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A Westjet plane sits at the gate as it loads passengers at the Calgary International Airport on Sunday February 26, 2012.

Chris Bolin/The Globe and Mail

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

Citing limited upside to its current level, Beacon Securities analyst Ahmad Shaath downgraded WestJet Airlines Ltd. (WJA-T) to "hold" from "buy."

On Tuesday, the airline reported fourth-quarter 2015 fully diluted earnings per share of 47 cents, exceeding Mr. Shaath's projection of 40 cents and the consensus of 41 cents. Revenue of $1.018-billion was in line with both the analyst's estimate ($1.017-billion) and the Street ($1.021-billion).

Operationally, WestJet also met expectations and its guidance. Revenue per available seat mile (RASM) fell 4.5 per cent year over year, versus Mr. Shaath's projection of a 4.4-per-cent decline. Cost per available seat mile (CASM) declined 1.7 per cent, in line with his estimate.

"WestJet reaffirmed its guidance for positive RASM trend to start with Q1/FY17 (guidance for +1.0 per cent to 3.0 per cent), with expectations for first half fiscal 2017 RASM to be up year over year as well, which is positive," the analyst said. "However, adjusted CASM guidance (up 1.5-2.0 per cent in the first quarter fiscal 2017) and continued increase in fuel prices could represent a significant challenge to the company's bottom line."

"We see potential impediments to RASM guidance primarily from WestJet's strategy to defend its position (ie. fare discounting) as Canada's LCC [low cost carrier] from new entrants (ie. NewLeaf) and challenging transatlantic and transborder markets. Air Canada ( AC-T, Buy Rated) recently initiated new routes to Iceland, including its low-cost Rouge brand, and Norwegian is promising $69 (U.S.) one-way transatlantic flights."

Based on the results, Mr. Shaath lowered his target price for the stock to $24.50 from $26. The analyst consensus price target is $24.

"In Q4/FY16 WJA realized fuel price was up 5.3 per cent year over year, and it has averaged 8.5 per cent quarter-over-quarter increase over the past three quarters, with the trend expected to continue into Q1/FY17," he said. "While some of the fuel price increases can be passed through to customers through higher fares, this takes some time to realize and we expect WJA's profitability to face some headwind in the meantime."


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Canaccord Genuity analyst Rahul Paul downgraded his rating for Asanko Gold Inc. (AKG-T) in reaction to its update on the progress of the expansion of its Asanko Gold Mine in Ghana.

On Monday, the Vancouver-based company announced that the permitting requirements for first phase of the mine's expansion are complete, and, accordingly, mining operations at Esaase and the overland conveyor are now fully permitted.

It also announced CSA Global, an independent mining industry consultancy, is reviewing the mine's global mineral resource inventory, utilizing 4 million tons of ore mining and nine months of steady-state operations.

"Management suggested that although there may be variances on a pit-by-pit basis, the global Asanko Gold mine mineral reserve is not expected to materially change," said Mr. Paul. "However, we were anticipating an increase in reserves (approx 400,000 ounce increase), largely from the drilling programs at the satellite deposits and their incorporation into the near-term mine plan (Nkran Extension, Dynamite Hill, Adubiaso, Akwasiso). However, it appears that incorporation of the satellite deposits will likely only offset depletion and other potential reserve losses at the Nkran pit.

"As a result, we have lowered our expected reserve additions ahead of the expected reserve/resource and Expansion DFS (incorporating the Phase 2 expansion) which explains the reduction in our target price."

Based on that drop in expectations, Mr. Paul lowered his target price for Asanko stock to $5.50 from $6.00. The analyst consensus price target is $5.88, according to Thomson Reuters.

To reflect a limited implied return to that new target, his rating for the stock dropped to "hold" from "speculative buy."

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In a fourth-quarter 2016 preview for the precious metals sector, Desjardins Securities analyst Michael Parkin said his earnings estimates have decline as his gold and silver price assumptions were "modestly" higher than the quarterly average price.

"We last updated our metals price and currency assumptions for spot prices on Dec. 7, 2016 for our 2017 outlook report when gold was at $1,175 (U.S.) per ounce," said Mr. Parkin. "With this update, we are factoring in actual 4Q16 average prices and FX rates, and adjusting our price deck for current spot prices, with our gold price assumption for 2Q17 through 2018 being [approximately] 3 per cent higher at $1,215 per ounce. Our 1Q17 metals prices and currency assumptions factor in the realized prices for the quarter to date. We have also updated our operational assumptions and factored in quarterly production results where applicable, which also had an impact on our quarterly estimates. We rolled forward our corporate G&A expense estimate by one year, which impacts our NAV valuation, and we rolled our models forward by one quarter. As we had previously updated our assumptions with less than one month remaining in 4Q, the actual realized average gold price was just 0.5 per cent below our estimate while our 4Q Canadian dollar and Mexican peso assumptions were just 0.3 per cent and 0.2 per cent stronger, respectively, than the actual quarterly average; hence, our 4Q financial estimates did not change materially with this update based on our price deck changes."

In the report, Mr. Parkin made several changes to target prices for stocks in his coverage universe. Those were:

- Agnico Eagle Mines Ltd. (AEM-T, buy) to $76 from $75. Consensus is $64.08.

- Argonaut Gold Inc. (AR-T, buy) to $3.50 from $3.30. Consensus: $3.78.

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- Mandalay Resources Corp. (MND-T, buy) to $1.30 from $1.20. Consensus: $1.17.

- New Gold Inc. (NGD-T, hold) to $4.50 from $5. Consensus: $5.40.

- Richmont Mines Inc. (RIC-T, buy) to $14 from $14.25. Consensus: $14.06.

- Stornoway Diamond Corp. (SWY-T, buy) to $1.30 from $1.40. Consensus: $1.34.

- Tahoe Resources Inc. (THO-T, buy) to $16.75 from $18. Consensus: $18.17.

Mr. Parkin also emphasized the potential for near-term market uncertainty due to new U.S. President Donald Trump.

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"Seasonality says it's time to sell in March, but Trump is on the mind of investors," he said. "Our gold seasonality analysis shows February as an excellent time to hold gold, whereas March does not indicate that based on seasonal trends; hence, this month could be considered a good time to lighten up on the gold trade. However, in our opinion, it is worth noting that the metal tends to perform well in April and also that seasonal patterns could be impacted by the new president in the U.S., his decisions in office as well as the near-term uncertainty that Trump and his Twitter account appear to be bringing. We have noticed that many investors we have met with or talked to recently are bringing up Trump as a risk factor in connection with investing in 2017, and thus gold demand may prove to deviate from seasonal trends this year. Another key difference from past years is the impact that the Indian government's restriction on currency notes has had on the gold trade. Indian demand has historically represented [approximately] 25 per cent of global demand but has proven soft over the past year; metals experts, such as GFMS, are calling for continued weakness from India through 2017.

"February is one of the best months to own gold as it has historically offered investors a 1.6-per-cent average return and a 65-per-cent chance of a positive return. However, driving this seasonal outperformance is the Chinese New Year, which usually falls in early February but occurred on Jan. 28 this year. Due to its early occurrence, we believe that the seasonal trend could turn weaker sooner than in past years. March tends to be a weak month to hold gold, as it has historically shown an average return of negative 0.8 per cent and has generated a positive return just 29 per cent of the time since 2000."


RBC Dominion Securities analyst Sam Crittenden said B2Gold Corp. (BTO-T) "remains a preferred name" ahead of "significant" production growth in 2018 as its Fekola project in Mali comes online.

"While the valuation appears to be in line with peers, we believe the company can continue to create value by completing the Fekola construction and through exploration around the operations," said Mr. Crittenden.

On Monday, the Vancouver-based company released fourth quarter and full-year 2016 gold production and revenue as well as production and cash cost guidance for 2017.

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It also reported Fekola is ahead of schedule with first production targeted for October.

"The Fekola project provides BTO with significant near-term growth production in a period where meaningful new mine production is relatively scarce due to lack of capital investment over the past few years," he said. "We estimate Fekola to bring B2's gold production to more than 900,000 ounces by 2018 from 550,000 ounces in 2016."

He added: "Management provided a first look at the potential parameters around the Anaconda deposit located near Fekola. The company believes Anaconda could add 80– 100,000 ounces annually at low costs due to the shared infrastructure with Fekola. B2 also continues to drill the Toega satellite deposit near the Kiaka project in Burkina Faso, which could improve Kiaka due to higher grades or become a standalone operation. Neither of these two projects is currently included in our NAV [net asset value] estimate."

With an "outperform" rating for the stock, Mr. Crittenden raised his target to $5 from $4.50. Consensus is $5.04.

Elsewhere, Canaccord Genuity analyst Rahul Paul maintained a $5 target and "buy" rating for the stock, which remains a focus list pick for the firm.

"B2Gold currently trades at 0.98 times [price to net asset value], marking a 29-per-cent premium to the large cap producer average," said Mr. Paul. "We believe that the premium is justified considering the combination of a strong team, attractive production and cash flow growth, leverage to higher gold prices, exploration upside potential and excellent operating momentum."

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Toromont Industries Ltd. (TIH-T) continues to "execute relatively well in a difficult market," said Raymond James analyst Ben Cherniavsky.

He added a "strong" balance sheet "offers investors both downside protection and 'option value.'"

On Monday, the Concord, Ont.-based company reported fourth-quarter 2016 EPS of 58 cents, a cent ahead of the analyst's projection (as well as its result of a year ago) and a penny below the consensus projection. Consolidated revenues rose 2 per cent year over year, topping Mr. Cherniavksy's expectation by $25-million.

"A shift towards higher product support revenues as well as improved equipment margins contributed to the Equipment Group's gross margins rising 150 basis points year over year," he said. "For CIMCO, however, gross margins decreased 90 basis points year over year on lower package margins and an unfavourable mix, offset by improved product support margins. SG&A came in 100 basis points and $8-million ahead of our forecast with about half of the increase related to mark-to-market DSU adjustments (up $1.8-million), compensation costs (up $0.9-million) and bad debt expenses (up $0.9-million).

"Taken together, EBIT $63-million was $3-million higher than our forecast and up 2 per cent year over year. Once again CIMCO had a meaningful impact on the company's bottom line, generating 73 per cent of the company's incremental 4Q16 operating profit. For the year as a whole, CIMCO generated nearly half of Toromont's incremental operating profit even though it only represents about 15 per cent of the company's total revenue."

Mr. Cherniavsky said the near-term outlook for its Equipment Group segment looks "uncertain," citing "the headwinds that continue to plague the broader Machinery industry–namely, challenging mining markets, f/x pressure, and excessive industry inventories."

"Longer term, infrastructure spending remains a bright spot although visibility into government spending remains unclear," he said. "The outlook for CIMCO remains positive and a meaningful growth opportunity for Toromont's overall business as we outlined in our comprehensive report from earlier this year. Finally, net-debt-to-cap of negative 4 per cent remains very low providing the company with considerable balance sheet flexibility, which we think could be deployed in either (or both!) operating segments."

With a "market perform" rating, Mr. Cherniavksy's target rose to $43 from $40, believing the shares remain "efficiently priced," trading at almost 20 times estimated 2017 earnings per share. Consensus is $41.88.


A recent sell-off in Sysco Corp. (SYY-N) creates an investing opportunity in a blue-chip consumer name, according to Credit Suisse analyst Edward Kelly.

He raised his rating for the stock to "outperform" from "neutral."

"SYY's stock is well off its high, despite generally strong earnings performances and an impressive increase in the company's 2018 earnings outlook," said Mr. Kelly. "We see the sell-off as an opportunity to own a blue-chip company in an attractive industry, with solid underlying operating momentum, and insulation from many of the structural issues plaguing the consumer sector today. Weak industry volume growth is the big push back, but the headwind seems overstated. With the stock now trading at about 17.5x our new fiscal 2018 estimate, the valuation is more appealing than it's been in some time."

On Monday, the Houston-based company adjusted second-quarter adjusted earnings per share of 58 cents (U.S.), topping the consensus projection of 54 cents. Sales of $13.5-billion met the Street's expectation and rose from $12.2-billion in the previous year.

Mr. Kelly said the market "seems to be mispricing" the quarterly outlook.

"SYY beat consensus and substantially raised its outlook," he said. "The company now expects 2015-2018 EBIT growth (excluding the Brakes deal) to be $600-650-million versus its prior guidance of $500-million. The market seems focused on flat Q2 case growth, but we note that high margin independent growth was still good and part of the issue was self-imposed as SYY walked away from low profit chain business. Management's comment about tough Q3 comparisons is also weighing on the stock, but we believe the guidance raise suggests the company remains positive on its fundamental outlook."

Mr. Kelly raised his EPS estimates for fiscal 2017, 2018 and 2019 to $2.50, $2.85 and $3.25, respectively, from $2.44, $2.71 and $3.

He raised his target price to $59 from $55. The analyst average is $55.07, according to Bloomberg.

Elsewhere, the stock was raised to "overweight" from "neutral" at JPMorgan by analyst John Ivankoe with a target of $57 (U.S.) per share from $55.50.


Citi analyst Robyn Karnauskas said the new Biogen Inc. (BIIB-Q) "looks fit and growing."

"Biogen in 2017 is emerging as a cleaner story relative to its own past as well as biotech sector in general," said Ms. Karnauskas. "This transformation has happened due to 1) spin-off of hemophilia business which was set to face competitive pressure in near term, 2) settlement with forward pharma on Tecfidera related IP issue removing overhang and 3) earlier than expected launch of Spinraza which reduces competitive pressure and fills the pipeline gap before Alzheimer's data become available (late 2019/early 2020).

"We continue to see pressure on the MS market due to slowing U.S. volume growth coupled with competitive pressure potentially resulting in pricing pressure on the space in general. We also see some new-flow in coming months on 1) IP front, 2) SMA competition and 3) Tysabri Competition from Ocrelizumab and 4) Incremental pressure from new oral pill in the MS market. However, we also acknowledge that investors who could look past the near term pressure could find the story attractive in the long run as this new Biogen has continuous growth and pipeline optionality in the form of Alzheimer's program."

Ms. Karnauskas raised her rating for the stock to "buy" from "neutral" with the expectation of "steady" growth over the next 4-5 years "despite modelling conservative MS numbers and accounting for SMA competition."

"We see this growth rate as healthy because while it is not industry leading, it is consistent, volume driven (in our model) and provides a nice bridge before the Alzheimer's program starts kicking in," she said. "We expect to see phase 3 data from Aducanumab in late 2019/early 2020 and double digit EPS growth till that point could provide a nice bridge."

The analyst raised her target to $305 (U.S.) from $280.94. Consensus is $319.98.


In other analyst actions:

Mosaic Capital Corp.(M-T) was rated new "buy" at Cormark Securities by analyst Gavin Fairweather with a target of $12. The analyst average target price is $11.58, according to Bloomberg.

Newalta Corp. (NAL-T) was raised to "outperform" from "sector perform" by Alta Corp Capital analyst Mark Westby, who raised his target to $3 from $2.50. The average is $2.88.

Parex Resources Inc. (PXT-T) was raised to "focus stock" from "sector outperform" by Scotia analyst Gavin Wylie. His target rose to $23 from $19, while the average is $21.17.

Caterpillar Inc. (CAT-N) was raised to "overweight" from "equal-weight" at Barclays by analyst Robert Wertheimer. He raised his target to $110 (U.S.) from $100. The average is $98.09.

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