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.

The balance sheet of Aecon Group Inc. (ARE-T) has been "quickly transformed" with the $232-million (U.S.) sale of its stake in Quito International Airport, said Canaccord Genuity analyst Yuri Lynk.

The net proceeds of the sale of its 45.5 per cent equity stake is almost $245-million (Canadian), or $4.37 per share - in excess of Mr. Lynk's $205-million forecast.

"After a prolonged process, we believe investors will view the Quiport sale positively given that the average sell-side estimate for Aecon's Quiport stake was [approximately] $4 [per share]," said Mr. Lynk. "We peg the sales multiple at 6.7x 2014 EBITDA and believe management surfaced good value for shareholders in what was an ambitious long-term project."

Along with the recent $35-million sale of Innovative Steam Technologies, the Quiport sale allows for "rapid" debt reduction and repayment of near-term debt maturity, the analyst said. He predicts the newly found financial flexibility will allow for it to take equity stakes in future projects and support its dividend.

The analyst maintained his "buy" rating while raising his price target to $17 (Canadian) from $16. The analyst consensus target price is $16.20, according to Thomson Reuters.

"At 5.7-times 2016 [estimated] EBITDA, we view Aecon as being attractively valued," he said. "While trading in line with the group, we note the company has sector-leading EBITDA and DPS growth in addition to one of the strongest balance sheets in the industry; all auguring for a premium multiple, in our view.."

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Believing its shares are "positioned for another leg of ascent," BMO Nesbitt Burns analyst Joanne Wuensch upgraded Edwards Lifesciences Corp. (EW-N) to "outperform" from "market perform."

"Edwards is likely to continue to rule the [Transcatheter Heart Valve] market for some time, with additional products (e.g., Sapien 3), and additional indications (e.g., Intermediate-risk), expected to increase usage and expand the patient population," said Ms. Wuensch.

She expects growth to come from the U.S. Food and Drug Administration's approval of Edwards' Sapien 3 transcatheter aortic heart valve, likely in the fourth quarter of 2015.

Though Ms. Wuensch lowered her second quarter earnings per share estimate by two cents to $1.06, she raised her 2016 EPS forecast to $4.65 from $4.51 (a 7.4-per-cent increase) and 2017 to $5.34 from $5.12 (14.9 per cent).

She raised her price target to $158 (U.S.) from $134. The analyst consensus is $149.13.

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CIBC World Markets analyst Jeremy Kaliel calls the decision by Bonterra Energy Corp. (BNE-T) to sell up to 1.2 million shares at $32 (Canadian) "prudent  given the company's slightly higher debt leverage. "

Bonterra aims to utilize the proceeds, expected to be $38.4-million, from the non-brokered private placement to fund ongoing drilling operations and pay down debt accrued in the acquisition of Cardium assets from Enerplus Corp. in February. Assuming the placement is fully subscribed, Mr. Kaliel estimates the company's new debt under the forward strip falls to 2.9 times (from 3.2) in 2015 and 2.2 times (from 2.5) in 2016.

"We believe Bonterra remains slightly levered and will look for future opportunities to reduce debt including possible further equity in conjunction with additional acquisitions, reduced spending, or even a possible upsizing of the announced private placement if demand is strong," he said. "We note that if fully subscribed the 1.2-million issuance would be [approximately] 4 per cent dilutive on a per share basis."

Mr. Kaliel maintained his "sector performer" rating but dropped his price target to $42.50 from $44 (Canadian) given the dilution from the issuance. The consensus price target is $44.35.

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Although the company lowered revenue expectations for the second quarter, Desjardins Securities analyst Maher Yaghi feels the impact on Sandvine Corp. (SVC-T) will not be a "significant detractor" to long-term growth.

In altering its revenue guidance to between $28-million and $28.5-million (U.S.), compared with a consensus view of $33.9-million, Sandvine blamed the timing of contracts that did not close during the quarter and more customer acceptance tests in its contracts, leading some revenue to be recognized later.

"We have made small adjustments to our revenue forecasts as the sale cycle has increased; however, we continue to forecast revenue growth of [approximately] 14 per cent for the 2016 fiscal year," said Mr. Yaghi. "We have also increased our valuation multiples due to comps' trading activity and recent transactions we have seen in the space."

Mr. Yaghi maintained a "buy" rating but lowered his target price by 10 cents to $4.50 (Canadian). The analyst consensus is $3.97.

"The company's past investments into market-leading products and the prospect for future growth as customers invest in virtualizing their networks position Sandvine to benefit attractively," he said. "In terms of valuation, when cash is stripped out, the company is trading at an [about] 11 times price-earnings —an attractive valuation given the company's growth attributes. Sandvine is also building up a healthy cash position that could be used for strategic [mergers and acquisitions[ or put toward its normal course issuer bid. Hence, we believe the pullback in the stock offers a good entry point."

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The growth of United Natural Foods Inc. (UNFI-Q) is being challenged by an "increasingly competitive retail environment," said Canaccord Genuity analyst Scott Van Winkle.

The natural and organic food distributor reported third-quarter GAAP earnings per share of 83 cents (U.S.), two cents lower than the consensus forecast. Without a 5-cent gain on a land transfer, Mr. Van Winkle said  the normalized EPS of 78 cents "was well short, reflective of the increasingly competitive natural and organic retail landscape and unfavorable channel mix."

The company lowered its EPS guidance to  $2.84 to $2.88 a share for the 2015 fiscal year from $2.90 to $2.99. It also dropped its revenue forecast to $8.15-billion to $8.19-billion from $8.19-billion to $8.2-billion.

"The EPS de-leverage reflects more pronounced gross margin pressure in the core distribution business, anticipating more significant channel shift away from independents along with the ongoing pressures of currency, continued supplier out-of-stocks and lower fuel surcharges," said Mr. Van Winkle.

He dropped his target price to $71 (U.S.) from $85 with a "buy" rating. Consensus is $80.94.

"UNFI is well positioned as the largest distribution of natural/organic foods and, while multi-channel, is over-indexed to the specialty retailer channels," the analyst said. "We continue to believe that a broadening opportunity due to the Tony's Fine Foods acquisition is a significant opportunity and the winning of $100 million in incremental business shipping in July illustrates the UNFI-Tony's value proposition."

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In other analyst actions:

American Airlines Group Inc. (AAL-Q) was downgraded to "Market Perform" from "Outperform" at Raymond James.

Alimentation Couche-Tard Inc. (ATD.B-T; ATD.A-T) was rated new "Outperform" at Macquarie by equity analyst Robert Summers. The 12-month target price is $53 (Canadian) per share.

American Water Works Co. Inc. (AWK-N) was raised to "Long-term Buy" from "Neutral" at Hilliard Lyons. The 12-month target price is $58 (U.S.) per share.

CRH Medical Corp. (CRH-T) was rated new "Buy" at Bloom Burton & Co. The 12-month target price is $5.50 (Canadian) per share.

Flexible Solutions International Inc. (FSI-A) was downgraded to "Sell" from "Hold" at Greenridge Global. The 12- month target price is $1.50 (U.S.) per share.

Newpark Resources Inc. (NR-N) was raised to "Overweight" from "Equal- weight" at Capital One Securities. The target price is $10 (U.S.) per share.

Akamai Technologies Inc. (AKAM-Q) was downgraded to "Neutral" from "Outperform" at Macquarie. The 12-month target price is $75 (U.S.) per share.

AMAG Pharmaceuticals Inc. (AMAG-Q) was rated new "Buy" at Guggenheim Securities. The 12-month target price is $85 (U.S.) per share.

Casey's General Stores Inc. (CASY-Q) was rated new "Outperform" at Macquarie. The 12-month target price is $100 (U.S.) per share.

Check Point Software Technologies Ltd. (CHKP-Q) was rated new "Buy" at Wunderlich. The 18-month target price is $105 (U.S.) per share.

Cinemark Holdings Inc. (CNK-N) was raised to "Buy" from "Hold" at Topeka Capital. The 12-month target price is $47 (U.S.) per share.

Costco Wholesale Corp. (COST-Q) was rated new "Neutral" at Macquarie. The 12-month target price is $136 (U.S.) per share.

Salesforce.com Inc. (CRM-N) was rated new "Buy" at Wunderlich. The 18-month target price is $85 (U.S.) per share.

CST Brands Inc. (CST-N) was rated new "Outperform" at Macquarie. The 12-month target price is $45 (U.S.) per share.

CVS Health Corp. (CVS-N) was rated new "Outperform" at Macquarie. The 12-month target price is $115 (U.S.) per share.

Dollar General Corp (DG-N) was rated new "outperform" at Macquarie by equity analyst Robert Summers. The 12-month target price is $82 (U.S.) per share. It was raised to "strong buy" from "market perform" at Raymond James by equity analyst Daniel Wewer. The 12-month target price is $90 per share.

Palo Alto Networks Inc (PANW-N) was rated new "hold" at Wunderlich by equity analyst Robert Breza. The 12-month target price is $180 (U.S.) per share.

Symantec Corp (SYMC-Q) was rated new "hold" at Wunderlich by equity analyst Robert Breza. The 18-month target price is $27 (U.S.) per share.

Sysco Corp (SYY-N) was rated new "outperform" at Macquarie by equity analyst Robert Summers. The 12-month target price is $45 (U.S.) per share.

Target Corp (TGT-N) was rated new "outperform" at Macquarie by equity analyst Robert Summers. The 12-month target price is $90 (U.S.) per share.

Vitamin Shoppe Inc (VSI-N) was rated new "neutral" at Macquarie by equity analyst Robert Summers. The 12-month target price is $40 (U.S.) per share.

Whole Foods Market Inc (WFM-Q) was rated new "neutral" at Macquarie by equity analyst Robert Summers. The 12-month target price is $44 (U.S.) per share.

Wal-Mart Stores Inc (WMT-N) was rated new "neutral" at Macquarie by equity analyst Robert Summers. The 12-month target price is $76 (U.S.) per share.