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Today's analyst upgrades and downgrades
Wednesday, October 23, 2013
Darcy Keith and Eric Atkins
Inside the Market’s roundup of some of today’s key analyst
actions. This file will be updated during the trading day. For breaking
analyst actions prior to market open every day, read our Before the Bell
morning report.
Desjardins Securities analyst Benoit Poirier upgraded
Canadian National Railway Ltd.
to "buy" from "hold," commenting that the company's "stellar"
third-quarter results have given him confidence that there will be
further stock gains.
Mr. Poirier, and at least four other analysts, also raised their price targets on the railway.
CN
Rail's adjusted earnings per share of $1.72 (Canadian) sailed past
Street expectations for $1.62, and revenues also beat forecasts.
"In
light of the strong quarter, including excellent operating metrics and
market share gains, as well as the positive longer-term outlook, we
believe there is additional potential upside to CN’s share price at
current levels," Mr. Poirier said in a research note.
"Overall,
we are impressed with the company’s ability to grow volume and improve
operating metrics in the current economic environment. In our view, the
market should take a more constructive view on CN in light of the
company’s notable growth opportunities and strong balance sheet," he
added.
Raymond James analyst Steve Hansen was a little more
cautious in his assessment, even while increasing his price target.
"While we continue to view CN as a core, long-term holding backed by a
solid
growth prospects, we reiterate our market perform rating due to the
stock's
lofty current valuation," Mr. Hansen said.
Canaccord Genuity
analyst David Tyerman echoed those thoughts in maintaining a "hold"
rating: "CN is trading at a slight premium to its historic
average on P/E and EV/EBITDAR bases and slightly above the sector and
broader
market valuations. None of this is dramatically out of line, but we
think CN’s
current valuation limits the share price upside potential," he said.
Targets:
Desjardins Securities raised its price target to $119 (Canadian) from
$102. Raymond James raised its price target to $118 from $115. Canaccord
Genuity raised its target to $109 from $105. RBC Dominion Securities
raised its target to $123 from $120 and maintained an "outperform"
rating. Credit Suisse raised its price target to $105 (U.S.) from $100.
========
Citing concerns about the
stock's increasingly high valuations - as well as the negative sentiment that
could arise over an upcoming U.S. House hearing on the botched Obamacare
website - Desjardins Securities downgraded
CGI Group Inc. to "hold" from
"buy."
Desjardins analyst Maher Yaghi made no change to
his price target, but noted that the stock's healthy gains over the past year
have left "shrinking potential upside for investors."
"Although
our view is that
CGI’s fundamentals are solid, we note that share price appreciation has
pushed
valuations higher. The spread between CGI’s valuation relative to peers
has narrowed over the past few months. CGI is currently trading at
8.4x next year EV/EBITDA. Relative to high-growth companies
like Accenture (8.7x next
year EV/EBITDA), spreads are nearing historical lows," he said in a
research note.
Meanwhile, CGI's U.S. unit, CGI Federal, will testify
Thursday at a House of Representatives hearing on the bug-filled implementation
of the Patient Protection and Affordable Care Act website. So far, the
Department of Health and Human Services has turned down the committee's
invitation to participate in the hearing and will only answer the committee's
questions next Wednesday.
"While we do not view CGI as the culprit
behind the failure of the website, given that the company will be
answering questions without the presence of CMS (content management
system) representatives during the hearing, we expect the tone of the
hearing to be accusatory and short on concrete reasons
for the failure, which could increase the negative perception of the
stock," Mr.
Yaghi said.
Target: Mr. Yaghi maintained a $40 (Canadian) price
target.
========
The expected sale of
Maple Leaf Foods Inc.’s “prized asset,”
Canada Bread Co. Ltd., has prompted CIBC World Markets analyst Mark Petrie to
upgrade the stock to "sector outperformer" and raise his price target.
Maple Leaf said on Monday it is considering selling its
90-per-cent stake in the bakery company, whose brands include Dempster’s. The
Globe and Mail reported the same day that private equity companies are interested in
Canada Bread, which has a steady cash flow and dominant market share but sales
that have flattened. The Globe
also reported food companies from China, Brazil and the United States are interested in buying
the main meat business, which is in the middle of a five-year restructuring.
Maple Leaf shares have risen by about 15 per cent since the
news was reported.
Maple Leaf chief executive officer Michael McCain said the
meat business is not for sale, and sources told the Globe any deal would wait
about 18 months for the restructuring to be completed.
In August, Maple Leaf sold its profitable animal parts and
biofuel division, Rothsay, to pay down debt. Mr. Petrie said in a research note
he was surprised Canada Bread is now on the auction block and believes it sets
the stage for the sale of the prepared meats business.
Mr. Petrie said the sale of Canada Bread could bring Maple
Leaf $1.6-billion. With the $1.8-billion value of the meat business, he says
Maple Leaf’s implied share value is $20, with a $1 discount to reflect the risk
a Canada Bread deal fails.
Target: Mr. Petrie raised his share price target to $19 from $14. The average
share price outlook is $18, according to analysts surveyed by Bloomberg.
========
RBC Dominion securities cut its price target on
Brookfield Canada Office Properties to $30 (Canadian) from $33 and maintained a "sector perform" rating.
TD Securities initiated coverage on
Potash Corp. with a "hold" rating and $32 (U.S.) price target.
M Partners downgraded
Wajax
to "hold" from "buy" and maintained a $39 price target.
UBS raised its price target on
Whole Foods Markets to $71 (U.S.) from $60 and maintained a "buy" rating.
UBS downgraded
United Natural Foods to "neutral" from "buy" but raised its price target to $73 (U.S.) from $67.
Wedbush downgraded
Broadcom to "neutral" from "outperform" and cut its price target to $27 (U.S.) from $33.
JPMorgan upgraded
DuPont to "overweight" from "neutral" and raised its price target to $67 (U.S.) from $60.
Credit
Suisse downgraded Weight Watchers International to "neutral" from
"outperform" and cut its price target to $44 (U.S.) from $45.
BMO Nesbitt Burns raised its price target on
Freeport-McMoran to $35 (U.S.) from $30 and maintained a "market perform" rating.
BMO Nesbitt Burns raised its price target on
Methanex to $63 (U.S.) from $57.50 and maintained an "outperform" rating. Raymond James raised its target to $63 from $58.
Merrill Lynch initiated coverage on
AOL with a "buy" rating and $47 (U.S.) price target.
BMO Nesbitt Burns cut its price target on
Coach to $65 (U.S.) from $70 and maintained an "outperform" rating.
BMO Nesbitt Burns raised its price target on
Kimberly-Clark to $105 (U.S.) from $96 and maintained a "market perform" rating.
BMO Nesbitt Burns raised its price target on
Polaris to $155 (U.S.) from $140 and maintained an "outperform" rating.
Canaccord Genuity upgraded
The Finish Line to "buy" from "hold" and raised its price target to $28 (U.S.) from $23.
Canaccord Genuity downgraded
Matador Resources to "hold" from "buy" and maintained a $21 (U.S.) price target.
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