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A man passes by a Couche Tard convenience store in Montreal, in this file photo.Graham Hughes/The Canadian Press

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

Alimentation Couche-Tard Inc. (ATD.B-T) is "surfing the wave" of the strengthening of the U.S. economy, said Desjardins Securities analyst Keith Howlett.

The company reported second-quarter 2016 operating earnings per share of 66 cents (U.S.), an increase of 20 per cent year over year and ahead of both Mr. Howlett's 65-cent estimate and the 64-cent consensus projection.

"Consumer spending at retailers in the U.S. has been disappointing in 2015," the analyst said. "Consumers have been frequenting new vehicle dealers, home improvement warehouses, the Apple store and not much else. It is now evident they are also driving around the country, purchasing premium-grade fuel and perhaps enjoying a Polar Pop at Circle K. CoucheTard posted same-store fuel volume growth of 7.4 per cent in the U.S., to complement 5.2-per-cent same-store merchandise growth. Fuel margins were exceptionally high at 25.66 (U.S.) cents per gallon. Merchandise gross margin increased [approximately] 40 basis points year over year to 33.1 per cent in the U.S."

He added: "Couche-Tard and most of the convenience store industry in the U.S. are posting solid same-store sales growth. While it does not appear U.S. consumers are taking their fuel savings and spending them at the shopping mall, they are at least spending some of the savings by driving more miles (somewhere) and buying a bit more inside the convenience store next to the gas pumps."

Mr. Howlett increased his 2016 EPS estimate by 3 cents to $2.21. His 2017 projection rose to $2.35 from $2.20.

"By the first quarter of the 2017 fiscal year, Couche-Tard will have cycled the decline of the Canadian and Scandinavian currencies," he said. "We continue to base our target price on 20x [fiscal 2017] EPS converted to Canadian dollars at the forward 12-month exchange rate, plus $6 (Canadian) in respect of future acquisitions."

Maintaining his "buy" rating, he raised his target price for the stock to $69 (Canadian) from $64. The analyst average is $67.73.

"We continue to view Couche-Tard as the right company in the right industry at the right time," he said.


The stock of Valspar Corporation (VAL-N) is likely to underperform in the near term compared to coating peers, said RBC Dominion Securities analyst Arun Viswanathan.

Accordingly, he downgraded his rating for the stock to "underperform" from "sector perform."

Valspar reported fourth-quarter earnings per share of $1.35 (U.S.), topping the consensus estimate of $1.31 largely on improved coatings earnings before interest and taxes.

However, Mr. Viswanathan expressed concern over the company's 2016 EPS guidance of $4.80 to $5.00, lower than his projection of $5.15 and the consensus of $5.09. The difference is based largely on currency, according to the analyst, which Valspar put at a 20-cent drag. He pointed out the guidance calls for mid-single-digit top line growth without foreign exchange, with FX impact up slightly from 2015.

Based on that guidance, he reduced his first-quarter 2016 EPS to 61 cents from 85 cents. He projects quarterly sales will be down $120-million year over year.

"We do expect better coating margins, which the company attributed to productivity enhancements in [fourth quarter 2015], to help in [first quarter 2016]," he said. "However, we expect VAL will benefit less than peers from lower raws due to in-house resin production and relatively more promotional activity in the paints segment. As a result, we reduced [first quarter 2016 EPS] by 24 cents, the majority of our 30-cent estimate revision for F2016."

His 2017 EPS estimate also dropped, going to $5.25 from $5.28. He said it is "due to the lower 2016 base (we do not model FX reversing as a benefit) and as we are increasingly cautious on 1) softness in general industrial (20 per cent of coatings segment sales), 2) increased competition in U.S. architectural paints (50 per cent of paint segment sales) due to new entrants and increased promotional activity – Behr in Home Depot, for example, 3) increased competition in non-Bisphenol A intent packaging by [PPA industries Inc.], and 4) weaker trends in Chinese construction."

Mr. Viswanathan increased his price target for the stock to $82 from $80. The analyst consensus is $85.40, according to Thomson Reuters.

"Overall, while we were pleased with the improved coatings margins in F4Q15, the lower than expected 2016 guidance and weakening trends across both segments, increase our cautious stance," he said. "Rolling forward our valuation to 2017 and applying the same 15.6x multiple results in an $82 price target, up from $80. With the stock currently trading at $85, our revised target would represent 4-per-cent downside. We believe on a relative basis versus its coatings peers, VAL should underperform. That said, management's guidance assumes aggressive FX headwinds in 2016 and, should currency reverse, this could represent upside to our estimates."


Veeva Systems Inc. (VEEV-N) should see the resumption of "solid" stock price outperformance in 2016, according to Canaccord Genuity analyst Richard Davis.

"VEEV has outperformed comparable indexes this year, but the reward has been back-end loaded with the last two months delivering basically all of the relative appreciation," said Mr. Davis. "With another solid quarter reported, it seems to us that VEEV sets up well for a 20- to 30-per-cent potential advance next year. The fact is that firms that make money are far more attractive in a market, interest rate environment and economy that we will likely see next year. Therefore, we suggest that investors consider VEEV as a worthwhile mid-cap growth investment."

On Tuesday, the U.S. tech company reported third-quarter 2016 revenue of $106.9-million (U.S.), an increase of 28 per cent year over year and $2.9-million above Mr. Davis's estimate. The company's non-GAAP earnings per share of 12 cents topped the analyst's projection by a penny. It generated $15.2-million of free cash flow in the quarter, which Mr. Davis said was "nicely ahead" of his $10.5-million estimate.

"Veeva's [fourth-quarter 2016] revenue and EPS guidance were respectively in line with and a penny ahead of consensus," he said. "More importantly, the firm offered a preliminary view of [the 2017 fiscal year], calling for revenue growth in the mid-20-per-cent range – in line with consensus, but below our estimate. We have adjusted our 2017 forecasts, taking [approximately] $12.5-million out of next year's revenue projections and trimming operating margin expansion to 80 basis points (or 27.8 per cent next year, down from our previous 28.2 per cent). We expect a return to more normalized operating cash flow growth in 2017, which in our model is roughly 30 per cent."

Maintaining his "buy" rating, Mr. Davis raised his price target to $35 from $33. The analyst average, according to Bloomberg, is $32.78.


In the wake of the announcement that Pinnacle Foods Inc. (PF-N) has agreed to buy Boulder Brands Inc. (BDBD-Q) for $682-million (U.S.), RBC Dominion Securities' David Palmer downgraded Boulder to "sector performer" from "outperformer."

"We believe 1) the acquisition represents a fair valuation and 2) [we will] see low likelihood of a higher bid from another strategic acquirer," said Mr. Palmer.

Pinnacle said the deal for Boulder, the maker of natural and organic brand foods, will be accretive to EPS beginning in 2016 and 8-per-cent accretive to EPS in 2017. It also expects to increase Boulder's earnings before interest, taxes, depreciation and amortization, which was $62-million in 2015, by 50 per cent over the next two years through synergies.

Mr. Palmer increased his target price to $11 from $10 to reflect the sale price. The analyst average is $10.25.

He added: "In August, Boulder's board of directors authorized management to explore financial and strategic alternatives for the company. The sale to Pinnacle marks the end of this process and a multi-year period of mixed performance. Over time, the company has shifted its business mix toward higher growth gluten-free, plant-based and healthy frozen foods. These businesses are largely captured in Boulder Brands' Natural segment (60 per cent of sales; 40 per cent of profit) and includes the growing Udi's (an increase of 20 per cent in the year to date in Nielsen) and Evol (up 60 per cent) brands. While there has been some modest slowing in the Natural segment, a more rapid rate of decline in the higher margin Balance segment (40 per cent of sales; 60 per cent of profit) has proven to be relatively damaging to gross margins (41.6 per cent in 2013 versus an estimate of 6.6 per cent in 2015). While a weaker spreads category is partly to blame for Smart Balance's decline, we also note that an ill-fated pullback in promotion spending in 1H14 also proved extremely damaging to market share trends (170 basis points of market share lost since 2013)."

Elsewhere, the stock was downgraded to "market perform" from "outperform" at William Blair by analyst Jon Andersen. SunTrust Robinson Humphrey analyst William Chappell moved it to "neutral" from "buy," while Lake Street Capital Markets' Christopher Krueger lowered it to "hold" from "buy."


On Nov. 30, the proposed merger of Frontline Ltd. (FRO-N) and Frontline 2012 Ltd. will be voted on.

Credit Suisse analyst Gregory Lewis believes the merger, which will make Frontline the surviving legal entity and Frontline 2012 a wholly-owned subsidiary, will be approved, solidify Frontline's industry position and "open the door" for dividends.

Noting "it's been a long, winding road" for Frontline, with Mr. Lewis maintaining an "underperform" rating for the shipping company since 2009, the analyst upgraded it to "neutral."

He raised his 2015 EPS estimate to 55 cents (U.S.) from 45 cents, saying the "table looks set" for a solid fourth quarter.

He also raised his target price to $4 from $2. Consensus is $2.63.


In other analyst actions:

Cracker Barrel Old Country Store Inc. (CBRL-Q) was downgraded to "hold" from "buy" at Argus by equity analyst John Staszak.

Chesapeake Gold Corp. (CKG-X) was downgraded to "hold" from "buy" at Mackie Research Capital by equity analyst Barry Allan. The target price is $2.25 (Canadian) per share.

Cubic Corp. (CUB-N) was raised to "buy" from "hold" at Benchmark by equity analyst Josephine Millward. The 12-month target price is $58 (U.S.) per share.

Foraco International SA (FAR-T) was raised to "buy" from "hold" at Mackie Research Capital by equity analyst Ryan Hanley. The target price is 45 cents (Canadian) per share.

Guyana Goldfields Inc. (GUY-T) was raised to "speculative buy" from "hold" at TD Securities by equity analyst Daniel Earle. The 12-month target price is $4 (Canadian) per share.

Lake Shore Gold Corp. (LSG-T) was raised to "buy" from "hold" at Mackie Research Capital by equity analyst Barry Allan. The target price is $1.50 (Canadian) per share.

Excelsior Mining Corp. (MIN-X) was raised to "speculative buy" from "hold" at Mackie Research Capital by equity analyst Barry Allan. The target price is $1.40 (Canadian) per share.

New Gold Inc. (NGD-T) was raised to "buy" from "hold" at Mackie Research Capital by equity analyst Barry Allan. The target price is $4.50 (Canadian) per share.

Palo Alto Networks Inc. (PANW-N) was raised to "buy" from "hold" at Argus by equity analyst Joseph Bonner. The target price is $227 (U.S.) per share.

SunEdison Inc. (SUNE-N) was downgraded to "sell" from "neutral" at UBS by equity analyst Julien Dumoulin-smith. The 12-month target price is $2 (U.S.) per share.

Tech Data Corp. (TECD-Q) was raised to "market perform" from "underperform" at Raymond James by equity analyst Brian Alexander.

Tiffany & Co. (TIF-N) was downgraded to "neutral" from "buy" at Monness Crespi by equity analyst Jim Chartier.

TIO Networks Corp. (TNC-X) was raised to "buy" from "speculative buy" at Cormark Securities by equity analyst Hubert Mak. The 12-month target price is $1.50 (Canadian) per share.

With files from Bloomberg News