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Detour Gold procession plant facilities at Detour Lake mine.

Inside the Market's roundup of some of today's key analyst actions

Boardwalk Real Estate Investment Trust (BEI.UN-T) is no longer oversold, according to Canaccord Genuity analyst Mark Rothschild.

Noting the REIT's unit price has risen 27 per cent since it reported fourth-quarter 2015 results on Feb. 18, Mr. Rothschild downgraded his rating to "hold" from "buy."

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"While we believe that Boardwalk's 2016 guidance, which assumes a range for same-property net operating income (NOI) growth of negative 2 to plus 2 per cent, may prove overly optimistic (the high end in particular), management continues to present a bullish outlook," he said. "Though rental apartment properties in Canada are generally quite defensive, fundamentals in Alberta have softened and we expect some pressure on NOI over the next year. Our 2016 funds from operations (FFO) per unit estimate of $3.47 sits just under the midpoint of the range ($3.40-$3.60), and reflects that the benefit of refinancing debt at lower rates should offset softer fundamentals."

In his March survey of Boardwalk's asking rental rates, four of nine cities saw increases, including London, Ont., (up 2.5 per cent) and Fort McMurray (2.2 per cent), one was unchanged and four declined.

"In the REIT's most important markets of Calgary (22 per cent of NOI) and Edmonton (41 per cent), asking rental rates declined 0.4 per cent and 3.1 per cent, respectively," he said. "The decline in Edmonton was widespread as nine of the 12 properties we surveyed had month-over-month drops in asking rental rates, including five with a decline of at least 5 per cent. Year over year, asking rental rates have declined in all of Boardwalk's Western Canadian markets, including Calgary (7.2 per cent) and Edmonton (7.7 per cent)."

"Of the 59 properties included in our survey, incentives are now being offered at 49 properties, which is up from 39 properties last month. We note that incentives are being offered at every building surveyed in Alberta and Saskatchewan, which suggests to us that Boardwalk continued to work aggressively to maintain occupancy to combat any drop in demand."

Mr. Rothschild did raise his target price to $54 per unit from $47.50. The analyst average target price is $57.18, according to Thomson Reuters.

"We do not expect the bearish sentiment towards Boardwalk to return in the near term, and it is likely that the REIT's portfolio has proved to be more defensive than investors previously believed," he said.

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New product introductions are likely to mitigate 2017 fiscal year headwinds for BRP Inc. (DOO-T), said Canaccord Genuity analyst Derek Dley ahead of the release of the company's fourth-quarter 2016 results on March. 18.

Mr. Dley is forecasting revenue to be flat year over year at $1.066-billion. His earnings before interest, taxes, depreciation and amortization projection of $155-million is below the consensus of $161-million, representing a 22-per-cent decline from the same period in 2015. His earnings per share estimate of 67 cents would be a drop of 31 cents from last year, and it is 2 cents below the consensus.

"Despite our expectation of muted industry-wide all-terrain vehicles (ATV) and side-by-side vehicle (SSV) sales across North America, we expect BRP to realize [approximately]13-per-cent year-over-year sales growth in Q4/F16, as the company's well received new products lead to market share gains," he said.

He added: "We expect snowmobile sales growth to be impacted not only by an unseasonably warm winter across much of North America, but also by the impressive growth experienced in the latter half of fiscal 2015. We are forecasting a 20-per-cent decline in seasonal product sales during the quarter, driven by lower sales of snowmobiles and a challenging sales environment in Western Canada, partially offset by strength in personal water craft (PWC) sales, namely continued growth in Spark sales.

Mr. Dley said the company expected its new low-cost facility, Juarez II, to be fully ramped up by the end of January of this year. As production shifts to the Chihuahua, Mexico-based plant, he said the company will begin to record margin gains in the 2017 fiscal year of between $20-million and $25-million.

"The company commented at its most recent investor day, that capacity 'within the walls' at its current manufacturing facilities is sufficient to support growth through 2021 or sales of $6-billion per annum," the analyst said. "Therefore, in addition to the margin benefit resulting from the transfer of production to its three lower cost facilities, longer-term margins should continue to grow as BRP increases its capacity utilization as the company moves towards $6-billion in consolidated revenue.

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Maintaining his "buy" rating for the stock, he lowered his target price to $25 from $32. Consensus is $24.18.

"In our view BRP is well positioned to capture additional market share in a growing powersports market, as it introduces new products, and extends its reach into complementary product lines," said Mr. Dley.

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Precision Drilling Corp. (PD-T) is "still attractive" after its stock's recent strong run, said BMO Nesbitt Burns analyst Michael Mazar.

The stock has jumped almost 50 per cent over the last month, compared to a 17-per-cent increase for the S&P/TSX Oil and Gas Services Index.

"Decent Q4/15 results, slightly improved crude prices, and a positive update on the fleet high-grading have helped drive the shares higher as the short interest has declined," said Mr. Mazar.

"Despite the strong recent performance, we still view PD as the best-positioned contract driller in our coverage universe. The high-grading of the rig fleet over the last several years has left PD with the best rig fleet in Canada, and has been done while maintaining a reasonably strong balance sheet."

Mr. Mazar noted the stock trades at a 46-per-cent discount to replacement value. He said it is "a modest premium to the group that we believe is justified in light of the company's reasonably strong balance sheet, superior rig fleet, and attractive geographic footprint."

Maintaining an "outperform" rating, he raised his price target to $7 from $5. Consensus is $6.61.

"With modestly higher crude prices over the last two months, coupled with a rash of fundraising by E&Ps, particularly in the U.S., PD's outlook has improved slightly and the shares, in our view, now warrant a better valuation," he said.

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Following the release of its fourth-quarter 2015 results, BMO Nesbitt Burns analyst Troy MacLean said he expects investment activity from Northwest Healthcare Properties REIT (NWH.UN-T) to increase in 2016.

On March 10, the Toronto-based REIT reported fully diluted funds from operations per unit of 18 cents, below the forecast of both Mr. MacLean and the consensus of 22 cents.

"The variance to our estimate was due to lower net operating income (NOI) in Germany and Brazil from currency translation differences (about 1 cent per unit), higher expenses (1 cent), and higher finance costs," the analyst said. "The REIT's 2015 priorities were completing the combination of NorthWest and NorthWest International, refinancing higher cost debt to take advantage of low interest rates, and selling non-core Canadian assets. With those objectives largely complete we expect the REIT's attention will focus on investments (NWH has agreed to acquire a German medical office buildings (MOB) portfolio and Vital Healthcare has been active in Q4/15 and Q1/16), including potentially forming joint ventures to take advantage of its operating platforms in Brazil, Germany, and Australasia, which could provide fee income to the REIT. NWH has sold 10 of the 15 Canadian properties that it has listed for sale. We expect organic growth in Canada will benefit from NorthWest's recent disposition activity, which has focused on slower growth assets."

He maintained a "market perform" rating but raised his target price to $10 per unit from $9.25. The analyst consensus is $9.57.

"Our market perform rating balances the REIT's attractive yield, and accretive near-term investment opportunities with currency headwinds from the REIT's non-Canadian portfolio," he said. "We believe the REIT's development pipeline should allow NorthWest to increase its net asset value (NAV) over time as 'value-add' projects are completed."

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There are few near-term catalysts to drive outperformance for Cummins Inc. (CMI-N) given headwinds across several end markets and recent strong stock performance, said RBC Dominion Securities analyst Seth Weber.

Noting a 25-per-cent increase in share price from January lows, he initiated coverage of the Indiana-based global diesel engine manufacturer with a "sector perform" rating.

"Our outlook for down/flattish FY16/17 EPS underscores puts/takes across CMI's platform," said Mr. Weber. "Whereas CMI remains uniquely positioned to benefit from a march toward lower engine emissions/higher fuel efficiency globally and an eventual uptick in developing market growth, near-term softening of NAFTA heavy-duty Class 8 trucks (with lower market share) and ongoing challenges in several industrial and developing markets more than offset new/evolving product/market initiatives.

"We consider CMI among the high-quality operators in our coverage. The manufacturer/distributor of diesel and natural gas engines, components, and power gen systems has a history of technology leadership and generating attractive returns. We like CMI's move to consolidate its distribution, and it has been proactive returning cash to shareholders and more vocal about willingness to use an under-levered balance sheet for acquisitions and/or additional partnerships."

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Mr. Weber noted the company expects NAFTA HD Class 8 truck production to fall 25 per cent from its 2015 peak. He forecasts a 27-per-cent decline year over year for 2016, noting "the fleet refresh provided enough capacity against a backdrop of softening truck fundamentals (freight volumes, freight rates, etc.). He anticipates 2017 "will remain muted [with a 2-per-cent increase] as well."

"We do not believe the secular growth story has run its course and see opportunity for new growth platforms and existing markets that are depressed to rebound eventually (although little visibility to that at this time)," he said. "To that end, we believe the landscape is changing. While a majority of the on- and off-highway vehicles globally are below optimal emissions standards, much of the shortcoming is in developing markets — several of which are currently weak — and where timing and adherence to policy can be hard to handicap. Developed markets that have experienced emission mandates are now shifting focus to fuel economy."

He set a price target of $98 (U.S.) for the stock. Consensus is $94.57.

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In other analyst actions:

Barrick Gold Corp (ABX-T) was raised to "outperform" from "neutral" at Macquarie by equity analyst Michael Siperco. The 12-month target price is $21 (Canadian) per share.

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Cardinal Health Inc (CAH-N) was downgraded to "market perform" from "outperform" at Cowen by equity analyst Charles Rhyee. The target price is $90 (U.S.) per share.

3D Systems Corp (DDD-N) was downgraded to "underweight" from "neutral" at JPMorgan by equity analyst Paul Coster. The target price is $10 (U.S.) per share. It was downgraded to "hold" from "buy" at Gabelli & Co. by equity analyst Hendi Susanto.

Goldcorp Inc (G-T) was downgraded to "neutral" from "outperform" at Macquarie by equity analyst Michael Siperco. The 12-month target price is $23 (Canadian) per share.

Harris Corp (HRS-N) was downgraded to "market perform" from "outperform" at Cowen by equity analyst Gautam Khanna. The 12-month target price is $90 (U.S.) per share.

Kinross Gold Corp (K-T) was downgraded to "underperform" from "neutral" at Macquarie by equity analyst Michael Siperco. The 12-month target price is $3.50 (Canadian) per share.

McKesson Corp (MCK-N) was downgraded to "market perform" from "outperform" at Cowen by equity analyst Charles Rhyee. The target price is $173 (U.S.) per share.

Mohawk Industries Inc (MHK-N) was downgraded to "neutral" from "overweight" at JPMorgan by equity analyst Michael Rehaut. The target price is $215 (U.S.) per share.

Noble Corp plc (NE-N) was downgraded to "neutral" from "positive" at Susquehanna by equity analyst Charles Minervino. The 12-month target price is $11 (U.S.) per share.

Oasis Petroleum Inc (OAS-N) was raised to "overweight" from "neutral" at JPMorgan by equity analyst Michael Glick. The target price is $9.00 per share.

Polaris Industries Inc (PII-N) was rated new "buy" at Lake Street Capital Markets by equity analyst Christopher Krueger. The 12-month target price is $121 (U.S.) per share.

Qihoo 360 Technology Co Ltd (QIHU-N) was downgraded to "hold" from "buy" at Stifel by equity analyst George Askew.

Rent-A-Center Inc (RCII-Q) was raised to "strong buy" from "outperform" at Raymond James by equity analyst Beryl Bugatch. The 12-month target price is $21.00 per share.

Whirlpool Corp (WHR-N) was raised to "overweight" from "neutral" at JPMorgan by equity analyst Michael Rehaut. The target price is $205 (U.S.) per share.

Whiting Petroleum Corp (WLL-N) was downgraded to "neutral" from "overweight" at JPMorgan by equity analyst Michael Glick. The target price is $8 (U.S.) per share.

With files from Bloomberg News

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