Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
Bombardier Inc. stands to gain more from a weaker Canadian dollar than any other company among its peers, says Desjardins Securities.
"We calculate that the drop in the Canadian dollar from par to $0.85 (U.S.) could represent about $435-million (U.S.) of cost savings for Bombardier Aerospace," said analyst Benoit Poirier. "We highlight that the C Series business plan was made with an exchange rate of US$1/C$1 back in 2008; hence, assuming a US$0.84/C$1 exchange rate will provide a huge benefit not only to the C Series program but for the entire aerospace segment."
He notes that this forecast for margin growth is conservative relative to previous instances in which the exchange rate sank to this level.
Bombardier's share price has had a very strong positive correlation with its Aerospace EBIT margin over the past decade, according to the analyst.
Over the next two to three years, the cumulative effect of the recent decline in the Canadian dollar could boost earnings per share by more than $3, he says.
Mr. Poirier maintained his "buy" rating and $6.25 (Canadian) price target on the stock.
Shaw Communications Inc. enjoys a number of tailwinds "but valuation is demanding," according to analysts at Canaccord Genuity.
Price increases and a decline in capital expenditures should boost the telecommunications company's free cash flow this year, says analyst Dvai Ghose, but "the market may be underestimating declining demand for traditional TV services and TV regulatory risk."
Shaw releases its quarterly results on Wednesday morning and is also scheduled to hold its annual general meeting of shareholders in Calgary on that date. The analyst's estimates for subscriber figures in its cable, broadband, and telephony segments are all well below the consensus calls.
Though Mr. Ghose raised his target multiple for yield-oriented stocks to reflect a shift towards them and away from resource names, he still sees little upside for the share price.
The analyst maintained his "hold" rating on the stock and upped his price target to $29 (Canadian) from $27.
Mullen Group Ltd.'s recent acquisition of privately-held Gardewine Group Limited Partnership will fail to fully offset the impact of declining activity in the Canadian oil patch, according to TD Securities.
The oilfield services and trucking company purchased the transportation carrier for $172-million in cash, as management has warned that its oilfield services segment is set to see revenues decline substantially this year.
"We view the acquisition of Gardewine positively as it expands Mullen's LTL trucking footprint in central Canada, diversifying its revenue streams away from western Canada, more specifically the oil & gas space," said analyst Scott Treadwell. "We continue to believe that the company will weather the downturn in commodity prices better than most as total revenue becomes less levered to oil & gas activity."
Mr. Treadwell believes the firm's 6.1 per cent dividend yield is sustainable.
The analyst resumed coverage on the stock by keeping his "hold" rating and lowering his target price to $23 (Canadian) from $25.
Canexus Corp. should cut its dividend to provide some balance sheet flexibility, says CIBC.
Analyst Jacob Bout believes a reduction in the chemical manufacturing and handling company's payout would be a prudent move for the company, as the current yield is north of 14 per cent and costs the company more than $70-million per year. He expects the company will need to draw another $100-million from its existing credit facility this year in order to finance capital expenditures and a convertible debenture that comes due at the end of 2015.
The firm's North American Terminal Operations, which it has expressed interest in selling, have likely suffered a significant decline in value as the price of crude oil has tumbled, according to the analyst.
"We continue to maintain that Canexus has great assets, but [is] mismanaged," said Mr. Bout.
The analyst maintained his "sector outperformer" rating but reduced his price target to $4.50 (Canadian) from $5.25.
Better-than-expected production results helped Mandalay Resources Corp. remain a 'top pick' for Desjardins Desjardins analyst Michael Parkin.
Mandalay announced on Monday its fourth-quarter and 2014 annual production results of 52,601 GEO (saleable ounces of gold equivalent) and 154,810 GEO respectively, which is at the upper end of guidance that ranged from 141,000–156,000 GEO.
"For 4Q, we were looking for GEO production of 48,065, and we were impressed with the 9 per cent beat to our estimate (reliable consensus estimates were not available)," says Mr. Parkin.
In addition to the 'top pick rating, the analyst maintains his $1.30 Canadian price target. The analyst consensus price target is $1.17, according to Thomson Reuters.
In other analyst actions
Athabasca Oil was downgraded to "market perform" from "outperform" at FirstEnergy Capital. The 12-month target price is $3 (Canadian).
BMO Nesbitt Burns upgraded Agnico Eagle Mines to "outperform" from "market perform" and maintained a price target of $38 (U.S.).
BMO Nesbitt Burns downgraded Oceanagold to "underperform" from "market perform" and cut its price target to $2.50 (Canadian) from $2.75.
Crew Energy was raised to "outperform" from "market perform" at FirstEnergy Capital. The 12-month target price is $7.75 (Canadian).
Bonterra Energy was downgraded to "market perform" from "outperform" at FirstEnergy Capital. The 12-month target price is $47 (Canadian).
Gear Energy was downgraded to "market perform" from "outperform" at FirstEnergy Capital. The 12- month target price is $2.50 (Canadian).
Raging River Exploration was raised to "top pick" from "outperform" at FirstEnergy Capital. The 12-month target price is $9 (Canadian).
Sterling Resources was downgraded to "market perform" from "speculative buy" at FirstEnergy Capital. The 12-month target price is 35 cents per share.
Valeura Energy was raised to "outperform" from "market perform" at FirstEnergy Capital. The 12-month target price is 90 cents (Canadian).
Nomura Securities upgraded Alcoa to "buy" from "neutral" and raised its price target to $23 (U.S.) from $15.
DR Horton was raised to "buy" from "hold" at KeyBanc. The 12-month target price is $30 (U.S.).
AOL was downgraded to "market perform" from "outperform" at Cowen. The 12-month target price is $48 (U.S.).
Joy Global was downgraded to "sector perform" from "outperform" at RBC. The 12-month target price is $52 (U.S.).
Laboratory Corp of America Holdings was raised to "outperform" from "neutral." The 12-month target price is $137 (U.S.).
With files from Bloomberg