Inside the Market’s roundup of some of today’s key analyst actions
While Canadian Tire Corporation Ltd.’s (CTC-A-T) earnings were in line with estimates, weak same-store sales are compounding concerns over the macro environment, said BMO Nesbitt Burns analyst Peter Sklar.
“Given investor concerns over the macroeconomic environment, and given that Canadian Tire is a consumer discretionary retailer, we believe it is unlikely the stock will experience multiple expansion within our investment horizon,” he said.
He downgraded the stock to “market perform” from “outperform” and cut his target price to $158 from $192.
On Thursday, Canadian Tire reported fourth-quarter adjusted earnings of $4.78 per share, which was slightly about the consensus forecast of $4.69.
The company attributed its disappointing sales growth, meanwhile, to mild December weather.
Desjardins Securities analyst Keith Howlett said he agrees that the top-line shortfall appears to be transitory. While he lowered his price target to $180 from $205, he maintained a “buy” rating.
“We are finally comfortable that Canadian Tire has the foundation laid for the digital era, upon which it will be able to continuously build,” Mr. Howlett said.
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Bombardier Inc.’s (BBD-B-T) fourth-quarter earnings beat helped to “assuage some doubts,” Credit Suisse analyst Robert Spingarn said.
After a disastrous third quarter report in November, Bombardier turned its first profit in five years in Q4 and reiterated its guidance for 2019 sales.
“The company put up decent numbers in the quarter, including better than expected free cash flow, though we believe the stock’s outsized reaction speaks more to management’s improving credibility than the quarter itself,” Mr. Spingarn said. Bombardier shares rose by 23 per cent on Thursday, and the streak continued into Friday’s open, notching another 8 per cent in upside in morning trading.
Despite setbacks in several of Bombardier’s train contracts, the rail division looks to be “on track,” Mr. Spingarn said. “Three of the five major contracts are scheduled to be largely delivered by year-end, and the remaining two are performing according to plan.”
The analyst slightly raised his target price to $4 from $3.76, while maintaining an “outperform” rating.
Meanwhile, the last analyst holdout turned bullish on Bombardier after the earnings report, as UBS analyst Myles Walton upgraded the stock to “buy” from a “hold.”
“Moving away from the challenges of 2018, this stock looks poised to perform into 2020,” he said.
All 19 analysts covering the company now rate the stock the equivalent of a “buy.”
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In light of Chemtrade Logistics Income Fund’s (CHE-UN-T) disappointing fourth-quarter performance, Desjardins Securities analyst David Newman said he’s “moving to the sidelines.”
Chemtrade reported fourth-quarter performance on Thursday, coming up short of estimates on earnings before interest, taxes, depreciation and amortization on all three of its business segments: sulphur products and performance chemicals, water solutions and specialty chemicals, and electrochemicals.
“While a turnaround plan is underway, we are cautious about Chemtrade’s near-term prospects given ongoing operational challenges, a lack of catalysts, limited visibility, stubbornly high Street estimates and constrained deleveraging opportunities over the next 12 months,” Mr. Newman said.
While Chemtrade’s shares are trading at a valuation that could appeal to deep-value investors, “we believe CHE’s near-term growth prospects should remain weak,” the analyst said. High earnings expectations are setting the company up to disappoint investors in the first two quarters of 2019, he added.
Mr. Newman lowered his rating on the stock to “hold” from “buy” and cut his target price to $11.50 from $14.
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While New Gold Inc. (NGD-T) beat consensus estimates on adjusted fourth-quarter earnings, a warning over rising costs will negatively affect the company’s valuation, CIBC World Markets analyst Anita Soni said.
After adjusting for a $671-million impairment charge related to the company’s Rainy River mine in northwestern Ontario and the Blackwater project in northern British Columbia, New Gold posted adjusted fourth-quarter earnings of $0.04 per share.
But the company guided to higher operating costs and sustaining capital expenditures for 2019, causing the analyst to downgrade the stock to “underperformer” from “neutral” and cut the price target to $0.50 from $1.30.
“We continue to view execution risk at Rainy River as a significant headwind for New Gold and a clear focus for the new CEO,” Ms. Soni said.
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Goeasy Ltd.’s (GSY-T) solid fourth-quarter results appear to have put the company back on track, Desjardins Securities analyst Gary Ho said.
The company posted adjusted earnings of $1.02 per share, compared to a consensus forecast of $0.96, while also raising its dividend and showing signs of improving credit trends in its Quebec loan book, Mr. Ho said.
The earnings beat was driven by lower-than-expected credit losses and reduced operating expenses, Mr. Ho said. Meanwhile, the company’s Quebec credit losses improved as new credit underwriting models began to take effect.
The analyst raised his target price on the stock to $57 from $53 while reiterating a “buy” recommendation.
“New product launches could provide upside while its credit facility amendments reduce the overall cost of debt,” Mr. Ho said.
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In other analyst actions:
Acadian Timber Corp : CIBC raises price target to C$17 from C$16
* Acadian Timber Corp : RBC raises price target to C$19 from C$18
* Allied Properties REIT : CIBC raises price target to C$51 from C$46
* Allied Properties REIT : Raymond James raises target price to C$50 from C$48
* Alithya Group Inc : Cormark Securities cuts target price to C$6 from C$6.75
* Birchcliff Energy Ltd : Raymond James raises target price to C$5 from C$4.60
* Canada Goose Holdings Inc : CIBC cuts price target to C$95 from C$104
* Canwel Building Materials Group : Canaccord Genuity cuts to hold from buy
* Canwel Building Materials Group : Canaccord Genuity cuts PT to C$4.8 from C$6.5
* Champion Iron Ltd : TD Securities raises target price to C$2 from C$1.95
* Choice Properties REIT : CIBC raises price target to C$14 from C$13
* Choice Properties REIT : National Bank of Canada raises target to C$13.50
* Constellation Software : Raymond James raises target price to C$1,200 from C$930
* Constellation Software Inc : RBC raises price target to C$1,350 from C$1,250
* Fairfax Financial Holdings Ltd : BMO cuts target price to C$680 from C$720
* First Capital Realty Inc : Raymond James raises target price to C$23 from C$22
* First Capital Realty Inc : RBC raises price target to C$24 from C$23
* First Quantum Minerals Ltd : TD Securities cuts target price to C$24 from C$26
* Gildan Activewear : National Bank of Canada raises target to C$47 from C$46
* H&R Real Estate Investment Trust : CIBC raises price target to C$25 from C$24.5
* Harvest Health & Recreation : Canaccord Genuity raises PT to C$16 from C$15
* Industrial Alliance Insurance : Canaccord Genuity raises PT to C$61 from C$60
* Industrial Alliance Insurance : BMO raises target price to C$62 from C$61
* Industrial Alliance Insurance : TD Securities raises target to C$62 from C$61
* Inter Pipeline Ltd : BMO cuts target price to C$24 from C$26
* Killam Apartment REIT : RBC raises price target to C$18.5 from C$17.5
* Mainstreet Equity Corp : TD Securities raises target price to C$55 from C$53
* Medipharm Labs : Canaccord Genuity initiates coverage with speculative buy rating
* Medipharm Labs : Canaccord Genuity initiates coverage with C$4.75 target price
* Morguard North American Residential REIT : TD Securities ups Tp to C$19
* Precision Drilling Corp : BMO raises target price to C$4.25 from C$4
* Sangoma Technologies : Cormark Securities raises target to C$2.40 from C$2.25
* Snc-Lavalin Group Inc : RBC cuts price target to C$44 from C$48
* Spin Master Corp : CIBC cuts price target to C$50 from C$61
* Sun Life Financial Inc : BMO raises target price to C$57 from C$56
* Sun Life Financial Inc : Cormark Securities raises target price to C$54
* Telus Corp : Cormark Securities raises target price to C$51 from C$48
* Telus Corp : Canaccord Genuity raises price target to C$51 from C$49
* Telus Corp : JP Morgan raises target price to C$51 from C$49
* Telus Corp : TD Securities raises target price to C$58 from C$55
* Tmx Group Ltd : TD Securities raises target price to C$98 from C$96
* TransCanada Corp : TD Securities cuts target price to C$73 from C$74
* Western Forest Products Inc : CIBC cuts price target to C$2 from C$2.25
With files from Reuters
Tim Shufelt