A man walks by a Rogers store in Toronto, Wednesday, August 15, 2013.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.
Fundamentals in the Canadian telecom and cable sector will remain supportive of continued dividend and earnings growth in 2014, Desjardins Securities analyst Maher Yaghi said today as he modestly raised his price targets for most of those stocks.
While wireless revenue growth is subsiding given the large number of smartphones already used by Canadians, the wireless arena should still see the highest growth rate among the telecoms' services, he said. Cable trends, meanwhile, remain very subdued but margins should be on an uptrend.
"While competition remains fierce for subscribers, we believe price competition has receded enough to allow business models to deliver improved profitability due to continued cost containment. We see regulatory trends as the main risk to our estimates, but clarity on that front will come only in 2H14 when governmental reviews of the wireless and TV markets in Canada are completed," Mr. Yaghi said in a research note.
He rates three stocks as a "buy": BCE Inc., with a price target of $49.50 (Canadian), up from $48; Cogeco Cable Inc., with a price target of $57.50, up from $53.50; and Telus Corp., with a price target of $41, up from $40.
His "hold" rated telecom and cable stocks are Bell Aliant Inc., with an unchanged price target of $27.50; Manitoba Telecom Services Inc., with a price target of $31.50, up from $31; Quebecor Inc., with a price target of $29.50, up from $27.50; Rogers Communications Inc., with a price target of $50.50, up from $48.50; and Shaw Communications Inc., with a price target of $26.50, up from $25.50.
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The plight of workers who manufacture Apple Inc. products has resulted in a downgrade to a 'sell' rating from Standpoint Research analyst Ronnie Moas.
The Miami Beach-based analyst made waves Monday morning with a blistering research note denouncing Apple for the conditions in factories owned by Apple contractor Foxconn. He previously rated the tech giant as a hold after reportedly downgraded it from a "buy" rating in August.
"For Apple Computers [sic] to pay their workers $2 an hour while they have $150 billion in the bank is nothing short of obscene," says Mr. Moas. He describes the "back-breaking and eye-burning work" endured by employees who are in "depressed states of mind and in many instances have already committed suicide."
"Instead of treating their employees like human beings, they are treated like animals," says Mr. Moas. He adds that Apple owes its success to its employees, and instead of rewarding them it provides only the "bare minimum and defend[s] this action with the argument that the wage is higher than the average there and in-line with what their competitors are paying."
Thomson Reuters and Bloomberg data bases have no record of Mr. Moas's recommendations on Apple. He is Standpoint's founder and director of research.
The average analyst target on Apple is $595.73.
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RBC Dominion Securities analyst Dan MacDonald upgraded Canyon Services Group Inc. to "outperform" from "sector perform," believing the company that provides pumping services in the oilpatch will benefit from increasing demand this year.
"Well drilling and licensing activity has begun to rise in the deep basin, a key pumping intensive market in Canada as operators shift capital from less pumping intensive oil plays," Mr. MacDonald said in a research note. "This is driving a tightening of pumping supply in Western Canada and should drive improved year/year operating metrics, potentially as early as fourth-quarter 2013 results."
"With about 75 per cent of its revenues generated in the Montney and Duvernay plays currently, we expect FRC to be among the primary beneficiaries of this improving market," he added.
Mr. MacDonald raised his price target to $16 (Canadian) from $13. The average price target is $13.69.
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Signs are emerging that potash markets may have turned the corner and could see a more stable and predictable outlook in 2014, CIBC World Markets analyst Jacob Bout said today as he cautiously raised his price target on Potash Corp. of Saskatchewan Inc.
The potash industry has started the year in a more positive mood as Russian potash giant OAO Uralkali and Belarusian state potash producer Belaruskali appear closer to reconciling their marketing efforts. Uralkali last summer collapsed its cartel-like entity with Belaruskali to help take market share away from rivals, sending global potash prices tumbling. But at the end of 2013, there was a change in Uralkali's management and there were comments made from the Russian ambassador that the company was ready to reconcile with Belaruskali.
Meanwhile, potash contract negotiations with China are well underway and expected to be signed by late January, Mr. Bout noted. That contact would set a floor globally for pricing and will lead other markets to resume buying as well.
"The view is that potash prices have either hit a floor or are very close to doing so, with producers being more bullish than in the previous several months. Uralkali is about to deliver up to six cargoes to Brazil in January, priced in the $310-$320/mt CFR range for the granular product. Recent requests for product at $305/mt CFR were ignored by producers, who expect to place product at slightly higher levels," Mr. Bout said.
Mr. Bout pointed out that any recovery won't be a fast one. "Soft potash demand and large potash surplus remain main issues for the potash industry. While price floor will be set by the Chinese contract, we expect a slow price recovery over the next couple years. Indian demand is uncertain given inefficient subsidy policy and rupee volatility," he said.
He raised his price target on Potash Corp. to $35 (U.S.) from $33 and reiterated a "sector performer" rating. The average target is $32.65.
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Morguard Corp., a Canada-based real estate investment firm that owns commercial and multi-unit residential properties, should perform better for investors than many of its peers if interest rates rise as expected, said RBC Dominion Securities analyst Neil Downey.
The risk of higher interest rates and their adverse impact on listed real estate investment trusts and real estate operating companies were a prime concern for equity investors last year. Yet, Morguard still managed to return 10 per cent to investors at a time when the REIT index sunk 6 per cent.
"While immunity may not be possible, we believe that such factors such as 1) operating leverage, 2) financial leverage, 3) valuation, 4) AFFO payout ratio, and 5) asset quality may all have an effect on the resiliency of a REIT/REOC business model and its equity within the context of a potentially rising interest rate environment," Mr. Downey said.
Morguard scores favourable on many of these factors, Mr. Downey pointed out as he raised his price target to $145 (Canadian) from $135 and reiterated an "outperform" rating. No other analyst tracked by Bloomberg or Thomson Reuters offers a price target on the stock.
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In other analyst actions:
Cormark Securities upgraded Encana to "buy" from "market perform" and raised its price target to $21 (U.S.) from $18.
Raymond James hiked its target on Open Text to $110 (US) from $91 and maintained an "outperform" rating.
RBC Dominion Securities raised its price target on Toromont Industries to $29 (Canadian) from $27 and maintained an "outperform" rating.
Cantor Fitzgerald Canada raised its price target on Constellation Software to $240 (Canadian) from $210 and maintained a "buy" rating.
Morgan Stanley downgraded Twitter to "underweight" from "equalweight" with a price target of $33 (U.S.)
Wells Faro upgraded Entergy to "market perform" from "outperform" and cut its valuation range to $63 (U.S.) from $64 from $65 to $66.
Wells Fargo upgraded Halliburton to "outperform" from "market perform" with a price target of $57 (U.S.).
Goldman Sachs downgraded Celgene to "sell" from "neutral" and maintained a $140 (U.S.) price target.
Goldman Sachs downgraded First Solar to "sell" from "buy" with a price target of $45 (U.S.).
Bernstein raised its price target on Google to $1,350 from $1,200 and maintained an "outperform" rating. UBS also raised its price target to $1,300 (U.S.) from $1,000 and maintained a "buy" rating.
RBC Dominion Securities upgraded Ventas to "top pick" from "outperform" and maintained a $80 (U.S.) price target.
Citigroup upgraded MGM Resorts to "buy" from "neutral" and raised its price target to $29 (U.S.) from $21.
Credit Suisse upgraded Tyco International to "outperform" from "neutral" and hiked its price target to $46 (U.S.) from $36.
UBS downgraded MetLife to "neutral" from "buy," with a price target of $58 (U.S.).
Credit Suisse downgraded Aflac to "neutral" from "outperform" and raised its target to $67 (U.S.) from $66.
Deutsche Bank downgraded Petsmart to "sell" from "hold" and cut its price target to $65 from $73.
RBC Dominion Securities downgraded Host Hotels & Resorts to "outperform" from "top pick" and reiterated a $21 (U.S.) price target.
RBC Dominion Securities initiated coverage on Valero Energy Partners with an "outperform" rating and $40 (U.S.) price target.
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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities