Thursday'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.

Credit Suisse analyst Kevin Choquette thinks Manulife Financial Corp. made a smart move by acquiring Standard Life Canada, but isn't budging his price target on the stock.

"We view the acquisition as positive, as it is a solid strategic fit as an in market merger and is also modestly positive financially in the medium-term, with further longer-term potential especially if Manulife integrates and operates effectively," Mr. Choquette said in a research note. "We view the purchase price as very reasonable especially given that it was a competitive bidding process."

He estimates the $4-billion purchase price was two times book value, which compares favourably to the 2.3 times book value that Great West Lifeco paid for London Insurance group in 1997.

He thinks the impact on earnings will be very modest, however, boosting earnings per share by only 3 cents - or 1.5 per cent - by 2016, based on his estimates.

He continues to rate Manulife as "outperform" with a 12-month price target of $26 (Canadian). The analyst consensus price target over the next year is $24.50, according to Thomson Reuters data.

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Steady fuel prices are boosting Alimentation Couche-Tard Inc.'s earnings and elevating the company's forecasts in the quarters ahead, CIBC World Markets analyst Perry Caicco said as he upgraded his rating on the stock.

On Wednesday, the company reported fiscal first-quarter earnings that beat analysts' expectations almost entirely as a result of higher gas margins, Mr. Caicco said.

"In fact, continually robust gas margins may be the most remarkable part of Couche-Tard's current business model," he said. "It is these strong gas margins that produce the cash flow that allows Couche-Tard to pay down debt quickly and get on with the next major acquisition."

Having established a long track record of successful acquisitions, the company is now on the hunt for its next target, Mr. Caicco said.

"The acquisitions are driven by aggressive debt paydown, which is in turn driven by strong fuel margins. Acquisitions are available in the U.S. (small), Europe (large), and Asia (massive)."

He upgraded the company's stock to "outperformer" from "sector performer" and raised his price target to $44 (Canadian) from $35.

Several other analysts also raised their targets on Couche-Tard after the earnings beat. National Bank Financial raised its target to $36 from $33; TD Securities to $41 from $37; Canaccord Genuity to $40 from $36; Desjardins Securities to $39 from $33; RBC Dominion Securities to $37 from $33; BMO Nesbitt Burns to $40 from $38; and Scotia Capital to $43 from $35.

The average price target is now $38.12, according to Bloomberg data.

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WestJet Airlines Ltd.'s regional Encore service, which was launched in June 2013, is proving to be a big contributor to the company's profitability, BMO Nesbitt Burns analyst Fadi Chamoun said.

Encore is currently servicing 20 cities, primarily in Western Canada.

"Encore has enabled WestJet to access medium and low density domestic markets, which in turn have enhanced the company's position on some of the major trunk-line routes such as Calgary-Toronto," Mr. Chamoun said. "Encore appears well-positioned to extend these benefits as it expands services towards Central and Eastern Canada where Air Canada Express is, to a large degree, the only player."

He raised his price target on the stock to $35 (Canadian) from $33 while maintaining an "outperform" rating. The analyst consensus price target over the next year is $33.69, according to Thomson Reuters data.

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RBC Dominion Securities initiated coverage on Yellow Media Ltd., advising investors to stay on the sidelines until the company shows further progress in its digital transformation.

RBC analyst Haran Posner set a $20 (Canadian) price target and "sector perform" rating.

"With new management, a significant digital foundation, and a healthier balance sheet, Yellow Media is embarking on the next phase of its digital transformation," Mr. Posner wrote in a note. "While successful implementation of the company's return-to-growth plan could produce considerable upside for investors, execution challenges are not insignificant and profitability should remain under pressure near-term. We look for further progress with management's initiatives ... before buying the shares."

There are now three analysts covering Yellow Media, with an average price target of $24, according to Bloomberg data.

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Despite recent share price weakness, D.R. Horton Inc. is a stock to own heading into 2015, according to UBS analyst David Goldberg.

Mr. Goldberg noted that in the last six weeks, shares in the U.S. homebuilder have declined 15 per cent, more than double those of its peer group. "Specifically, management's commentary about focusing on return on inventory and margins receding to more normalized levels seemed to take investors by surprise," he says. "We view these concerns as an overreaction and continue to believe that the company is well positioned heading into the next stage of the recovery."

Mr. Goldberg upgraded D.R. Horton to "buy" from "hold" and raised his target price to $26 (U.S.) from $20. The analyst consensus price target is $24.13, according to Thomson Reuters.

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M Partners this morning initiated coverage on Castle Mountain Mining Co. with a "buy" rating and one-year price target of $1.60 (Canadian), implying a rate of return of 158 per cent.

"In our view, Castle Mountain has reduced risk relative to most other development companies in North America as it is a past producer and has mining permits; consequently we believe the company's shares are likely to re-rate as the key development milestones on the horizon provide clarity on the path to production," commented M Partners analyst Derek Macpherson.

Castle Mountain is a gold exploration company with the right to acquire a 100 per cent interest in the past producing Castle Mountain mine, a potential open pit heap-leach project in San Bernardino County, California. Under previous ownership the Castle Mountain mine produced in excess of one million ounces of gold over a span of 10 years from 1992 to 2001, when operations ceased due to a low gold price environment. The company is working towards the restart of the Castle Mountain project and has completed a Preliminary Economic Assessment outlining three development scenarios.

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In other analyst actions:

National Bank Financial downgraded Transat AT to "sector perform" from "outperform" with a price target of $10.50 (Canadian).

BMO Nesbitt Burns initiated coverage on Domtar with an "outperform" rating and $42 (U.S.) price target.

Laurentian Bank initiated coverage on Inovalis Real Estate Investment Trust with a "buy" rating and $10.85 (Canadian) price target.

JPMorgan downgraded GoPro to "neutral" from "overweight" and a 15-month price target of $51 (U.S.).