A man enters a new Bank of Montreal (BMO) branch, located in Fort McMurray, Alberta, Tuesday, February 05, 2013.Brett Gundlock/The Globe and Mail
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.
SNC-Lavalin Group Inc. shareholders are facing the risk that the company may be barred from Canadian government work for 10 years, says TD Securities Inc. analyst Michael Tupholme in downgrading the stock.
Mr. Tupholme notes that SNC describes the fraud and corruption charges related to its Libyan operations "without merit", and that it is entirely possible that the company may find a way to settle the matter through a financial arrangement.
"That said, with SNC having been formally charged, we see notable incremental risk that the eventual conclusion to this situation winds up resulting in more than simply a monetary fine," says Mr. Tupholme. "One such possibility that has always existed, but would now appear to be a more front and centre risk that investors cannot ignore, is the potential for SNC, if convicted, to be debarred from bidding on Government of Canada contracts (an important part of SNC's business) for 10 years."
He is downgrading SNC Lavalin to "hold" from "buy" and cutting his target price to $46 (Canadian) from $52.00. The analyst consensus price is $55.48.
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Citi Research analyst Stefan Nedialkov expects disappointing first-quarter results from Bank of Montreal on Tuesday.
Mr. Nedialkov believes the bank will report adjusted earnings per share of $1.60 vs. the Reuters consensus estimate of $1.63, which would be a miss of 4 per cent. He expects better year-over-year results in BMO's insurance and wealth divisions, and worse results in capital markets and corporate services.
The analyst maintains his "neutral" rating and is lowering his target price to $83 (Canadian) from $90. The analyst consensus price target is $84.
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Enerplus Corp.'s strong performance in 2015 prompted a pair of analysts to downgrade the stock.
The company's cash flow per share in the fourth quarter came in above the consensus estimate, but the forward outlook was not as bright. Management lowered production guidance to 93,000 to 100,000 barrels of oil equivalent per day from its previous range of 100,000 to 107,000 barrels, reduced its capital budget to $635-million from $480-million, and cut its monthly dividend to $0.05 from $0.09.
The stock is up more than 17 per cent year to date as of Friday's close.
"The last time Enerplus traded at this level, WTI was 30 per cent higher than today," said TD analyst Aaron Bilkoski.
He lowered the stock to "neutral" from "buy" and maintained a $13.50 (Canadian) price target.
Similarly, Desjardins Securities analyst Kristopher Zack raised valuation concerns on Enerplus.
"While we like the measures that the company has taken to protect the balance sheet, our target turn had narrowed significantly following the recent run in the stock, which has materially outperformed to date this year," he said. "We fully expect that the company will continue pursuing measures to strengthen its financial position; however, given the reduced potential return to our target, we are moving our rating to hold [from buy]."
He kept a $14.00 price target on the stock.
The average analyst price target is $15.13.
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Boardwalk Real Estate Investment Trust's upside is "too compelling" to ignore, says Dundee Securities analyst Frederic Blondeau.
Mr. Blondeau explains that while low oil prices threaten to be a drag on its Alberta properties, the REIT's current value and strong fundamentals more than offset the downside potential.
"Risks relate to a prolonged low oil price environment or a shock in interest rates," he says. "At the moment we believe interest rates will remain low for longer than the market anticipates. We believe BEI will continue to profit from solid rental fundamentals, a top-tier management team and a conservative balance sheet."
Mr. Blondeau is upgrading Boardwalk to "buy" from "neutral" and lowering his target price to $67 (Canadian) from $69. The analyst consensus price target is $67.95.
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The bullish case for Tesla Motors Inc. has been "largely debunked," according to Bank of America Merrill Lynch analyst John Lovallo.
Contrary to the company's claims that it has struggled to meet heavy demand, Mr. Lovallo claims that Tesla suffers from a demand shortage. The optimistic thesis does not agree with the company's production levels, which are below both past rates and the company's current capacity, the analyst said.
"We have long contended that Tesla's primary challenge is a lack of demand for its [electric vehicles]," Mr. Lovallo said. "Tesla's management and the bulls consistently argue that the company can stimulate demand at will and that the true issue is capacity and supply. In other words, Tesla appears to be pulling back on production, which we believe could create the appearance of rising demand."
He cut his target price on the stock to $65 (U.S.) from $70, and maintained an "underperform" rating. The average analyst price target for the stock over the next year is $268.12.
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In other analyst actions
Arch Coal Inc. was downgraded to "sell" from "buy" at Argus by equity analyst William Selesky.
Alexander's Inc. was raised to "buy" from "hold" at Sandler O'Neill by equity analyst Alexander Goldfarb. The 12-month target price is $480.00 (U.S.) per share.
Ascendis Pharma A/S was rated new "outperform" at Wells Fargo by equity analyst Matthew Andrews.
Century Communities Inc. was downgraded to "neutral" from "overweight" at JPMorgan by equity analyst Michael Rehaut. The target price is $19.00 (U.S.) per share.
Canadian National Railway Co. was rated new "neutral" at JPMorgan by equity analyst Brian Ossenbeck. The target price is $88.00 (Canadian) per share.
Canadian Pacific Railway Ltd. was rated new "overweight" at JPMorgan by equity analyst Brian Ossenbeck. The target price is $290.00 per share.
CSX Corp. was rated new "overweight" at JPMorgan by equity analyst Brian Ossenbeck. The target price is $41.00 per share.
Computer Task Group Inc. was raised to "buy" from "neutral" at B. Riley by equity analyst Kevin Liu. The 12-month target price is $11.25 per share.
DIRECTV was downgraded to "hold" from "buy" at Brean Capital by equity analyst Todd Mitchell.
Entellus Medical Inc. was rated new "overweight" at Piper Jaffray by equity analyst Thomas Gunderson. The 12-month target price is $25.00 (U.S.) per share.