Tuesday’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 often during the trading day so check back for new details.

Though first-quarter results were better than expected, the outlook remains rocky for Ensign Energy Services Inc. (ESI-T), said BMO Nesbitt Burns analyst Michael Mazar.

The company reported adjusted earnings per share of 18 cents, beating the consensus of 10 cents. Its revenue of $449-million was in line with expectations, though down 28 per cent from the same quarter in 2014. Earnings before interest, taxes, depreciation and amortization of $112-million beat consensus estimates by 17 per cent, due largely to lower-than-forecast expenses.

"Ensign's relatively strong Q1 performance in the context of a weak activity environment highlights the favourable, highly variable cost structure of contract drillers and Ensign in particular," said Mr. Mazar. "Strong top-line in the U.S. and International segments offset weaker revenues in Canada, partially as a result of the strengthening of the U.S. dollar."

However, Ensign saw a reduction in working days in Canada and the United States of 37 per cent quarter over quarter and 42 per cent year over year.

Mr. Mazar said: "Management's outlook on the sector remains bleak, with the company highlighting the reality that there has been no material improvement in supply/demand fundamentals over the past several months along with continued downward pressure on day rates and rig counts. International is a relative bright spot, but we expect some revenue degradation for the rest of 2015."

He added: "While we generally prefer [Precision Drilling] over Ensign due to its more modern fleet and attractive geographic footprint, Ensign's superior cost structure continues to be a company hallmark, as evidenced by the strong Q1 results. That said, we continue to believe producers will prefer the more modern, highly efficient, high-spec offering of Precision and Trinidad Drilling when activity levels recover."

After adjusting his 2015 EPS forecast to 14 cents from a loss of 5 cents in the wake of the first-quarter results, the analyst raised his target price to $11.50 from $9.50 (Canadian). He maintained his "market perform" rating.

Elsewhere, Raymond James upgraded Ensign Energy Services to "market perform" from "underperform" and raised its price target to $10.25 (Canadian) from $8.25.

The analyst consensus price is $10.50, according to Thomson Reuters.

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Expecting improved U.S. housing data in the coming months, Raymond James analyst Daryl Swetlishoff upgraded Norbord (NBD-T)  to "outperform" from "market perform."

Norbord reported first-quarter earnings below interest, taxes, depreciation and amortization of $10-million, beating consensus estimates of $6-million, but below the $15-million fourth quarter of 2014. Depressed oriented strand board (OSB) prices, down 11 per cent quarter over quarter, were partially due to slowing housing activity. Accordingly, Norbord dropped production at several mills, reducing shipments by 8 per cent quarter over quarter.

Mr. Swetlishoff's 2015 OSB forecast assumes a 15-per-cent increase in housing starts. He expects to see evidence in that direction when the April housing starts survey is released on May 19. He also noted that that rise in activity will also have an impact on the company's quarterly dividend of 25 cents.

"We forecast higher U.S. housing starts and tighter OSB markets which support the dividend payout in our model," said Mr. Swetlishoff. "However, we believe it bears mentioning that earnings at current cycle low OSB pricing are not sufficient to support the existing $1/share payout. At any rate, even at current depressed pricing, in our view, Norbord maintains sufficient financial flexibility to continue to fund the dividend over our 12-month forecast horizon"

The analyst also raised his price target  to $30 from $26 (Canadian) . The consensus is $25.18.

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Though MacDonald, Dettwiler and Associates Ltd. (MDA-T) will likely encounter a difficult environment in its commercial segment in the near term, CIBC World Markets analyst Stephanie Price thinks it has "multiple opportunities to build its business."

After the bell on Monday, the company reported first-quarter revenue of $534-million, below consensus estimates of $554-million, and adjusted earnings per share of $1.53, above the $1.50 consensus.

"With 25-26 industry awards expected in 2015, we believe the company has the ability to meet its typical 25 per cent to 30 per cent market share, but it is off to a slow start," said Ms. Price.

She raised her target price to $98 from $96 (Canadian). The analyst consensus is $103.11 (Canadian).

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Canaccord Genuity initiated coverage of Vermilion Energy Inc. (VET-T) by calling the stock its top pick among Canadian oil and gas exploration and production companies.

Analyst Dennis Fong rated Vermilion "buy" and said it provides a "compelling method for investors to gain exposure to oil and gas," noting the management's track record of growth; its diverse portfolio provides exposure to global pricing; long-term growth visibility; "steadfast" capital prudence and a strong balance sheet; and a significant free cash flow from its Corrib offshore natural gas project in Ireland.

Mr. Fong set a price target of $70 (Canadian). The analyst consensus price is $62.43.

"We believe the current premium reflects the robust free cash flow generation profile, its clean balance sheet and its ability show profitable returns despite the current commodity price environment and expect this premium to be maintained," said Mr. Fung.

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Credit Suisse analyst Jason West says the strategic update from McDonald's Corp. (MCD-N) failed to provide "game-changing news" that will move the stock forward.

Mr. West feels the stock will remain in the $95-to-$100 (U.S.) range, weighed down by a lack of near-term catalysts and weak fundamentals. However, he thinks the announcement did enough to quell pressure for change.

"MCD's turnaround plan feels more like incremental steps in the right direction, rather than revolutionary change in the way the company is managed," said Mr. West. "The initial plan is light on details, with limited guidance beyond 2015 on areas such as capex/buybacks. Management provided no specific expectations or timelines on when operational and management changes may begin to turn sales momentum in key markets. As such, we have not changed our core model assumptions of a gradual stabilization, then recovery, in global [same-store sales]."

He does look positively on the company's willingness to let its credit rating fall lower, which would support higher buybacks in 2015. He raised his forecast to $5.3-billion from $3.3-billion.

He raised his estimates to reflect expense cuts and buybacks. His target price is now $100, increasing from $99. The consensus is $100.65.

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In other analyst actions:

Merrill Lynch upgraded Netflix (NFLX-Q) to "buy" from "underperform" with a price target of $722 (U.S.) Shares of the company are up almost 3 per cent in the premarket as traders reacted to the upgrade.

Jefferies initiated coverage on Tesla Motors (TSLA-Q) with a "buy" rating and $350 (U.S.) price target.

NioCorp Developments Ltd. (NB-T) was rated new "buy" at HC Wainwright. The target price is $1.75 (Canadian) per share.

Cineplex Inc. (CGX-T) was downgraded to "sector perform" from "outperform" at National Bank. The 12-month target price is $50 (Canadian) per share.

American Science & Engineering Inc. (ASEI-Q) was raised to "buy" from "hold" at Benchmark. The 12-month target price is $45 (U.S.) per share.

Strategic Hotels & Resorts Inc. (BEE-N) was raised to "outperform" from "market perform" at Wells Fargo.

CEVA Inc. (CEVA-Q) was raised to "buy" from "neutral" at Chardan Capital. The 12-month target price is $21 (U.S.) per share.

Chuy's Holdings Inc. (CHUY-Q) was raised to "outperform" from "market perform" at Raymond James. The 12-month target price is $27.50 (U.S.) per share.

Conn's Inc. (CONN-Q) was raised to "outperform" from "market perform" at Oppenheimer. The 18-month target price is $39 (U.S.)per share.

Eversource Energy (ES-N) was rated new "buy" at Janney Montgomery. The 12-month target price is $56 (U.S.) per share.

Exact Sciences Corp. (EXAS-Q) was downgraded to "hold" from "buy" at Lake Street Capital Markets. The 12-month target price is $24 (U.S.) per share.

Qualys Inc. (QLYS-Q) was raised to "outperform" from "neutral" at Robert Baird. The 12-month target price is $50 (U.S.) per share.

Ring Energy Inc. (REI-A) was rated new "buy" at Wunderlich. The 12-month target price is $15 (U.S.) per share.

JM Smucker Co. (SJM-N) was downgraded to "market perform" from "outperform" at Sanford Bernstein. The 12-month target price is $125 (U.S.) per share.

Swift Transportation Co. (SWFT-N) was raised to "outperform" from "market perform" at Wells Fargo.

Olympic Steel Inc. (ZEUS-Q) was raised to "outperform" from "neutral" at Macquarie. The 12-month target price is $23 (U.S.) per share.

Hanesbrands Inc. (HBI-N) was rated new "outperform" at Cowen. The 12-month target price is $38 (U.S.) per share.

Moog Inc. (MOG.A-N; MOG.B-N) was downgraded to "market perform" from "outperform" at Cowen. The 12-month target price is $75 (U.S.) per share.

Rent-A-Center Inc. (RCII-Q) was raised to "outperform" from "market perform" at Raymond James. The 12-month target price is $34 (U.S.) per share.

Royal Gold Inc. (RGLD-Q; RGL-T) was raised to "buy" from "hold" at BB&T Capital. The 12-month target price is $85 (U.S.) per share.

Orchids Paper Products Co. (TIS-A) was rated new "outperform" at Oppenheimer. The 12-month target price is $27 (U.S.) per share.

With files from Bloomberg News