Inside the Market’s roundup of some of today’s key analyst actions
Many analysts cut their price targets on JPMorgan Chase & Co. (JPM-N) following an earnings report Thursday that overall fell short of expectations and sent the bank’s stock price down 3.5%.
America’s largest bank reported a worse-than-expected 28% fall in quarterly profit and suspended share buybacks in the face of growing risks of a recession.
RBC analyst Gerard Cassidy reiterated an “outperform” rating but dropped his price target to US$130 from $155.
“The company’s core traditional banking businesses performed well but its capital markets businesses, especially investment banking, had a difficult quarter,” he said in a note to clients. Still, its net interest income growth was strong, loan growth was good and credit quality was very good, he added.
With the various price target cuts on the Street this morning, the average is now US$138.56. One month ago, the average target was US$156, according to Refinitiv Eikon data. The bank has 16 buy ratings, 10 holds and 2 sells.
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Canaccord Genuity analyst Luke Hannan has slashed his price target on shares of Gildan Activewear Inc. (GIL-N, GIL-T) ahead of the company’s earnings in early August. The analyst believes slowing consumer appetite for the apparel manufacturer’s products will limit upside in earnings and the stock price.
He reiterated his “buy” recommendation and cut his price target to US$37 from US$48
For the quarter, he is forecasting revenue of $784 million, below the consensus’ $826 million estimate. Similarly, he is forecasting adjusted EPS of $0.72, below consensus’ $0.77 forecast, with his estimate implying 6% EPS growth from a year earlier.
Mr. Hannan pointed out that Gildan mentioned alongside its first quarter results that point of sale [POS] data in the second quarter to date showed signs of meaningful deceleration.
“Granted, the quarter-to-date YoY growth management alluded to was in the mid-single-digit range, which suggests despite the deceleration, demand (at the time) was still healthy. That said, we note consumer sentiment has materially weakened since GIL’s Q1/22 print, with Target specifically mentioning basics apparel as an area of relative weakness on its last earnings call. Accordingly, we estimate POS, and by extension shipments from GIL, softened for the balance of the quarter,” he said in a note to clients
“Price increases taken in H2/21 and in Q1/22, though, should moderate the top-line impact from lower sales volumes,” he added.
The analyst said the bigger near-term concern for investors is whether distributor demand will weaken for the balance of the year, implying negative earnings estimate revisions are in the cards. “Indeed, distributor inventories remain lean, which suggests the probability of a prolonged period of destocking (and hence fewer shipments from GIL) isn’t quite as high as it has been in years past,” he said.
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National Bank analyst Cameron Doerksen cut his price target on Cargojet Inc (CJT-T) to C$158 from C$185, citing concerns over slowing growth trends and more cautious market conditions.
He lowered his valuation estimates for the company, commenting that several factors could limit multiple expansion over the near-to-medium term. These include slowing e-commerce volume growth at the company’s major customers, a likely peaking of international air cargo rates, and growing concerns over a broader economic slowdown that could impact some of the Cargojet’s volumes.
“On 2022 consensus estimates, Cargojet shares are currently trading at 7.8x EV/EBITDA, down significantly from the peak valuation of 13.0x in 2020 and below the 9.1x forward EV/EBITDA the stock has traded at on average since mid-2015. However, peer group multiples have also contracted significantly, and we suspect the market will need more certainty on the economic backdrop before multiples begin to expand again,” the analyst said in a note to clients.
Mr. Doerksen maintained a “sector perform” rating, however, and said shares are worth monitoring for future buying opportunities. “We consider Cargojet a high-quality name within our coverage universe that should outperform many other transportation-related stocks in the event of a broader economic slowdown. As such, we would be buyers on any significant further weakness in the stock,” he said.
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Benchmark cut its target price on Boeing Co. (BA-N) to US$200 from US$250.
But analyst Josh Sullivan still rates the planemaker a “buy” and thinks several factors are working in its favour:
“The multi-year water torture of internal supply side negative news from Boeing is at an inflection point, as CEO Calhoun indicated in June at a conference. This was recently supported by the better than expected 737 deliveries for 2Q as well as an affirmation that the 737 supply chain production is at the previously projected 31/month. The 787, which hasn’t been delivered in a year with +100 units in inventory, is also progressing towards FAA approval and could begin deliveries this summer. Global air passenger demand has been so strong this summer it has nearly overwhelmed airport and airline infrastructure capacity. However, the macro backdrop, Chinese 737 re-certification, 737-10 FAA certification and 777x development time-lines do remain concerns. Net, net broader macro issues are a concern but the structural consumer shift to services including air travel remains all while BA regains the initiative.”
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In other analysts actions:
Cogeco Communications (CCA-T): National Bank of Canada downgrades rating to sector perform from outperform and cuts target price to C$108 from C$119. BMO cut its target price to C$120 from C$130 and Scotiabank cut its target to C$112.50 from C$114.50.
Organigram Holdings Inc (OGI-T): Haywood Securities cuts target price to C$1.9 from C$2.5
Teck Resources Ltd (TECK-B-T): JP Morgan cuts target price to C$43 from C$60
Valens Company Inc (VLNS-T): Atb Capital Markets cuts to sector perform from outperform, cuts target price to C$1.80 from C$3. Haywood Securities cuts price target to C$1.25 from C$4.75 and downgrades rating to hold from buy
Alcoa Corp (AA-N): JP Morgan cuts target price to $60 from $106
With files from Reuters
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Darcy Keith