Inside the Market’s roundup of some of today’s key analyst actions
Canadian National Railway Co. (CNR-T, CNI-N) reported only a modest earnings beat late Tuesday, but it was enough to spur several price target hikes among analysts, in part because of management’s relatively upbeat outlook at a time of economic upheaval.
“We like the quarter for a number of reasons, including new records for certain productivity metrics and commodities, an EPS beat, and, most importantly, doubling of YTD free cash flow (FCF) vs. last year,” commented Konark Gupta of Scotiabank.
“While the ~2% EPS beat may not impress the market, given EPS was down ~26% y/y, we believe solid FCF trends should boost investor confidence in CNR’s guidance of at least $2.5B FCF this year (implying 25%+ growth y/y). We remain positive on CNR, supported by mgmt’s bullish tone on various traffic segments into 2H and 2021, a favourable y/y setup from Q4/20 onward, CNR’s expectations of further improvement in record productivity metrics, and a rebound in FCF from this year,” he said in a note.
Scotiabank, which is maintaining a “sector outperform” rating, raised its price target to C$137 fro $135.
Raymond James analyst Steve Hansen raised his price target to C$135 from $125, “to account for modest improvements in the traffic outlook and better-than-expected cost management efforts through the depth of the COVID-induced traffic recession. That said, with the stock currently trading at the high-end of its historical valuation, we reiterate our MP3 rating,” he said. An MP3 rating is the equivalent of a hold.
Elsewhere, CIBC raised its target price to C$130 from C$125. National Bank of Canada hiked its price target to C$129 from C$122. And Credit Suisse raised its target price to US$102 from US$95.
The median analyst target price on the stock is now C$122, according to Refinitiv Eikon.
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Credit Suisse analyst Andrew Kuske downgraded Emera Inc (EMA-T) to “neutral” from “outperform,” in part because of the soaring rates of COVID-19 in Florida that may impact business demand for energy services in the state at a U.S. franchise.
He cut his price target to C$60 from C$64.
“We continue to believe Emera Inc.‘s Florida franchise with Tampa Electric and Peoples Gas will deliver longer-term growth in a more normal environment at a generally outsized rate versus many jurisdictions,” Mr. Kuske said in a note. “In the near-term, some potential COVID-19 impacts are likely to be mitigated by favourable Q2 weather in the Tampa Bay area that looked to be roughly 2.5% warmer than average. Yet, COVID-19 rates in Florida are more of a concern versus some other jurisdictions of exposure in EMA’s own utility holdings – let alone the exposure of other companies. Given some model revisions and a re-assessment of positioning, we downgrade Emera.”
The median price target is $60.
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Canaccord Genuity analyst Mark Rothschild upgraded Choice Properties REIT (CHP-UN-T) to “buy” from “hold,” encouraged by rent collection rates improving as the economy re-opens. He maintained a $14.50 price target.
“With many retail tenants temporarily shut down due to COVID-19 during Q2/20, monthly rent collection rates declined in the quarter. Overall, 89% of the REIT’s total contractual rent was collected for Q2/20, including 88% from the retail portfolio, 97% from the industrial portfolio and 89% from the office portfolio. We note that, as the economy has started to re-open, rent collection rates have improved and Choice expects to collect 94% of total rent for July. This compares to 86% of total rent collected for the month of April,” Mr. Rothschild said in a note.
Choice Properties has agreed to a combination of rent deferrals and participation in the Federal Government’s CECRA program to support tenants impacted by COVID-19.
Mr. Rothschild pointed out there was a more optimistic tone from management in the company’s earnings conference call this week. “Rent collections have improved, tenants are actively reopening stores, and the overall sentiment among its tenants is more positive. We believe that grocery-anchored shopping centres will perform well over the next year, and while there will likely be some negative impact on rental rates from previous levels, it will be relatively modest, and far less than current retail REIT valuations suggest,” the analyst added.
The median price target is $13.50.
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United Airlines’ second-quarter results on Tuesday have “a positive read-through” for Air Canada (AC-T), said RBC analyst Walter Spracklin, citing the U.S. airline’s projections for better-than-expected cash burn rates for the third quarter.
“UAL’s updated Q3/20 cash burn guidance of $25MM/day better than previous guidance by the company for daily burn of $30MM and the key takeaway from the quarter, in our view,” Mr. Spracklin said in a note. “We note that our current estimates for Air Canada reflect daily cash burn dropping from $20MM in Q2 to $12MM in Q3, and accordingly are encouraged with peer commentary such as this that shows that cost savings initiatives are starting to take hold with cash burn rates expected to moderate going forward.”
Mr. Spracklin has a target price on Air Canada shares of C$23, which is down from a previous target of C$27, and an “outperform” rating. His target price cut was mainly based on higher risks associated with the reopening of the economy.
The median target is $24.
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UBS analyst Jay Sole initiated coverage on Canada Goose Holdings Inc. (GOOS-N, GOOS-T) with a “buy” rating, citing strong growth opportunities in China. He forecasts above-consensus EPS estimates and expects the stock’s P/E multiple to rise 10 per cent. He set a price target of US$30.
The median target is US$31.
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ATB Capital Markets analyst David Kideckel downgraded Organigram Holdings (OGI-T) to “sector perform” from “outperform” and cut his price target on the Moncton-based cannabis company’s stock to C$2.30 from C$4.10. Elsewhere, Canaccord Genuity cuts target price to C$3 from C$5 and CIBC cuts target price to C$2 from C$2.75.
In a report, Mr. Kideckel said that Tuesday’s financial results fell short his and consensus expectations. “We believe OGI is facing headwinds due to the COVID-19 pandemic and the product oversupply in the Canadian cannabis market, making up for an uncertain environment which is beyond management’s control. In our view, this uncertainty may persist over the next few quarters. As such, we adopt a more cautious view and move to a neutral stance on the stock.”
The median price target is $3.50.
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Nick Corcoran, an analyst for Calgary-based Acumen Capital, raised his price target on CargoJet Inc. (CJT-T) to $180 from $150, saying the Mississauga-based air cargo carrier’s record operational performance will lead to strong results for the remainder of 2020.
“Flight data for CJT indicates Q2/20 was a record quarter for the Company in terms of number of segments and flying time. We believe strong Q2/20 activity will set up for another record peak season in Q4/20,” he said.
“Catalysts include continued operational momentum, additional ACMI or charter wins, and the acquisition of additional aircraft.”
He kept his “buy” rating. The median analyst target is $150.
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In other analyst actions:
Bombardier (BBD-B-T) RBC cuts target price to C$0.5 from C$0.7.
Boralex Inc (BLX-T) National Bank of Canada cuts to sector perform from outperform, raises price target to C$37 from C$34.
Cascades Inc (CAS-T): RBC cuts price target to C$13 from C$15 and lowers rating to underperform from sector perform.
Lundin Gold Inc (LUG-T) National Bank of Canada cuts to sector perform from outperform but raises PT to C$14.25 from C$13.75
Northland Power (NPI-T): National Bank of Canada cuts to sector perform from outperform and raises PT to C$37.50 from C$35.
Brookfield Renewable Partners LP (BEP-N): National Bank of Canada cuts to sector perform, ups PT to US$59 from US$54.
Gildan Activewear Inc (GIL-N): UBS initiates with Neutral, $16 target price.
Macy’s Inc (M-N): UBS cuts to sell from neutral; cuts target price to $3 from $6.
Snap Inc (SNAP-N): Guggenheim cuts to neutral from buy, raises target to $22 from $18.
With files from Reuters
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Darcy Keith
Roma Luciw