Finning International, the world’s biggest Caterpillar equipment dealer, has seen its stock hammered by a drop in sales of mining equipment.
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.
CIBC World Markets analyst Leon Esterhuizen is warning investors to stay clear of North American Palladium Ltd. after the company said the ramp up of its Lac des Iles palladium mine is going slower than expected, putting the producer precariously close to running out of cash.
Mr. Esterhuizen downgraded his rating to "sector underperformer" from "sector performer" and slashed his price target to 60 cents (Canadian) from $1.40. Investors are listening to his message: shares plunged at today's open and closed down 27 per cent at 51 cents.
After having burnt through $24-million in cash in the third quarter, North American Palladium now has only $18-million in cash left and all its debt facilities are fully drawn, he noted.
"Given $37-million of capex in Q4, the company has weeks of liquidity left and management is now actively looking at its options to bridge the funding gap until the mine starts generating positive cash in 2014," Mr. Esterhuizen said in a research note.
He estimates that North American Palladium needs $10-million to $15-million in cash immediately - but that is not all. "In the absence of any guidance for 2014 and beyond, the mid-to longer-term financing needs remain unclear but based on our estimates with costs dropping to US$400/oz. (from US$580/oz. in Q3), PDL needs at least $50-million, but it could be $150-million if the palladium price stays at US$730/oz," he said.
In reporting its latest financial results last week, North American Palladium noted that the start-up of an underground crusher unit at the Ontario mine experienced difficulty with automated controls. The crusher has been able to function manually, but the slower-than-expected ramp-up has had a detrimental impact on the company's balance sheet.
"As such, the slightly slower ramp-up has now pushed the company to the brink as far as its finances are concerned yet again. Very concerning is the fact that the ramp-up output miss was not materially below management expectations. The fact that it then has such a marked impact on the funding need speaks volumes on just how tight liquidity is in PDL," he said.
"Management did not quantify the extent of this potential funding gap or the potential timing. Even more concerning was the lack of clear guidance, or in fact any guidance for 2014 and beyond. This does not paint a picture of a management team that has line of sight (yet) into the next 12 months. Alternatively, it paints apicture of a management team that are just so gun-shy that making any promises at this stage has become virtually impossible for fear of missing these," he added.
The average price target among analysts is $1.01, according to Bloomberg data.
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Shares in Toromont Industries Ltd. have moved up too far, too fast, said M Partners analyst Tom Varesh as he downgraded his rating to "hold" from "buy."
The stock is up 12 per cent since the company reported third-quarter results on Nov. 4 that beat Street expectations. Its now trading at the highest price-to-earnings multiple among its industrial and agricultural equipment dealership peers, he noted.
"With the rapid rise in the price of the stock in such a short period of time, we believe the stock has gotten ahead of itself and is fully valued at these levels," said Mr. Varesh. "While Toromont's underlying business is strong, we believe the stock is currently fully valued at these levels given the 2014 outlook for its end markets."
Mr. Varesh maintained a $26.50 (Canadian) price target. The average Street target is $26.33, according to Thomson First Call data.
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Robust high-end consumer demand is creating a rosy outlook for Vail Resorts Inc., according to Credit Suisse analyst Joel Simkins, who upgraded the ski resort operator to "outperform" from "neutral."
Mr. Simkins is looking to a more regular snowfall this winter and a recovering Denver economy to improve earnings for the company, hiking his price target to $81 (U.S.) from $71.
"We remain favourably biased to businesses where competition is rational, supply growth is low or non-existent (theme parks and lodging versus cruise), and there is long-term pricing power," he said.
Vail is also in the middle of a lawsuit to take over operations at a resort in Utah operated by Park City Mountain Resort, with a decision expected to come by mid-2014.
"If victorious this would move the company closer to controlling and integrating a resort with 7,300 acres of skiable terrain (larger then Vail and comparable to Whistler Blackcomb)," he said.
The average target among analysts is $74, according to Thomson Reuters.
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Salesforce.com, enjoying strong earnings growth driven by a new acquisition, had its "buy" rating reiterated by Richard Davis of Canaccord Genuity.
He also raised his price target to $65 (U.S) from $54.
The cloud-computing company, which specializes in its customer relationship management software, acquired digital marketing management company ExactTarget earlier this year, helping to bolster its bottom line and shares, which have risen over 35 per cent over the past five months.
"Stock-wise, Salesforce is our favourite large-cap growth name because if 2013 was about Growth At Any Price, we expect 2014, with the specter of rising rates, will force investors to pay at least some attention to growth plus cash flow margins," he said.
Analyst Philip Winslow of Credit Suisse hiked his price target to $65 from $60 and maintained a "outperform" rating, though he expressed concern over a slowdown in the company's core businesses.
"CEO Marc Benioff's consistent commentary reinforces our belief that CEOs remain focused on retaining existing customers and attracting new customers and are willing to spend on technologies to achieve these goals," he said.
Goldman Sachs also raised its price target to $65 from $60 and maintained a "conviction buy" rating.
The average target among analysts is $56.26 according to Thomson Reuters.
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After a rocky year of struggling to adapt following Andrea Jung's departure as CEO, Credit Suisse analyst Michael Steib initiated coverage of Avon Products Inc. with a "neutral" rating and a target price of $19 (U.S.).
"AVP's new management is making progress, albeit somewhat unevenly, toward its long-term goals of mid single-digit sales growth and double-digit margins," he said.
While many of its direct-selling competitors have experienced sales growth in the last year, Avon has lagged behind as new pilot projects experienced hiccups, changes to operational structure affected sales and emerging markets saw a slowdown in earnings.
"In theory, AVP has a beautiful business model: Skewed to EM (emerging markets) and lower-income consumers, the model has many inherent attractions, not least of which is a high-ROIC (return on invested capital) financial profile. We think management's actions are creating longer-term value for shareholders, even if that value creation may take time to materialize," he said.
The average target among analysts is $20.88, according to Thomson Reuters.
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In other analyst actions:
Credit Suisse cut its price target on George Weston to $96 (Canadian) from $102 and maintained an "outperform" rating.
Beacon Securities raised its price target on Easyhome to $22.50 from $18.50 and maintained a "buy" rating.
M Partners cut its price target on Coastal Energy to $22 (Canadian) from $24 and maintained a "buy" rating.
Desjardins Securities cut its price target on TeraGo to $9 (Canadian) from $10 and maintained a "hold" rating.
Raymond James raised its price target on Alaris Royalty to $39.75 (Canadian) from $37 and maintained an "outperform" rating.
Raymond James raised its price target on Renegade Petroleum to $1.40 (Canadian) from $1.60 and maintained a "market perform" rating.
BMO Nesbitt Burns raised its price target on Tyson Foods to $36 (U.S.) from $34 and maintained an "outperform" rating.
UBS raised its price target on Envestnet to $38 (U.S.) from $27 and reiterated a "neutral" rating.
Credit Suisse initiated coverage on Estee Lauder with an "outperform" rating and $82 (U.S.) price target.
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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities