x. We believe a lower multiple is warranted given soft reinsurance pricing, flat pricing in commercial lines and a defensive investment portfolio."
Mr. Holden maintained his "sector underperformer" rating and $400 (Canadian) price target.
The turnaround plan for McDonald's Corp. needs more work, says UBS analyst Keith Siegner.
After poor second-quarter results and a disappointing July for global sales, McDonald's management presented a multi-year plan to turn things around, noted Mr. Siegner. It hasn't worked out.
"Unfortunately, it sounds like the plan remains the plan," he says. "With details light against recent sales deterioration, the market may refuse to give MCD much if any benefit of the doubt. We continue to believe that regardless of strengthening the foundation, more impactful effort needs to be made to bridge the gap."
On the upside, he ultimately believes patience will yield meaningfully improved results as the company will be positioned to capitalize on "sizable growth opportunities" such as menu customization, personalization, and digital engagement.
Mr. Siegner maintains his "buy" rating and cut his target price to $115 (U.S.) from $120.
In other analyst actions:
TD Securities upgraded Sprott Inc. to "buy" from "hold" with an unchanged price target of $4 (Canadian).
Raymond James downgraded Norbord to "market perform" from "outperform" and cut its price target to $26.25 (Canadian) from $32.
Deutsche Bank initiated coverage on Valeant Pharmaceuticals with a "hold" rating and $133 (U.S.) price target.
Haywood Securities downgraded Luna Gold Corp. to "sell" from "buy" and cut its price target by 80 cents (Canadina) to $1.05.
Merrill Lynch upgraded Microsoft to "neutral" from "underperform" and raised its price target to $47 (U.S.) from $35. There were some other price target hikes as well on the Street; Oppenheimer raised its target to $50, Cowen's target went up to $45, and FBR raised its target to $51.