REBECCA COOK
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
Metro Inc. is well-positioned to benefit from improving conditions for grocery chains, which could offer some relief from the industry's intense competition, Desjardins Securities analyst Keith Howlett said.
"Metro is one of the best operators within the grocery industry, as well as an efficient user of capital. A light breeze from improving industry conditions, which we expect, will improve profitability," he said.
While the company posted declining EBITDA in its food business for its third quarter, its earnings per share grew by almost 10 per cent over the prior year, largely as a result of share buybacks, Mr. Howlett said.
The competitive outlook remains tough, but rising food inflation is increasingly being passed on to consumers. And Metro is in good position to pursue a major transaction, Mr. Howlett said.
"We continue to believe that the current challenging environment is likely to lead other key industry participants to be receptive to joining forces with Metro."
He upgraded Metro stock to "buy" from "hold" and raised his target price to $76 (Canadian) from $68.50. The analyst consensus price target is $69.05, according to Thomson Reuters.
A number of other analysts also raised their target prices on Metro following Wednesday's earnings announcement: CIBC World Markets to $75 from $70, National Bank Financial to $74 from $73, TD Securities to $72 from $68, and Credit Suisse to $70 from $66.
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Canaccord Genuity analyst Jenny Ma is downgrading HealthLease Properties REIT in light of its intention to be acquired by Health Care REIT, Inc.
HealthLease Properties REIT announced Wednesday morning that it has entered into an agreement to be acquired by Health Care REIT, Inc. for $14.20 (Canadian) per unit, in cash. The offer price equates to a 31 per cent premium to Tuesday's closing price of $10.83.
"In our view, the probability of the deal being completed as currently contemplated is very high," says Ms. Ma. "While we acknowledge that a competing bid from one of HCN's large-cap competitors is possible (at this time, it is unclear to what extent the HealthLease portfolio has been shopped around to other potential buyers), we believe that the existing bid represents an attractive valuation and generates substantial returns to the REIT's unitholders."
"Based on the C$14.20 offer price, units of the REIT have generated an annualized total return of more than 25% since HealthLease's June 2012 initial public offering; the aggregate total return since IPO is 62%."
Ms. Ma is downgrading HealthLease to "hold" from "buy" and maintaining her price target of $14.20. The analyst consensus price target is $12.94, according to Thomson Reuters.
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Solid second-quarter earnings for Alliance Grain Traders Inc. have resulted in a price target boost from Raymond James analyst Steve Hansen.
Mr. Hansen explains that Alliance's reported earnings before interest, taxes, debt and amortization of $24.4-million handily beat his estimate of $18-million, while revenue grew 45.8 per cent year-over-year to $359.8-million vs. his $304.4-million estimate.
"We continue to recommend AGT shares based upon the firm's robust core pulse platform, sustained internal efficiency gains, and long-term strategy aimed at layering on complementary, high-growth/margin businesses in the food ingredient sector," he says.
Mr. Hansen maintains his "outperform" rating and is raising his price target to $27 from $26. The analyst consensus price target $22.69, according to Thomson Reuters.
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Russel Metals Inc. not only beat analyst earnings expectations in its second quarter, it raised its dividend and said it expects favourable steel pricing and demand through the rest of this year, CIBC World Markets analyst David Galison said.
"While we continue to believe the near-term relative weakness in steel prices will continue, we expect demand to improve sufficiently," Mr. Galison said.
He upgraded the stock to "sector outperformer" from "sector performer" and raised his price target to $41 (Canadian) from $33. The analyst consensus price target is $35.50, according to Thomson Reuters.
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Credit Suisse analyst Dan Galves is initiating coverage of Ford Motor Co. with a "neutral" rating and an $18 target price.
"Ford is well positioned," says Mr. Galves, in a research note. "If we were bullish on [original equipment manufacturers], Ford would be high on the list. In the next 1-2 years, Ford will approach 100% of volume off 9 high-volume, versatile platforms and their vision years ago to shrink vehicle size and go full-bore into downsized, turbocharged engines is exactly what consumers are demanding today. But our cautious view on US demand/pricing, and our belief that NA EBIT will not snap back as quickly as the market thinks drives our Neutral rating on Ford."
He adds that while Ford is making "tremendous inroads" in China, the company has provided no specific view on future profitability. "Our deep-dive analysis points to earnings approaching $1.45 bn by 2016 from ~$800MM in 2013. We believe this is approximately in-line with the consensus. We see potential for another $1bn of earnings beyond that, but that would take another two to three plants, which is not realistic for several years."
The analyst consensus price target is $20, according to Thomson Reuters.
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In other analyst actions:
TD Securities raised its target price for Aimia Inc. to $23 (Canadian) from $22; maintains "buy" rating.
Cantor Fitzgerald raised its target price for Ag Growth International to $53 from $51, maintains "buy" rating.
CIBC raised its target price for Agellan Commercial REIT to $10.25 from $10.
Advisory Board Co. was rated new "market perform" at FBR Capital Markets by equity analyst Steven Halper. The 12-month target price is $50 (U.S.) per share .
AMAG Pharmaceuticals Inc. was rated "market perform" at FBR Capital Markets by equity analyst Andrew Berens. The 12-month target price is $21.00 per share.
TD Ameritrade Holding Corp. was rated "buy" at Deutsche Bank by equity analyst Brian Bedell. The 12-month target price is $38.00 per share.
Aruba Networks Inc. was upgraded to "buy" from "hold" at Stifel by equity analyst Sanjiv Wadhwani. The 12-month target price is $24.00 per share.
Black Diamond Group Ltd. was downgraded to "sector underperform" from "sector perform" at CIBC by equity analyst Jon Morrison. The 12-month target price is $31.50 (Canadian) per share.
Sotheby's was raised to "market perform" from "underperform" at Williams Capital by equity analyst Marc Riddick. The 12-month target price is $38.00 (U.S.) per share.
China Automotive Systems Inc. was upgraded to "buy" from "hold" at Greenridge Global by equity analyst William Gregozeski. The 12-month target price is $10.50 per share.
Carfinco Financial Group Inc. was downgraded to "market perform" from "buy" at Cormark Securities by equity analyst Jeff Fenwick. The 12-month target price is $10.00 (Canadian) per share.
Computer Modelling Group Ltd. was downgraded to "market perform" from "outperform" at FirstEnergy Capital by equity analyst Kevin Lo. The 12- month target price is $15.50 per share.