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The Suncor Refinery in Edmonton, Alta., is seen on April 29, 2014.JASON FRANSON/The Canadian Press

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

The stage is being set for continued strength in the markets, according to Acumen Capital analyst Brian Pow, citing the fact that macro indicators suggest the world's economies "are doing well" and supported by "reasonable underlying corporate fundamentals."

"We believe this is encouraging for our small cap universe," said Mr. Pow.

"We expect corporate earnings reports in the coming months will support further upward revisions to estimates and target prices. While we expect reasonable performance in 2018, we are tempering our expectations for returns this year. As we build the list, we are focused on (1) higher quality names that performed reasonably well in 2017, and (2) showcasing a few names that have been transitioning their businesses, with expectations that 2018 performance will reflect the benefits of these initiatives. Our focus is on fundamentals, potential catalysts, and valuations."

In a research report released Wednesday, Mr. Pow released Acumen's list of 2018 top investment ideas, which consists six TSX-list stocks.

The list contains a single stock with a market cap of over $1-billion - Badger Daylighting Ltd. (BAD-T)

"BAD's 2017 stock performance of a 15-per-cent decline contradicts what we believe has been a year with significant progress," said Mr. Pow. "The CEO is now well entrenched in the business and is showing his ability to accelerate growth and drive operational improvement. Furthermore, the growth focus is in the U.S. where there is less competition and the company is well on its way to its goal of doubling its U.S. business in the next 3 – 5 years. We also believe BAD will be one of the names in our universe to benefit the most from the U.S. tax changes in 2018. The benefit of the accelerated depreciation is particularly attractive as BAD is currently sending most of its trucks to its U.S. operations. We would take advantage of the current price as we expect street estimates to be revised upward to reflect a faster pace of truck manufacturing to support its growth objectives."

Mr. Pow maintained a "buy" rating and $37 price target for Badger shares. The analyst average price target is currently $32.92, according to Bloomberg data.

Acumen's list contained the following stocks with market caps under $1-billion:

- Andrew Peller Ltd. (ADW.A-T) with a "buy" rating and target of $17.25, rising from $15.25. The average target on the Street is $16.58.

"ADW is a brand building exercise by an experienced management team," said Mr. Pow. "We believe operational improvements, strong organic growth, and the acquisition of three wineries in British Columbia will set the stage for a strong 2018."

- K-Bro Linen Inc. (KBL-T) with a "buy" rating and $48 target (unchanged). The average is $47.64.

"KBL was active in the first half of 2017 with the commissioning of its new Toronto facility that established the company as the lowest cost operator in the Toronto market and helped with some competitive healthcare contract wins," said Mr. Pow. "We believe KBL is well positioned in the Toronto market for further gains in 2018. The company also completed a transformative transaction in November 2017 with the acquisition of UK-based Fishers Topco Ltd., adding an established network of processing facilities in a geography that is ripe for consolidation. For 2018, the commissioning of the Vancouver facilities in the first half of 2018 will weigh on performance (as it did in for the Toronto plant), but we expect Canadian margins to be at new levels by early-2019."

- Park Lawn Corp. (PLC-T) with a "buy" rating and $24.75 target (unchanged). The average target is $25.15.

"PLC was active with acquisitions in 2017, including its second U.S. transaction," said Mr. Pow. "We expect the performance in 2018 will benefit from the larger scale of the business, integration initiatives, and further acquisitions. A recharged balance sheet and growing competitive advantages set the stage for above industry average growth over the next couple of years."

- People Corp. (PEO-X) with a "buy" rating and $8.75 target (unchanged), which is also the consensus target.

"PEO had a successful 2017 and carries strong momentum into 2018," said Mr. Pow. "Management has a comprehensive game plan to grow the business and increase its market share through acquisitions and organic growth. We believe that the company will have another active year for acquisitions, providing numerous catalysts for the shares."

- Pollard Banknote Ltd. (PBL-T) with a "buy" rating and target of $19.50, rising from $17.75. The average is $18.50.

"A relatively unknown stock ten months ago is now one of the most compelling names in our universe," said Mr. Pow. "PBL was our strongest performer last year, ending 2017 up 114.3 per cent since we initiated coverage December 2016. Revenue and EPS growth explained, in part, the strong move. The acquisition of Innova Gaming also brought attention to the stock. We are modelling further growth in 2018 (revenue up 15.5 per cent year over year to $325.5-million and EBITDA up 24.5 per cent year over year to $51.8-million). As we write this note, the stock continues to set new highs as investors read into the near-term outlook. We remain constructive on the name as the valuation remains reasonable in the context of historical levels and its peers."

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The frigid start to the winter will prove to be beneficial for Uni-Select Inc. (UNS-T) moving forward, said Desjardins Securities analyst Benoit Poirier.

"The winter has been very cold across North America, with temperatures well below 2016 levels at the end of December," he said. "These cold temperatures have positive implications for UNS's aftermarket business in Canada, as aging vehicles in the country will require replacement parts (battery, engine parts, etc). This trend is even more favourable for North American aftermarket companies, as the average age of vehicles in Canada and the U.S. has never been higher (10 years and 11 years, respectively). On top of that, the intense temperatures most likely increased the number of car accidents in both countries given the unfavourable road conditions during the holidays, when lots of families travel. Consequently, these unfortunate conditions will likely increase the demand for collision repair services, a positive for automotive paint distributors like UNS."

Thus far in 2018, the U.S. peers of the Boucherville, Que.-based company, which distributes automotive refinish and industrial paint and related products, have jumped in price by almost 7 per cent, while Uni-Select has slipped 7 per cent.

In reaction to that gap and his bullish outlook, Mr. Poirier upgraded his rating for its stock to "top pick" from "buy."

"U.S. aftermarket peers have outperformed the market (up 7 per cent on average versus 3 per cent and 1 per cent for the S&P 500 and the S&P/TSX, respectively) since the beginning of the year based on strong fundamentals," the analyst said. "Despite the market enthusiasm for the industry, UNS has significantly underperformed its peers during the period—an unjustified reaction, in our view, given its strong exposure to regions severely impacted by the cold temperatures, such as Montréal and Chicago through FinishMaster and its aftermarket parts division. On top of that, temperatures in the UK were also favourable for UNS's business, as the weather during Christmas was among the harshest in years. As a result, we believe UNS's stock performance since the beginning of the year does not reflect the strong fundamentals in the industry."

Mr. Poirier raised his target price for the stock to $37 from $34. The average on the Street is $32.71.

"In light of the potential total return of 41 per cent, recent share price performance, improved fundamentals and strong FCF generation with a 10-per-cent FCF [free cash flow] yield, we are upgrading our rating to Top Pick (from Buy) and believe that recent weakness provides a buying opportunity," he said.

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In an update to Credit Suisse's "Top Investment Ideas in Canada" list, analyst Jason Frew added Suncor Energy Inc. (SU-T) to his Oil & Gas exploration and production/integrated picks, replacing Imperial Oil Ltd. (IMO-T).

Each analyst identifies and ranks up to three top stock ideas with an eye toward a 6- to 12-month investment timeline.

Mr. Frew's top pick remains Encana Corp. (ECA-T). He has an "outperform" rating and $15 target for its stock. The consensus target is $14.78.

"ECA is now poised to grow production and cash flow meaningfully over the medium term with an inventory of over 10k "premium" locations concentrated in the Permian and Montney stacked plays," he said. "ECA's premium inventory is conservatively based on (1) proven horizons, (2) oil and condensate hydrocarbons; and, (3) standard spacing. Growth should accelerate mid-2017 and into 2018 as a growth budget is deployed in 2017 and as new facilities come onstream in the Montney."

His No. 2 pick of Enerplus Corp. (ERF-T) also did not change. He maintained an "outperform" rating and $17 target, which is slightly above the average of $16.75

"We continue to expect ERF to grow debt and dividend adjusted CFPS at a relatively robust rate vs. our coverage universe over the next three years while maintaining strong financial metrics," the analyst said. "Management has built a solid track record that is evidenced by superior historical debt and dividend adjusted production per share growth and recycle ratios. Recent updates from management provided clear visibility around growth plans and further down spacing tests in the Bakken which could enhance depth of inventory – one of few remaining pushback areas in our view."

Mr. Frew has an "outperform" rating and $51 target for Suncor. The average is $50.14.

"Following the completion of Fort Hills and Hebron, SU is well positioned to grow significant free cash flow over the long run, which should augment further dividend raises and share buybacks," he said. "While production growth is expected to moderate beyond Fort Hills, we believe SU's oil sands margins will expand materially over the next several years from asset synergies and new technologies that could structurally reduce the costs of its large oil sands asset base. SU's integration limits exposure to light heavy spreads which could widen with increased rail use in 2018+ and new IMO rules in 2020+. Oil sands input."

Mr. Frew said he removed Imperial Oil as he sees "better opportunities elsewhere."

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Canaccord Genuity analyst Jenny Xenos recommends investors buy shares of Frontera Energy Corp. (FEC-T), believing it is entering a "period of re-rating."

She initiated coverage of Frontera, formerly Pacific Exploration & Production Corp. and Pacific Rubiales Energy Corp., with a "buy" rating.

"The company underwent a major restructuring in 2016 and now has a lean and focused E&P portfolio, with oil representing 92 per cent of production and reserves, as well as interests in select infrastructure assets," said Ms. Xenos.

"2017 was a transition year, while new (management) and board focused on restructuring and optimization. FEC has emerged from the reorganization with a renewed strategic focus, positive cash flow, a solid balance sheet, and a strong focus on value creation. In 2018, we expect FEC to turn to growth, while spending within cash flow. Due to significant margin improvements as a result of cost cutting and strict capital discipline, completion of restructuring, and stronger oil prices, we forecast CFPS to increase from $4.38 in 2017 to $6.75 in 2018 (based on $54.42 per barrel Brent in 2017 and $62.50 per barrel 2018+)."

Calling it an "attractive investment opportunity" and noting "any number of upcoming potential catalysts could unlock significant value for the stock," Ms. Xenos set a price target of $54 for its stock, which is a loonie higher than the consensus target on the Street.

"We see share price upside in the near to mid-term from margin expansion and cash flow growth," she said.

"We see potential upside to our estimates from additional non-core asset dispositions (including the port), TOP contract renegotiations, contract extension and term improvement in Peru, and exploration success. We believe that the value these potential catalysts represent is not reflected in the current stock price and could provide significant potential upside. In addition, we think there is room for multiple expansion, as Frontera transitions from its focus on restructuring and optimization in 2017, to a story of cash flow growth and exploration upside in 2018 and onwards."

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Canaccord Genuity analyst Yuri Lynk called Neo Performance Materials Inc. (NEO-T) "a wide-moat business with solid growth prospects."

Calling its stock "attractively valued," he initiated coverage of Toronto-based chemical manufacturer with a "buy" rating.

"In our view, Neo is well positioned to benefit from the secular trends toward more stringent environmental regulation and the miniaturization and proliferation of electronic devices," said Mr. Lynk. "The company enjoys numerous competitive advantages, including a greater than 30-year head start in the manufacturing of bonded and hot deformed rare earth based magnetic powders, where the Magnequench segment commands over 70 per cent of the global market. Management has leveraged the C&O segment's unparalleled access to low-cost Chinese rare earth supply to build a high value-add auto catalyst business that has grown to be a top-three global player. Lastly, we note the Rare Metals segment is well positioned to benefit from rising demand for superalloys for jet engines and LED lighting. Neo boasts an impressive roster of longstanding customers that include BASF, Samsung, Panasonic, Daido Electronics, Johnson Matthey, and Umicore."

Mr. Lynk set a price target for Neo Performance shares of $23.

"We believe Neo's multiple can expand over the next year as investors better appreciate the company's growth profile, numerous competitive advantages, and debt-free balance sheet," he said. "The inherent regulatory risks of doing business in China and, to a lesser extent, ongoing patent litigation will likely prevent Neo from trading in line with or at a premium to the group, in our view. Nevertheless, the 28-per-cent return, inclusive of a 2.1-per-cent dividend yield, implied by our $23.00 one-year target price supports our BUY rating."

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In his 2018 outlook for agricultural chemical and fertilizer sector, CIBC World Markets analyst Jacob Bout named a trio of stocks as his top picks after downgrading three other companies.

Mr. Bout's top picks for the year are:

- Nutrien Ltd. (NTR-N, NTR-T) with an "outperformer" rating and $62 (U.S.) target. The average is $58.72.

"We think it is likely that Nutrien is sandbagging its $500-million synergy target; we see potential $100-million-plus in incremental synergies if NTR doubles its Retail footprint and an additional $125-million in cost savings by reorganizing its potash assets," he said. "There are lots of levers management can pull to enhance shareholder value, and we think a 5-per-cent share buy-back is quite reasonable if they execute on selling their equity investments ($5-billion in after-tax proceeds). NTR could increase its Retail footprint to a third of the U.S. market vs. 19 per cent currently."

- Ag Growth International Inc. (AFN-T) with an "outperformer" rating and $70 target, rising from $65. The average is $64.88.

"AFN continues to be a top pick this year given its positioning as one of the top turnkey ag storage solution companies globally and given that grain storage remains a top theme in agriculture today," he said. "We believe 2018 and 2019 will be defined by the ramp of AFN's Brazil operations, which ultimately should add $30-million in EBITDA. On the M&A front, we expect AFN to be active as it looks to build out its fertilizer, food, seed, and feed platform. FCF yields are attractive (10 per cent on 2019 estimates)."

- Chemtrade Logistics Income Fund (CHE.UN-T) with an "outperformer" rating and target of $24, up a loonie. The average on the Street is currently $21.72.

"We expect the recently acquired Canexus assets and improving chloralkali markets to drive earnings growth in H2/18 and 2019," he said. "We expect a successful resolution of the piping issues at the North Vancouver plant early in Q2/18, with the temporary fix in Q4/17 allowing it to run at normal rates in the interim."

Over the last two days, Mr. Bout downgraded the following companies:

-  AGT Food and Ingredients Inc. (AGT-T) to "neutral" from "outperformer" with a target of $24 (unchanged). The average is $22.61.

"We are further decreasing our 2018 and 2019 estimates to reflect the global oversupply in pulses, a situation that we suspect will not improve meaningfully in the next 12 months," he said "Canadian exports of lentils are forecast to remain weak, and there is a strong possibility of another large Indian crop, which is not a positive sign for global pulse supply/demand dynamics. Although we continue to like the Food Ingredients story, its ramp and margin profile have been disappointing."

- Methanex Corp. (MEOH-Q, MX-T) to "neutral" from "outperformer" with a $67 (U.S.) target, up from $61. The average is $62.53..

"Environmental restrictions in China (strong boiler demand and limited gas-based supply) have supported surging methanol prices (S.E. Asian spot up 40 per cent in four months)," he said. "But with MTO economics on the brink of affordability, China taking measures to temporarily restore coal availability, and the imminent start-up of the 1.8Mt OCI facility in H1/18, we think prices will ease from current levels. We forecast methanol prices to still be significantly higher than 2016 levels, but flat to down from Q4/17 levels. We like MEOH's FCF generation ability and think the company can implement further 10-per-cent NCIBs (perhaps as two separate 5-per-cent+5-per-cent bids) in 2018 as well as 2019."

Rocky Mountain Dealerships Inc. (RME-T) to "neutral" from "outperformer" with a $15 target, up from $13.50. The average is $15.25.

"While we continue to think the outlook for Canadian agriculture is robust and expect equipment sales to be up 5-10 per cent once again in 2018, the next leg of growth will likely be from M&A," he said. "We are concerned about RME finding the 'right' acquisition at a reasonable valuation. The most logical acquisition would be in the Northwest U.S., but we suspect that target acquisition multiples would be elevated."

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Citing a "tepid" 2018 box office outlook, RBC Dominion Securities analyst Leo Kulp downgraded AMC Entertainment Holdings Inc. (AMC-N) to "sector perform" from "outperform."

"We currently expect a flat box office in 2018," said Mr. Kulp. "We see fewer event films this year. And we see more non-sequel content, which could be a positive if it is well received, but could be negative if it isn't. In this context, we prefer to take a more defensive approach to our stock selection in addition to looking for stocks with near-term company-specific catalysts.

He maintained a $15 (U.S.) target for the stock. The average target is $20.75.

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In other analyst actions:

Cormark Securities Inc. analyst Richard Gray upgraded B2Gold Corp. (BTO-T) to "top pick" from "buy" and raised his target to $6.75 from $6.25. The average target on the Street is $5.13.

Mr. Gray upgraded New Gold Inc. (NGD-T) to "buy" from "market perform" with a target of $5.50 (unchanged). The average target is currently $5.23.

Mr. Gray downgraded Agnico Eagle Mines Ltd. (AEM-T, AEM-N) to "market perform" from "buy" with a $72 target, which remains above the consensus on the Street of $68.89.

Stifel initiated coverage of Nutrien Ltd. (NTR-N, NTR-T) with a "buy" rating and $64 (U.S.) target. The average is $58.72.

TD Securities analyst Daniel Earle initiated coverage of Equinox Gold Corp. (EQX-X) with a "speculative buy" rating and $2 target. The average is $2.12.

National Bank Financial analyst Rupert M Merer downgraded Nemaska Lithium Inc. (NMX-T) to "sector perform" from "outperform" while raising his target by a dime to $2.40. The average is $2.57.

RBC Dominion Securities analyst Seth R Weber upgraded Deere & Co. (DE-N) to "outperform" from "sector perform" with a $190 (U.S.) target, rising from $155 and above the consensus of $165.18.

"We like the combination of DE's leadership position within stabilizing/modestly improving North America HHP farm machinery and exposure to the earth-moving equipment category via C&F; same time, we also see good opportunity with the recent Wirtgen Group acquisition," he said.

Atlantic Equities analyst John Heagerty upgraded Wells Fargo & Co. (WFC-N) to "neutral" from "underweight" and hiked his target to $64 (U.S.) from $55. The average is $66.

Mr. Heagerty also upgraded Morgan Stanley (MS-N) to "overweight" from "neutral" with a target of $61 (U.S.), up from $48. The average is $59.07.

Susquehanna Financial analyst Bill Dreher upgraded Target Corp. (TGT-N) to "positive" from "neutral" with a target of $84 (U.S.), jumping from $54. The average is $68.51.

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