Shares of Chorus Aviation, the company behind the regional carrier Jazz Aviation, soared by almost 30 per cent on Tuesday after an arbitration panel ruled it could maintain its current cost structure on the flights it operates on behalf of Air Canada.MIKE CASSESE/Reuters
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.
Chorus Aviation Inc. is poised to hike its dividend after winning a long legal battle this week against its partner Air Canada, says RBC Dominion Securities analyst Walter Spracklin.
He raised his price target to $4.50 (Canadian) from $3.50 and maintained an "outperform" rating.
An arbitration panel ruled that Chorus could maintain its current cost structure on the flights it operates on behalf of Air Canada.
"Not only does this eliminate the $180-million back payment risk (upwards of $1.50 per share) and provides near-term cash flow visibility; the decision sets the precedent and methodology on the next benchmarking provision in 2016. As a result, we see lower risk that the next benchmarking provision will result in: 1) another protracted arbitration; and 2) an adjusted mark-up rate," Mr. Spracklin said.
He thinks Chorus should be able to hike its dividend by 50 per cent, which would yield more than 12 per cent at current valuations. A decision could come at a board meeting in December, and the increase in the dividend would take effect in the first quarter of next year.
Chorus shares rose 30 per cent on Tuesday after the ruling was made public. But Mr. Spracklin still see considerable upside.
"While the risk of the arbitration was a retro-active payment of $1.50 per share, we believe the markets were pricing in a compromise of roughly $0.75. With the shares up roughly that amount (Tuesday), the markets have now priced that in; however, they have yet to value the improved cash flow profile on a go-forward basis, in our view," he said.
"Chorus Aviation continues to do an excellent job operationally, maintaining an impressive service record while lowering its cost base," he added.
The average analyst target is $3.21, according to Thomson Reuters data.
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Raymond James analyst Theoni Pilarinos raised her price target on Mosaic Capital Corp. to $14.50 from $11 (Canadian) after the investment company reported third-quarter earnings.
She maintained an "outperform" rating, believing that the future will bring better returns for its portfolio of firms operating in the printing, oil and gas services, technology and real estate sectors.
"While the quarter was technically a 'miss', we view most of the factors as temporary in nature," Ms. Pilarinos said in a research note. "Mosaic continues to post positive organic growth, has a full deal pipeline (currently five letter of intents outstanding), and remains financially flexible to act on acquisitions (net cash of $16-million)."
The average analyst target is $13.25, according to Thomson Reuters.
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Slowing momentum in uranium exploration at UEX Corp. has prompted Dundee Securities analyst David Talbot to downgrade the company to "neutral" from "buy."
He also decreased his price target to 80 cents (Canadian) from 1.70.
The mining company currently operates a project in Shae Creek, Sask., which contains the Athabasca basin's largest undeveloped uranium resource. Progress in finding uranium ore deposits, however, has slowed.
"We believe that recent drilling at the already massive Shae Creek deposit doesn't garner enough interest, and results from along the trend have so far underwhelmed," he said, suggesting that the company would be better served in the short term by focusing on its operations further south.
Raymond James analyst David Sadowski also recommended caution on the company, maintaining a "market perform" rating but decreasing his price target to 50 cents from 80 cents.
Mr. Sadowski said that a mixture of slowing momentum and higher drilling costs have "compelled the company to reduce spending and turn its focus to shallower, but earlier-stage assets. While the company's cash position ($9.4-million Canadian) should be sufficient to fund exploration through 2014, we anticipate reduced news flow until the macro picture improves."
The average target among analysts is 80 cents, according to Thomson Reuters.
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Canaccord Genuity analyst Robert Young slashed his price target on ePals Corp. to 28 cents (Canadian) from 60 cents after new CEO Katya Anderson downplayed the likelihood of a strategic investor in the education media company.
"While we are encouraged by the company's first commercial launch in China and its positioning for a shift toward digital distribution of education media, we stay cautious on the timing of a potential turnaround and the lack of a near term strategic investor," Mr. Young said in a research note.
Management didn't see strong odds of finding a strategic investor in the near term, but it did see potential operating deals as its platform matures. "In our view, the value of the user base, platform and media assets to a strategic buyer is well above the current market value," said Mr. Young, who reiterated a "speculative buy" rating.
The average target among analysts is 40 cents, according to Thomson Reuters.
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Anthony Petrucci of Canaccord Genuity cut his price target to 65 cents (Canadian) from 85 cents on Pinecrest Energy Inc. after the company missed third-quarter production expectations. He maintained a "speculative buy" rating.
Pinecrest, which specializes in oil and gas exploration, reported production levels well below the company's guidance, as well as overspending on its new waterflood programs.
"Production levels were hampered during the quarter due to a facility turnaround that took longer than expected. The company quoted current production of 2,650 boe/d (barrels of oil equivalent per day), which suggests, in our view, that it will be difficult for the company to reach its exit rate guidance of 3,100 to 3,400 boe/d," he said.
The company has been vocal over the past year about the monetary benefits of a shift towards waterfloods, which pushes water through underground formations to flush oil towards nearby wells.
"If the recent waterflood programs and those expected in 2014 yield similar results, it could significantly lower PRY's corporate declines. The company estimates it currently has about one-third of corporate production under waterflood," he said.
Dundee Securities also cut its price target to 90 cents from $1.20 and maintained a "buy-high risk" rating.
The average target among analysts is 80 cents, according to Thomson Reuters.
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Canaccord Genuity analyst David Tyerman said he has faith that Exco Technologies Ltd. will successfully emerge from a new investment phase as he maintained a "buy" rating for the industrial and auto components company.
He also increased his target to $8 (Canadian) from $7.25.
"We believe Exco (XTC) is beginning an investment phase that should drive the next leg of growth for the firm. We expect investment related startup costs to reduce profitability below potential in fiscal 2014, but we expect these investments to ultimately generate good returns on an increased capital base. "
Though revenues have improved minimally mainly due to increased North American light vehicle production, higher operation and production costs affected bottom lines, which was made worse by inefficiencies arising from equipment upgrades.
"We believe the medium-term outlook is much better for XTC, driven largely by the Brazil and Thailand expansion initiatives. Management commented that these should add $30-million to $40-million of sales in the medium-term, much more than we had expected."
The average target among analysts is $7, according to Thomson Reuters.
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In other analyst actions:
Raymond James cut its price target on Detour Gold to $11 (Canadian) from $15 and maintained an "outperform" rating.
BMO Nesbitt Burns cut its target on Fairfax Financial to $430 (Canadian) from $440 and maintained a "market perform" rating, as it comes off coverage restriction following an equity financing.
CIBC World Markets analyst David Noseworthy raised his price target on Keyera to $65.50 (Canadian) from $62 and maintained a "sector outperformer" rating.
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Editor's Note: An earlier online version of this article incorrectly said Ms. Pilarinos had cut her price target on Mosaic Capital. This version has been corrected.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities