Hunter Harrison, CEO of Canadian Pacific Railway Limited addresses shareholders at the company's annual general meeting in Calgary, Alberta, May 1, 2014.MIKE STURK/Reuters
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
CIBC World Markets analyst Kevin Chiang downgraded Exchange Income Corp. to "sector performer" from "sector outperformer" after its shares shot up Tuesday in reaction to news that the company sold its U.S. WesTower unit for $200-million (U.S.).
Mr. Chiang said the U.S. WesTower sale was likely the best outcome for Exchange Income, but the stock's gains has reduced the expected returns to his $22 (Canadian) price target.
"With U.S. WesTower out of the picture, EIC remains extremely confident in its ability to grow the rest of its operations," Mr. Chiang commented. The transaction brings its senior long-term debt to virtually nil, providing the company with "enough dry powder" for future acquisitions, he added.
Exchange Income expects a gain of between 55 cents and 65 cents a share on the back of the sale of U.S. WesTower divestiture to MasTec Inc.
The analyst consensus price target for Exchange Income Corp. over the next year is $25.07, according to Thomson Reuters data.
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Canadian Pacific Railway Ltd. is well positioned to ride out the volatility in crude oil prices, says Credit Suisse analyst Allison Landry.
Ms. Landry said that CP management continues to expect to increase capacity to 200,000 carloads of crude in 2015 despite the recent drop in crude oil prices and narrowing of spreads.
"Importantly, CP believes that crude would have to 'take a meaningful, meaningful drop for it to really be material to the point' where it would affect guidance in both the near and long term," she says. "The rationale is that most of the growth is expected to come in the form of heavy Canadian vs. light crude. The producers of heavy crude in Western Canada have low cash costs; and there has been a substantial amount of investment in both explorers and producers as well as the construction of rail terminals."
Ms. Landry maintains her "outperform" rating and lowered her price target to $262 (U.S.) from $265. The analyst consensus price is $229.80, according to Thomson Reuters.
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RBC Dominion Securities Robert Kwan has raised his price target on Enbridge Income Fund Holdings Inc. in the wake of news last month that Enbridge Inc. will transfer $1.76-billion (Canadian) in pipeline assets and shares into the fund.
The Enbridge Income Fund Holdings unit will increase its dividend 12 per cent as it gains direct and indirect stakes in the U.S. leg of the Alliance oil pipeline and the Southern Lights pipeline through the asset transfers.
"We positively view the dropdown of Southern Lights and Alliance (U.S.) into Enbridge Income Fund due to the significant forecast cash flow accretion more than adequately underpinning a 12 per cent increase in the annual dividend coupled with delivering an increasing tilt of cash flows towards liquids infrastructure," said Mr. Kwan.
Mr. Kwan maintains his "sector perform" rating and boosted his price target to $32 (Canadian) from $30. The analyst consensus price target is $29.67, according to Thomson Reuters.
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A slump in its share price has resulted in an upgrade for Hess Corp. by UBS analyst William Featherston.
Mr. Featherston noted that over the last three months, oil prices have declined approximately 22 per cent while the exploration and production sector has fallen a steeper 24 per cent, due to lower than expected demand growth, rising Libyan supply, a stronger US dollar, and concerns the Saudis may be abandoning their policy of defending oil prices in favor of market share gains.
He expects West Texas Intermediate oil prices to trade in a range of $75 and $95. "Under this framework, Hess (which has declined 20 per cent in the last three months) screens as having an attractive valuation risk/reward, strong liquidity to withstand a potential period of low oil prices, strong leverage to oil to benefit from a recovery, and several catalysts on the horizon to improve its discount valuation," he said.
Mr. Featherston upgraded Hess to "buy" from "neutral" and maintains his $100 (U.S.) target price. The analyst consensus price target is $103.27, (U.S.).
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Chesapeake Energy Corp.'s new CEO has addressed four of the five bear arguments that have historically plagued the company, says UBS analyst William Featherston.
Mr. Featherston explains that since being appointed CEO last June, Doug Lawler's focus on capital efficiency and returns-driven growth has removed bear arguments including high leverage, lack of transparency, "material free cash flow outspend" and an expensive valuation.
"We believe CHK is positioned for a significant re-rating as the market rewards its shift towards financial discipline & improved returns, with additional upside if it uses divestiture proceeds to boost its oil inventory," he says.
Mr. Featherston is upgrading Chesapeake to "buy" from "neutral" and boosted his target price to $27 (U.S.) from $24. The analyst consensus price target is $29.17, according to Thomson Reuters.
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In other analyst actions:
Citibank cut its price target on Kinross Gold to $3.30 (U.S.) from $4.55; on Teck Resources to $19 (Canadian) from $26; and on Barrick Gold to $19 (U.S.) from $24.
Cormark Securities upgraded Canadian National Railway to "buy" from "market perform" with a price target of $85 (Canadian).
TD Securities downgraded Canaccord Genuity Group to "hold" from "buy" with a price target of $12.50 (Canadian).
TD Securities downgraded Niko Resources to "hold" from "speculative buy" with a price target of 60 cents (Canadian).
Raymond James upgraded Paladin Energy to "market perform" from "underperform" with a price target of 30 cents (Canadian).
M Partners initiated coverage on NeuLion with a "buy" rating and a $1.30 (Canadian) 12-month price target.
Societe Generale downgraded Coca-Cola to "sell" from "hold" and cut its price target to $37.50 (U.S.) from $42.
BMO Nesbitt Burns downgraded Coeur Mining to "underperform" from "market perform" and cut its price target to $4 (U.S.).
FBR Capital Markets upgraded Yahoo to "outperform" from "market perform" with a price target of $50 (U.S.)
Sanford Bernstein upgraded Texas Instruments to "outperform" from "market perform" with a price target of $54 (U.S.).
With files from Bloomberg