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The logo for the Bank of Montreal is seen at its branch Toronto, March 5, 2013.Mark Blinch/Reuters

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.

Recent "uncharacteristic" volatility in the shares of Canadian National Railway (CNR-T;CNI-N) presents an attractive investing opportunity, said Raymond James analyst Steve Hansen.

He upgraded the stock to "outperform" from "market perform," noting the stock has dropped a "surprising" 11.5 per cent in the four weeks since he downgraded his rating over concerns about strong share appreciation and traffic weakness. During the same span as that recent fall, the S&P TSX composite index has fallen only 5.8 per cent "with [CN] shares seemingly caught up in the heightened global/macro uncertainty that's been reverberating throughout global markets," he said.

"While it's been rare for CN to exhibit such volatility/underperformance in recent years, we highlight that the stock enjoyed similar (upside) volatility earlier this summer on the back of a robust second quarter print and a subsequent wave of insider/institutional buying (that ultimately prompted us to downgrade)," said Mr. Hansen. "In many respects, we view this reversion as expected."

He added that the railway company's weekly traffic data shows "marked" signs of improvement in recent weeks, with its first "definitively" positive data coming last week as its revenue ton miles (RTMs) grew 1.8 per cent year over year. He called it a "noteworthy reversal" in comparison to the 24 consecutive weeks of negative data which preceded it.

"Beneath the surface, we notably attribute this RTM strength to improved traffic in forest products, intermodal and automotive," the analyst said.

Mr. Hansen said his upgrade is further supported by an "attractive valuation" with shares trading at 15.5 times his 2016 earnings per share estimate. He said it is "attractive not only an absolute basis, in our view, but also on a relative basis versus the broader market."

He added: "We highlight that CN currently trades at a narrow (0.9 times) premium versus the S&P 500's current 14.6 times forward valuation, one of the narrowest spreads witnessed over the past five years."

Mr. Hansen maintained a target price of $85 (Canadian) for the shares "due to its best-in-class operating metrics and attractive long-term growth opportunities." The analyst consensus target price is $79.72, according to Thomson Reuters.

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The current valuation for KP Tissue Inc. (KPT-T) is currently "lofty" as it faces margin compression from increasing capacity and a weaker Canadian dollar, according to RBC Dominion Securities analyst Paul Quinn.

He downgraded his rating for the stock to "sector performer" from "outperformer."

Mr. Quinn said, given the "weaker" Canadian economy and loonie, he expects U.S. producers will abandon plans to increase their presence in the market. That will allow KP to maintain (and perhaps increase) its market share, which will partially offset the increased pulp costs (due to the strength of the U.S. dollar).

"While we continue to think that KP will likely follow P&G's lead and desheet in Canada over the next 2–3 months, we have increased concerns that it may prioritize maintaining market share and desheet to a lesser extent than competitors," said Mr. Quinn. "At the same time, peers such as Wausau have made margin improvement efforts (on the away-from-home (AfH) side), with a price increase in Canada (to partially offset the weaker loonie); however, KP has yet to follow suit. As a result, we suspect that KP's margins are at risk of compression if the company decides to focus on maintaining (or increasing) share at the expense of margin improvement."

Mr. Quinn also lowered his price target for the stock to $15 (Canadian) from $17, believing "near-term headwinds are not reflected in the current share price."  Consensus is $18.

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In the wake of the announcement that Strategic Hotel and Resorts (BEE-N) is set to be acquired by The Blackstone Group in a $6-billion deal, Canaccord Genuity analyst Ryan Meliker said he no longer sees upside in the stock.

He downgraded his rating for Strategic to "hold" from "buy" and said the deal, for $14.25 (U.S.) per share, is lower than his expectation of $15.

"Our $15 price target was based on year-end [net asset value], but our current NAV is $14, thus the Blackstone offer represents a modest premium to current net asset value," he said. "The $14.25 valuation represents 17.1 times our 2015 [earnings before interest, taxes, depreciation and amortization] estimate, 15.3 times our 2015 [estimated funds from operation] and a 5.2-per-cent implied cap rate based on our forward estimates, assuming a 6-per-cent [furniture, fixtures, and equipment] reserve. Had the process taken longer, as we had anticipated, we would have expected a slightly higher price, driven by rising cash flows, as we valued the stock at $15 on a 5.25-per-cent cap rate, but we believe the certainty of the transaction at this valuation is very attractive."

He lowered his price target to $14.25 (U.S.) from $15, expecting the stock to trade at that level on Wednesday.  The average analyst target, according to Bloomberg, is $15.25.

"As BEE launched a formal sale process, we don't expect any other bidders to materialize going forward," he said. "We would not be surprised, however, to see Blackstone flip some of the trophy hotels to a buyer like Cascade, which owns almost 10 per cent of BEE shares."

Elsewhere, Raymond James analyst William Crown downgraded Strategic to "underperform" from "outperform." Wells Fargo Securities analyst Jeffrey Donnelly lowered his rating to "market perform" from "outperform."

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A recent decline in the share price of Canfor Pulp Products Inc. (CFX-T) is "unwarranted," according to RBC Dominion Securities analyst Paul Quinn.

He upgraded his rating to "outperform" from "sector performer."

Following the release of "weak" second-quarter results in late July, Canfor shares have fallen 8.5 per cent (versus a 6.8-per-cent decline for the S&P 500). Accordingly, Mr. Quinn noted it is currently trading at only 3.9 times on an [enterprise value/earnings before interest, taxes, depreciation and amortization] basis. That is a discount to its peers at 6.1 times.

"We believe Canfor Pulp is well positioned to meet the long-term growth in Chinese demand for softwood pulp (given its low-cost mills in Western Canada) and we note that the current valuation presents an attractive buying opportunity," he said. "We expect Canfor Pulp's low-cost, efficient operations to support strong profitability. In the short term, we expect softwood pulp prices to move slightly higher, further aided by a weak [Canadian dollar]. Over the medium to long term, we believe Canfor Pulp is well positioned to benefit from growing global demand trends for softwood pulp."

He maintained a target price of $15 (Canadian). Consensus is $17.80.

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In summarizing the third-quarter 2015 results for Canadian banks, BMO Nesbitt Burns analyst Sohrab Movahedi emphasized the word "resilient."

"The results were generally better than expectations and the industry's operating [earnings per share] were up 5-per-cent year over year (highest at CIBC and BMO), and the industry delivered an operating [return on equity] of 16.2 per cent (highest at CIBC), down from 17.6 per cent last year; [return on assets] was 84 basis points (highest at Royal Bank), down from 89 bps last year," said Mr. Movahedi. "The 'Big 6' [Core Tier 1] ratio was a solid 10.2 per cent (highest at CIBC) up from 9.8 per cent last year but flat sequentially as good internal capital generation was offset by growth and the [foreign exchange] impact of a depreciating Canadian dollar."

Though he maintained his 2016 EPS estimates for the banks, with the exception of a 3-per-cent increase for Canadian Imperial Bank of Commerce due to a "more constructive outlook" for its retail and business banking segments, he did lower his target price for the stocks by approximately 6 per cent based on lower target price-to-earnings multiples in reaction to slower economic growth outlook for Canada.

"At about 10.1 times our 2016 [estimated] EPS, the Canadian bank index is currently trading at a 10-per-cent discount to its average PE multiple of 11.2 times since 2000, but in line with prior periods when the Canadian GDP growth rate has been in the 0-2-per-cent range," said Mr. Movahedi. "On a price-to-book value basis, the index is currently trading at 1.6 times, which is about 6 per cent below the average of 1.7 times it trades at in prior periods when Canadian GDP growth rate has been in the 0-2 per cent range and compares with the average of 1.5 times during the 08/09 financial crisis."

The target price changes were as followed (with unchanged stock ratings noted):

Bank of Montreal (market perform, BMO-T) to $80 from $84. Consensus: $79.31.
Bank of Nova Scotia (outperform, BNS-T) to $70 from $76. Consensus: $67.69.
Canadian Imperial Bank of Commerce (outperform, CM-T) to $106 from $108. Consensus: $101.81
National Bank of Canada (market perform , NA-T) to $50 from $55. Consensus: $49.50.
Royal Bank of Canada (market perform, RY-T) to $83 from $90. Consensus: $82.56.
Toronto Dominion Bank (outperform, TD-T) to $57 from $60. Consensus: $58.56.

He said: "Our long-term view on the banks has not changed. The banks maintain attractive yields of [approximately] 4.4 per cent and ROEs [return on equity] of [approximately] 16 per cent, offset somewhat by top-line growth concerns (in a persistently low rate environment) and below cyclical average credit costs."

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In other analyst actions:

Apartment Investment & Management Co (AIV-N) was raised to "Buy" from "Neutral" at Janney Montgomery by equity analyst Robert Stevenson. The 12-month target price is $41 (U.S.) per share. It was also raised to "hold" from "sell" at Miller Tabak + Co by equity analyst Tom Mitchell with a target price of $33.79 per share.

Canfor Pulp Products Inc (CFX-T) was raised to "outperform" from "sector perform" at RBC Capital by equity analyst Paul Quinn. The 12-month target price is $15 (Canadian) per share.

Ciena Corp (CIEN-N) was raised to "outperform" from "Sector Perform" at RBC Capital by equity analyst Mark Sue. The 12-month target price is $28 (U.S.) per share.

Canadian Solar Inc (CSIQ-Q) was rated new "Outperform" at Oppenheimer by equity analyst Colin Rusch. The 18-month target price is $43 (U.S.) per share.

Duke Realty Corp (DRE-N) was raised to "hold" from "sell" at Miller Tabak + Co by equity analyst Tom Mitchell. The target price is $17.71 (U.S.) per share.

Equity Residential (EQR-N) was raised to "hold" from "sell" at Miller Tabak + Co by equity analyst Tom Mitchell. The target price is $64.63 (U.S.) per share.

E*TRADE Financial Corp (ETFC-Q) was raised to "buy" from "hold" at Evercore ISI by equity analyst Christopher Allen. The 12-month target price is $33 (U.S.) per share.

Homeinns Hotel Group (HMIN-Q) was raised to "accumulate" from "neutral" at GuoTai JunAn by equity analyst Noah Hudson. The target price is $27.00 per share.

China Lodging Group Ltd (HTHT-Q) was raised to "buy" from "neutral" at GuoTai JunAn by equity analyst Noah Hudson. The target price is $32 (U.S.) per share.

MannKind Corp (MNKD-Q) was downgraded to "underweight" from "neutral" at Piper Jaffray by equity analyst Joshua Schimmer. The 12-month target price is $1.50 (U.S.) per share.

Polaris Industries Inc (PII-N) was downgraded to "neutral" from "buy" at Longbow Research by equity analyst David Macgregor.

Pepco Holdings Inc (POM-N) was raised to "overweight" from "sector weight" at KeyBanc by equity analyst Paul Ridzon. The 12-month target price is $25.50 (U.S.) per share.

Shaw Communications Inc (SJR.B-T) was rated new "hold" at Canaccord Genuity by equity analyst Aravinda Galappatthige. The 12-month target price is $27 (Canadian) per share.

Terex Corp (TEX-N) was downgraded to "underweight" from "neutral" at JPMorgan by equity analyst Ann Duignan. The 6-month target price is $23.00 per share.

Tetraphase Pharmaceuticals Inc (TTPH-Q) was downgraded to "neutral" from "outperform" at Robert Baird by equity analyst Brian Skorney. The 12-month target price is $10 (U.S.) per share. It was downgraded to "hold" from "buy" at Brean Capital by equity analyst Jonathan Aschoff. It was also downgraded to "hold" from "buy" at Cantor Fitzgerald by equity analyst Daniel Brims with a 12-month target price of $11 per share.

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