Cameco’s Cigar Lake operation in Saskatchewan.
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.
Canaccord Genuity analyst Gary Lampard downgraded Cameco Corp. to "sell" from "hold," citing both the stock's recent appreciation and the reduced cash flows that will result from the uranium producer offloading its stake in Bruce Power LP.
"While the downgrade is mostly due to recent share price outperformance, it also reflects our view of earnings and NPV (net present value) dilution from the Bruce Power sale," Mr. Lampard said in a research note.
Cameco said last week it was selling its 31.6 per cent stake in Bruce Power for $450-million (Canadian). Mr. Lampard said that he welcomed the cash Cameco will raise from the deal, but he noted that Bruce Power was accountable for up to 30 per cent of his previous operating cash flow forecasts for Cameco in 2014 through to 2017.
Meanwhile, he raised his valuation on Cameco, expecting the stock to trade at an enterprise value 15 times EBITDA, up from his previous forecast of 12 times. He said the higher multiple reflects market anticipation of positive news for the uranium sector, including the likely initial restarts of Japanese nuclear reactors.
"However, we believe that the market remains in fundamental surplus, and with continued excess Japanese inventory build," he cautioned.
Mr. Lampard maintained a $20.50 (Canadian) price target. That's well below the average analyst target of $25.54, according to Thomson Reuters.
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As Domtar Corp. continues to successfully reposition its business into growth markets such as personal care, recent industry capacity reductions should support strong near- to medium-term profitability in the company's core white papers business, said RBC Dominion Securities analyst Paul C. Quinn.
With International Paper, the No. 1 global uncoated freesheet producer, reportedly pushing through price increases, there is now upward pricing momentum in white papers, said Mr. Quinn - especially given recent production cuts in the industry.
"Domtar continues to successfully reposition its business away from declining North American white paper markets into growing businesses such as personal care (growing at 7 per cent/year), pulp (+1-2 per cent/year) and specialty papers (GDP+ industry growth rate)," Mr. Quinn said in a research note. "With the recent acquisition of (adult diaper maker) Indas, Domtar continues to make progress toward its goal of $300-million plus of EBITDA from consumer product businesses by 2017, while at the same time returning the majority of free cash flow to shareholders."
He raised his price target on Domtar to $135 (U.S.) from $115 while reiterating his "top pick" rating. The average target is $106.57 (U.S.).
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CIBC World Markets analyst Alec Kodatsky cut his price target on Newmont Mining Corp. to $27 (U.S.) from $30 after the company forecast a 10 per cent decline in gold production this year alongside a 7 per cent rise in cash costs.
"We think this guidance is contrary to consensus expectations and expect most numbers on the Street to move lower," Mr. Kodatsky warned.
"Given 2014 cost expectations, NEM's margins look skinny at current gold prices, leading investors to increasingly question the sustainability of the dividend policy and what other steps may be taken to preserve the investment-grade rating," he added.
Mr. Kodatsky cautioned that Newmont shares face several near-term headwinds, including not only the lower production and higher costs, but also limited near-term opportunities for growth and the uncertainty surrounding its balance sheet and dividend.
He reiterated a "sector underperformer" rating. The average target is $26.92.
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The U.S. State Department's recent finding on the environmental impact of the Keystone XL pipeline is a net positive for TransCanada Corp., but not enough to warrant a target price change, according to CIBC World Markets analyst Paul Lechem.
The State Department's Final Environmental Impact Statement finds that Keystone XL, by itself, does not have a significant incremental environmental impact.
"The regulatory process now moves into the (hopefully) penultimate stage - the National Interest Determination period - which is expected to last 90 days," said Mr. Lechem. "The Presidential decision is expected thereafter. If a positive decision is reached by early summer, we still expect an early 2016 in service."
He maintained his "sector outperformer" rating and $58 (Canadian) price target. The average target is $54.10.
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Efforts at Dundee Industrial Real Estate Investment Trust to bolster the internal property management platform appear to be bearing fruit, said Desjardins Securities analyst Michael Markidis, who believes the REIT has considerable operating momentum heading into 2014.
Mr. Markidis says the 24 per cent decline in the REIT's shares over the past year makes the case for a value play, as opposed to a consolidation story that was arguably "priced to perfection" at the beginning of last year.
He maintained his "buy" rating and $10 (Canadian) price target. The average target is $10.16.
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In other analyst actions:
Dundee Securities downgraded Uranerz Energy to "neutral" from "buy" but hiked its price target to $1.80 (Canadian) from $1.50.
Dundee Securities upgraded UEX to "buy" from "neutral" and maintained a price target of 80 (Canadian) cents.
B. Riley downgraded Mattel to "neutral" from "buy" and cut its price target to $41 (U.S.) from $55.
Wells Fargo upgraded Norfolk Southern to "outperform" from "market perform" and maintained a price target range of $101-$104 (U.S.).
BMO Nesbitt Burns raised its price target on Tyson to $43 (U.S.) from $36 and maintained an "outperform" rating.
Wells Fargo upgraded Palo Alto Networks to "outperform" from "market perform" and raised its price target range to $75-81 (U.S.) from $53-56.
Barclays downgraded Exco Resources to "underweight" from "equalweight" and cut its price target to $5 (U.S.) from $7.91.
UBS hiked its price target on American Railcar to $50 (U.S.) from $35 and maintained a "neutral" rating.
UBS cut its price target on Chevron to $120 (U.S.) from $125 and maintained a "neutral" rating.
UBS raised its price target on Royal Caribbean to $57 (U.S.) from $50 and maintained a "buy" rating.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities