Air Canada stock has risen by more than 50 per cent in the past five weeks.The Globe and Mail
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.
BMO Nesbitt Burns' Fadi Chamoun has become one of the most optimistic analysts on the Street when it comes to Air Canada stock, after a recent meeting with senior management spurred him into raising earnings forecasts for the airline.
Mr. Chamoun raised his price target today to $10 (Canadian) from $7.50, while reiterating an "outperform" rating. That's well above the consensus Street target, according to Bloomberg data, of $7.90.
His discussions with the airline covered a broad range of issues, ranging from its cost reduction strategy to the competitive landscape.
Air Canada should see further significant cost reductions next year, thanks in part to deploying five new high-density Boeing 777 aircraft and other maneuvers involving its aircraft, he said. "Against this positive cost-reduction backdrop, the demand environment remains favourable and Air Canada's lowered cost structure (via the Air Canada rouge brand) is also underpinning growth in new routes. The combination of lower costs and growing revenues should enable strong improvement in margins and ROIC (return on invested capital)," Mr. Chamoun said in a research note.
He now expects the airline to post earnings per share of $1.39 in 2014, up from his previous forecast of $1.32.
"The increase in our price target is a function of (1) a modest increase in our forecast; and (2) an increase in our valuation multiple from 4.4 times to 4.7 times EV/EBITDAR, which we believe is reasonable in the context of the significant expansion in airline stock multiples over the last year," he said.
Shares in Air Canada are up 1.4 per cent at the TSX open.
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RBC Dominion Securities initiated coverage on several fertilizer producers today, and is pointing investors more towards Agrium Inc. and Mosaic Co. than Potash Corp. of Saskatchewan Inc.
RBC initiated coverage on Potash Corp. with a "sector perform" rating and $35 (U.S.) price target. Agrium got an "outperform" rating and $115 (U.S.) price target, and Mosaic received an "outperform" rating and $57 (U.S.) price target.
RBC analyst Chris Nocella believes Agrium has the highest upside potential of all its peers.
"Agrium has built the most diverse, vertically integrated agricultural input business with continued opportunities to expand both organically and through acquisitions," Mr. Nocella said in a research note. "We believe the company has a clear path to strong earnings growth from both its retail and wholesale businesses that will translate to robust cash flows with lower volatility."
But he also thinks Mosaic has strong potential to please investors, given that the significant investments it has made to grow its potash and phosphate businesses has given it broad exposure to what he anticipates will be improving demand for both commodities.
He also thinks that Potash Corp. is "well positioned" to meet rising potash demand and capture market share as new expansion projects come online over the next couple of years and its recent cost reduction efforts take hold.
Although Mr. Nocella sees less upside for Potash Corp. than the others, he notes its peer-leading dividend yield of 4.4 per cent will provide downside support.
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Raymond James analyst Steven Li raised his price target on Evertz Technologies Ltd. to $19 (Canadian) from $17.50 and maintained his "outperform" rating amid signs that the company is bouncing back from three consecutively weak quarters.
The equipment provider to the broadcasting industry reported a slightly more positive fiscal 2014 second quarter as well as record international earnings, which accounted for over half of total revenues.
The company also has a busy sports year ahead, with a roster that includes the Winter Olympics, the FIFA World Cup, the Commonwealth Games as well as US midterm elections.
"This coupled with consumer trends such as Ultra HD and over the top TV options/TV everywhere (multiple screens) should continue to drive studio upgrades by broadcasters. Evertz's balance sheet remains pristine," he said.
Canaccord Genuity analyst Robert Young also maintained a "hold" rating and increased his target to $17 from $15.
"2013 is a transition year for the broadcast space and is the weakest year in the industry four-year cycle given a lack of major sporting (i.e., Olympics, UEFA, etc) and political events. We expect improvement in 2014 driven by events and mid-term elections," he said.
The average target among analysts is $16.50, according to Thomson Reuters.
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Canaccord Genuity analyst Bobby Burleson reiterated a "buy" rating and hiked his price target to $85 (U.S.) from $65 on 3D Systems Corp., as the company appears primed to take on the consumer 3D printing market with the announcement of several significant products in development.
The company recently revealed that it has been refining its technology to be able to print full colour, multiple materials such as plastic and rubber, and continuous production versus batch production. Over a half dozen projects are also in development to be aimed at specific industries such as dental and jewelry.
"Revenue growth is being driven by strong organic demand, a continuing expansion of new products (metal, software, and others), looming consumables growth acceleration, and an expanding consumer channel," he said.
3D Systems is also involved in in a project with Motorola, now owned by Google, manufacturing customizable cellphones with replaceable parts. Mr. Burleson expects that increased investor interest will come from this project during the Mobile World Progress conference in 2014.
The average target among analysts is $70.73, according to Thomson Reuters.
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Pacific & Western Bank of Canada is a "forgotten" financial institution that is making big strides in its operating metrics, said Industrial Alliance Securities analyst Fred Westra as he initiated coverage with a "speculative buy" rating and $8 (Canadian) price target.
Pacific & Western operates under two segments: credit card lending and commercial lending. While its revenue dropped from $32.4-million in 2012 to $25.6-million in 2013, it's expected to rise again to $34.3-million in 2014, Mr. Westra said. And "earnings quality" is rising dramatically, as net interest income rose from 60 per cent of revenue last year to near 100 per cent this year and next, he said.
Meanwhile, he thinks the bank is well positioned to withstand future increases in interest rates.
"If interest rates were to rise, PWB would actually benefit from NIM (net interest margin) expansion positioning them favourably vs. many specialty lenders in Canada," he said. "This is because PWB is long funded, treasury operations currently have negative spreads, which would turn positive if rates rose."
The stock went public earlier this fall; there is no other analyst coverage available.
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CIBC World Markets cut its price target on Bank of Montreal to $77 (Canadian) from $78 and maintained a "sector underperform" rating. RBC Dominion Securities raised its price target to $71 (Canadian) from $69 and maintained a "sector perform" rating.
Goldman Sachs downgraded Citibank to "neutral" from "conviction buy" but raised its price target to $60 (U.S.) from $58.
Goldman Sachs upgraded U.S. Bancorp to "conviction buy" from "neutral" and raised its price target to $44 (U.S.) from $40.
JPMorgan downgraded AT&T to "neutral" from "overweight" with an unchanged price target of $38 (U.S.).
Raymond James cut its price target on Copper Mountain Mining to $3.25 (Canadian) from $3.75 and maintained an "outperform" rating.
RBC Dominion Securities upgraded Johnson Controls to "outperform" from "sector perform" and raised its price target to $61 (U.S.) from $45.
Credit Suisse cut its price target on Kinder Morgan to $40 (U.S.) from $45 and maintained an "outperform" rating.
UBS raised its price target on Navistar International to $46 (U.S.) from $38 and maintained a "buy" rating.
M Partners initiated coverage on Temple Hotels with a "buy" rating and $7 (Canadian) price target.
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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities