Inside the Market’s roundup of some of today’s key analyst actions
Credit Suisse Securities Inc. sharply raised its target price for Brookfield Business Partners LP (BBU-UN-T) after the firm returned from a research restriction owing to its investment-banking work for Brookfield.
Analyst Andrew Kuske reiterated an “outperform” rating and said Brookfield Business Partners, an offshoot of Brookfield Asset Management Inc. that owns business-services and industrial companies, is “reloading.” Two key recent transactions are an IPO of its GrafTech International Ltd. electrodes business and buying Westinghouse Electric Co. LLC out of bankruptcy. Mr. Kuske sees electrode pricing improving, boosting GrafTech stock and allowing Brookfield BP to make orderly sales of its remaining stake in coming months. He sees Brookfield BP expanding Westinghouse’s profits via cost savings, revenue growth and profit margin expansion.
Mr. Kuske uses multiples of EBITDA, or earnings before interest, taxes, depreciation and amortization, to value the various segments of Brookfield BP’s businesses and help arrive at a net asset value of US$54 for the units.
Target: Credit Suisse raised its target to US$54 from US$42.
Edward Sterck of BMO Nesbitt Burns Inc. upgraded Mountain Province Diamonds (MPVD-T) to “outperform” from “sector perform.” Mr. Sterck reduced his earnings estimates due to higher depreciation expense but kept his cash-flow forecasts largely intact.
The shares’ recent decline — they were trading at his $3.30 target price in late July, but closed Wednesday at $2.85 — make them attractive, he says, particularly in light of a brand-new dividend. The payout of 4 cents, payable Sept. 25, represents a 5.6 per cent yield when annualized, the Globe calculates.
Mr. Sterck expects the company to generate enough cash to pay its dividend and financing costs yet still repay more than half of its bond debt due in 2022.
Target: His price target remains at $3.30.
The solid but unspectacular quarter at Royal Bank of Canada (RY-T) led to mostly modest increases in target prices among some of the analysts covering the stock.
“This one felt a bit like a self-driving quarter, as issues that one might find in the numbers sort of self-corrected without us having to do too much to our model,” wrote CIBC World Markets Inc. analyst Robert Sedran. He’d been looking at margins, provisions for troubled loans, and overall expenses, and found that RBC was able to report results that mitigated his concerns and delivered “a good result that was slightly ahead of estimates and in line with expectations of a solid quarter.” He raised his target to $110 from $109. (The shares closed Wednesday at $103.97.)
Sohrab Movahedi of BMO Nesbitt Burns Inc. also raised his target to $110, from $106. Analysts at Eight Capital raised their price target to $122 from $119.
Giant home-improvement retailer Lowe’s Cos. Inc. (LOW-N) missed consensus on pretax profit and lower guidance, but the shares rose because the company is in a “honeymoon period” with a new CEO and his new strategic initiatives, said analyst John A. Baugh of Stifel, Nicolaus & Co. Inc. He’s on board, maintaining an “outperform” rating and raising his target price to US$125 from US$105.
Mr. Baugh says that Lowe’s recent underperformance, relative to Home Depot Inc., has created the opportunity to increase earnings at a faster rate. “Having set the earnings bar lower by poor execution these past few years, the company has set up the likelihood that its EPS growth rate will accelerate and be faster than HD. This is what we believe excites investors. While we concur with this conclusion, once the clock starts ticking, the execution must follow. But we can see this Honeymoon phase staying with us through at least December.”
Mr. Baugh was just one of a number of analysts boosting target prices on Lowe’s after earnings, according to MarketBeat. Analysts at Bank of America Corp. went to US$126 from US$113, Wells Fargo to US$120 from US$110 and Raymond James to US$112 from US$105; all the firms have “buys.” Citigroup Inc. analysts went to US$112 from US$99; they have a “hold” rating on the shares.
BMO Nesbitt Burns Inc. analyst Troy Maclean increased his net asset value estimate on Boardwalk Real Estate Investment Trust (BEI-U-T) to $49.50 from $45 after a solid second-quarter report. He maintained a “market perform” rating.
“BEI has made material progress on improving occupancy and rents, and its [capital expenditure] program appears to be bearing fruit, but we think the REIT is fairly valued at current levels,” he wrote. The REIT’s Alberta portfolio is improving, but Saskatchewan remains weak.
His price target rose to C$54.50 from $50.
In other analyst actions:
* Founders Advantage Capital : Canaccord Genuity cuts target to C$3 from C$3.25
* Lucara Diamond Corp : BMO cuts price target to C$2.75 from C$3.50
With files from Reuters
More to come