A Royal Bank of Canada (RBC) logo is seen on Bay Street in the heart of the financial district in Toronto, January 22, 2015.MARK BLINCH/Reuters
Inside the Market's roundup of some of today's key analyst actions. This file will be updated often during the trading day so check back for new details.
Canaccord Genuity analyst Tony Lesiak is urging Barrick Gold Corp. to look for new sources of revenue and consider acquiring smaller, more profitable players in the mining industry.
Mr. Lesiak notes that the combination of Barrick's cash flow problems and its plan to reduce net debt by $3-billion in 2015 mean the company should be looking at other revenue options, including new equity, a dividend cut and the monetization of its Acacia stake.
"Overall, we applaud management's new vigor and alignment, unfortunately the magic of youth is unlikely to return," he says. "ABX is losing the weight it needs but it remains mature with a rapidly declining production profile that will need to be addressed. The value destruction from asset fire sales needs to stop. We believe ABX should use its current strong NAV multiple for M&A."
Mr. Lesiak maintains his "sell" rating and is cutting his target price to $13.50 (Canadian) from $14. The analyst consensus price target is $14.77.
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A reduced capital budget isn`t enough to stave off a ratings downgrade for Baytex Energy Corp.
AltaCorp Capital Research analyst Thomas Matthews notes that Baytex reduced its 2015 capital budget by approximately $75-million, but says it's not enough to offset a runup in its share price and the slumping price of oil.
"We applaud BTE for prudently revising its capital budget downwards which we calculate to result in a debt neutral budget in 2015 at current strip pricing, (while paying its $0.10/m dividend)," says Mr. Matthews. "We continue to believe that BTE represents one of the best oil-levered options to play a commodity price rebound given its low break-even cost asset base and terrific operational execution.
"Unfortunately, based on our current commodity assumptions, and as a result of the recent strength in the share price (up 27.7 per cent in the last month), our $23 target price only provides a 7 per cent return (including a 5.3 per cent yield), which is below our 20 per cent return threshold required for an Outperform rating. That said, investors may look for any weakness in the stock to add to existing positions."
Mr. Matthews is downgrading Baytex to "sector perform" from "outperform" and maintaining his $23 (Canadian) target price. The analyst consensus price target is $24.94.
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Finning International Inc.'s struggling share price has earned the company a ratings upgrade from Raymond James analyst Ben Cherniavsky.
He is upgrading the stock to "outperform from "market perform" and boosting his target price to $26 (Canadian) from $23.
Mr. Cherniavsky explains that the upgrade has little to do with the company's recent fourth-quarter 2014 earnings, or any short-term catalysts at all, for that matter.
"In fact, 4Q14 was slightly weaker than we expected while management indicated more headwinds in 1Q15," he says. "The underlying premise for our new outperform rating is valuation. Finning's stock has been under severe pressure over the past five months, declining 31 per cent (vs. TSX +2 per cent) since our Sep-25-14 downgrade."
Mr. Cherniavsky adds that Finning's forward price-to-earnings multiple has fallen from 15.8x to 13.3x, which is at the low end of the historical range.
The analyst consensus price target is $25.35.
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In other analyst actions
Chorus Aviation Inc. was downgraded to "hold" from "buy" at TD Securities by equity analyst Timothy James. The 12-month target price is $6.00 per share.
Canadian Imperial Bank of Commerce was downgraded to "underperform" from "market perform" at Keefe Bruyette by equity analyst Brian Klock. The target price is $92.00 per share.
Finning International Inc. was raised to "outperform" from "market perform" at Raymond James by equity analyst Ben Cherniavsky. The 12– month target price is $26.00 per share.
Plaza Retail REIT was rated new "outperform" at BMO Capital Markets by equity analyst Troy Maclean. The target price is $4.75 per share.
Royal Bank of Canada was downgraded to "underperform" from "market perform" at Keefe Bruyette by equity analyst Brian Klock. The target price is $74.00 per share.
West Fraser Timber Co Ltd. was downgraded to "hold" from "buy" at TD Securities by equity analyst Sean Steuart. The 12-month target price is $77.00 per share.
With files from Bloomberg News