File photo of a man passing a Couche-Tard convenience store in Montreal.The Canadian Press
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.
Street analysts are confident that shares in Alimentation Couche-Tard Inc., which rose nearly 3 per cent on Tuesday after posting impressive quarterly results, will continue their journey into record high territory.
Several analysts have aggressively boosted their price targets on the convenience store operator, while at least one -- BMO Nesbitt Burns -- upgraded its rating, effectively advising investors to jump on board ahead of further gains to come.
Couche-Tard posted a 26.8 per cent jump in second-quarter earnings to well above Street estimates, in part thanks to strong gas margins. As a further unexpected treat for investors, it announced a 14 per cent increase in its quarterly dividend.
"Overall, we view this as a strong quarterly result, with solid same-store sales numbers across the board that were further facilitated by strong cost management," commented BMO Nesbitt Burns analyst Peter Sklar as he upgraded his rating to "outperform" from "market perform."
He raised his price target to $89 (Canadian) from $64, predicting that strong cost control trends and improvements in its European businesses will continue.
He notes that generation of free cash flow has significantly improved the company's balance sheet for potential future acquisitions. And, unlike what other Canadian publicly traded retailers are facing, there is an absence of competition from foreign entrants into the convenience store space.
CIBC World Markets analyst Perry Caicco noted that Couche-Tard now has the largest market cap in the Canadian retail and consumer sector. He thinks the current high gas margins are sustainable heading into 2014 and raised his price target to $83 from $63 while maintaining a "sector perform" rating.
Elsewhere, Desjardins Securities raised its price target to $85 from $70 and maintained a "buy" rating, and Canaccord Genuity raised its target to $86 from $79.
One broker a little more cautious is Credit Suisse. It downgraded its rating to "neutral" from "outperform" and raised its price target more conservatively, to $77 from $72.
The average analyst target is $84.67, according to Bloomberg data.
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BMO Nesbitt Burns analyst Meredith Bandy downgraded Teck Resources Ltd. to "market perform" from "outperform," believing that the commodity producer's stock looks fully valued.
Ms. Bandy, who also thinks there is limited potential for near-term growth at the company, cut her price target to $29 (Canadian) from $33.
"Teck looks fully valued relative to its diversified resources peers, at 90 per cent P/NPV (price to net present value) and 6.0x estimated 2014 EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation and amortization) vs. 75 per cent and 5.3x, respectively, for the diversified peers," Ms. Bandy said.
"Also relative to its diversified peers, Teck also has fewer near-term growth options. Most of the coal expansions are complete and two key copper projects (QB2 and Relincho) have been delayed until 2019 at the earliest. Fort Hills is coming online, but is not expected to start until late 2017 with full production in 2019. As a result, Teck has limited near-term growth and net cash flow," she added.
But, on the bright side, Ms. Bandy notes that Teck will benefit when sentiment recovers in the mining sector, given that it is the sole major listed Canadian diversified miner.
The average analyst target is $33.21, according to Thomson Reuters.
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Inefficient strategies for growth has led to a worrying outlook for Intel Corp., according to RBC Dominion Securities analyst Doug Freedman, who downgraded the software and technology giant to "sector perform" from "outperform" after a meeting between analysts and executives.
Mr. Freedman also lowered his price target to $26 (U.S.) from $27.
Intel is now pouring much of its efforts into gaining a foothold in the tablet and handset market as PC sales continue to dwindle. The company has also revealed plans to begin manufacturing semiconductors for other companies and microchips for cheaper tablets.
"In the past, Intel has entered new markets with subsidies that offset less attractive solutions and, once again, that is the plan for the tablet market. Our issue is that the ROI (rate of investment) has not been supported by the opportunity…We believe Intel is spending in excess of $2-billion a year to gain share in the tablet and handset markets," he said.
Mr. Freedman questioned whether acquisitions would not be a better strategy to gain footholds in mobile, instead of spending on developing a new product.
"Our view is that the mobile market is fickle in terms of maintaining long-term customer relationships (Qualcomm and MediaTek appear to be exceptions) and that the market may not become dependent on Intel in the manner expected. Therefore, Intel could find it challenging to convert payment into enhanced customer loyalty," he said.
The average target among analysts is $23.99, according to Thomson Reuters.
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RBC Dominion Securities analyst Steve Arthur downgraded Avigilon Corp. to "sector perform" from "outperform" based on valuation concerns after the stock rallied 160 per cent so far this year.
The Vancouver-based tech company, which produces high-definition video surveillance equipment, has seen its revenues rise 100 per cent year-over-year.
"Our forecasts reflect continued strong growth in coming years, although at these levels we believe that share price valuation has caught up with current fundamentals," he said.
A recent share offering also sold 2.9 million shares and raised an estimated $100-million. "This is more than sufficient to sustain organic growth initiatives and facilitate additional tuck-in acquisitions," he said.
He raised his price target to $31 (Canadian) from $28. The average target among analysts is $28.56, according to Thomson Reuters.
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A booming market for luxury goods in Asia has led to stronger-than-expected earnings for Tiffany & Co. - and analysts today are responding.
Cantor Fitzgerald raised its price target to $98 (U.S.) from $88 and maintained a "buy" rating, while Credit Suisse raised its target to $94 (U.S.) from $89 and maintained an "outperform" rating.
The luxury jeweller now makes almost a quarter of its profits from Asia, where it has been expanding aggressively, excluding Japan. In the U.S., sales have expanded more modestly as it continues to struggle with engineering the right price-points for customers. The company also recently launched a new collection and relaunched an old one in a bid to attract more sales.
"These collections reflect the new design strategy to increase the emphasis on higher-price point items within a given collection. Strong response to more expensive gold items within these collections serves as a validation point of this strategy, and suggests incremental benefits are likely in 2014 as additional product lines are introduced," said Credit Suisse analyst Christian Buss.
Tiffany shares have had a good year, having gained over 40 per cent. The company has also benefited from lower prices for diamond, gold, silver and platinum.
"All in, results highlight the potential for future earnings leverage as the company executes on plans to improve its fashion jewelry business (40 per cent of sales), capitalizes on its iconic brand status in less developed markets (particularly Asia), and benefits from a favorable commodity environment," he said.
The average target among analysts is $88.33 according to Thomson Reuters.
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In other analyst actions:
M Partners raised its price target on Mainstreet Equity to $40 (Canadian) from $35.50 and maintained a "buy" rating.
CIBC World Markets raised its price target on Chorus Aviation to $3.75 (Canadian) from $3 and maintained a "sector perform" rating.
AltaCorp Capital downgraded Trinidad Drilling to "sector perform" from "outperform" and kept a $12 price target after an equity financing.
Industrial Alliance Securities upgraded Tecsys to "buy" from "hold" and raised its price target to $5.50 (Canadian) from $4.75.
Evercore Partners upgraded Hewlett-Packard to "equalweight" from "underweight" and raised its price target to $25 (U.S.) from $20. BMO Nesbitt Burns raised its price target to $30 from $26 while Mogan Stanley raised its target to $28 from $26. Credit Suisse raised its price target to $30 from $25.
S&P Capital upgraded Tesla Motors to "neutral" from "sell" with a price target of $130 (U.S.).
BMO Nesbitt Burns downgraded OGE Energy to "market perform" from "outperform" and cut its price target to $35 (U.S.) from $38.
SunTrust Robinson Humphrey downgraded Tilly's to "neutral" from "buy" and cut its price target to $13 (U.S.) from $20.
Canaccord Genuity raised its price target on Mosaic Capital to $13.75 (Canadian) from $11 and maintained a "buy" rating.
Credit Suisse raised its price target on Pall to $94 (U.S.) from $84 and maintained an "outperform" rating.
UBS downgraded Nuance Communication to "neutral" from "buy" and slashed its price target to $14 (U.S.) from $22.
MKM Partners initiated coverage on Twitter with a "buy" rating and $50 (U.S.) price target.
Beacon Securities cut its price target on Greenfields Petroleum to $6.75 (Canadian) from $9 and maintained a "buy" rating.
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Editor's note: An earlier online version of this article incorrectly said Canaccord Genuity cut their target price on Mosaic Capital. This version has been corrected.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities