Canadian Pacific Rail CEO Hunter Harrison addresses the company's annual meeting in Calgary, Thursday, May 1, 2014.Jeff McIntosh/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.
InterRent REIT's recent pullback "is unwarranted, and current valuation presents a compelling entry point for investors, given (its) value-creation strategy and management's significant experience operating in different cycles," said Raymond James analyst Ken Avalos.
Its units "now trade at a 6.1 per cent implied cap rate, or what we believe to be at least a 50-75 basis point discount to the private market. Additionally, InterRent trades at a 13 per cent discount to our net asset value, providing what we view as a very attractive risk/reward equation," he wrote in a research note.
Target: Mr. Avalos upgraded his rating to "strong buy" from "outperform" and has a target price of $6.50. The analyst consensus price target for InterRent over the next year is $6.51, according to Thomson Reuters.
–––
WSP Global's acquisition of Parsons Brinckerhoff "meaningfully expands" its exposure to the U.S. and should help management deliver on its goals for 2015 and 2020, said Desjardins Securities analyst Benoit Poirier.
"We firmly believe that this transaction has considerable strategic significance for WSP, especially with respect to growth in key end markets," he wrote in a research note.
"The addition of Parsons Brinckerhoff provides a modest increase to our valuation, with potential for further upside should WSP deliver more cost synergies than expected."
Target: Mr. Poirier raised his target price to $45 from $42 and rates the stock "buy."
Separately, Raymond James analyst Frederic Bastien said the deal would "transform WSP into one of the largest pure-play engineering firms globally." He raised his target price to $46 from $42. The analyst consensus price target for WSP Global over the next year is $42.14, according to Thomson Reuters.
–––
Canadian Solar Inc. will gain from limited capacity to meet strong demand for solar panels, particularly from Asia, said Canaccord Genuity analyst Josh Baribeau.
"With the strength in the markets, some tightness in demand and price stabilization is likely into the fourth quarter and exiting the year, benefitting module makers such as Canadian Solar," he wrote in a research note.
"After a slow start to the year we believe that China will hit its aggressive installation target of 13GW and remain a resilient market in the coming years following a positive change to its rooftop and commercial policy. The other major geographies such as the U.S., Japan, U.K. and emerging markets also remain strong, with minimal pricing pressures."
"We continue to believe that Canadian Solar's project pipeline puts it in an enviable position among its Chinese manufacturing peers who have yet to gain significant footholds in the often-more lucrative international markets."
Target: Mr. Baribeau raised his price target to $48 (U.S.) from $44 and rates the stock "buy." The analyst consensus price target over the next year is $43.56, according to Thomson Reuters.
–––
Another Transocean Inc. rig has gone idle, and it won't be the last, says Credit Suisse analyst Gregory Lewis.
Transocean's ultra-deepwater (UDW) drill ship Jack Ryan has been idled, bringing the company's idle fleet count to three, explains Mr. Lewis.
"RIG has another six UDW rigs rolling off contract by year end - we expect more rigs to idle later this year," he says.
Target: Mr. Lewis maintains his "neutral" rating and is lowering his price target to $30 (U.S.) from $35. The analyst consensus price target is $36.52, according to Thomson Reuters.
–––
Two analysts have raised their price targets for Canadian Pacific Railway, whose share price has soared by 40 per cent this year amid strong profit growth and expectations for more.
Walter Spracklin, an equity analyst with RBC Capital Markets, raised his 12-month target to $205 from $175 as the Calgary-based company continued to post higher earnings through 2016. In a research note to clients, Mr. Spracklin said his new price target was based on a price-to-earnings multiple of 18 applied to his 2016 profit forecast of $11.31 a share. By 2016, he expects freight volume will grow by 2 per cent and operating ratio will improve by 300 basis points.
"The 18-times multiple is above the peer average due to CP's strong operating momentum and earnings potential, but below CP's direct competitor as we see risks to the earnings level implied in the stock today that could cause share price volatility going forward," said Mr. Spracklin, who likes the rail sector for its potential to post higher freight rates and volumes for the next three to five years. He rates the stock "sector perform."
Meanwhile, Salman partners analyst Kam Mangat increased her 12-month share-price target to $240 from $222. To reach the higher target, Ms. Mangat applied an earnings multiple of 18.5, up from 18.
She rates CP shares a "buy" based on the potential for strong earnings, higher dividends and share buybacks in addition to expectations for real estate sales.
Target: The 12-month analyst consensus for CP shares is $223.25, according to Bloomberg.
–––
In other analyst actions:
- BlackBerry Ltd. was downgraded to "market perform" from "speculative buy" at Cormark Securities by equity analyst Richard Tse. His 12- month target price is $11.50 per share.
- Chevron Corp. was rated new "neutral" at JPMorgan by equity analyst Phil Gresh. The 12-month target price is $133.00 per share.
- DIRTT Environmental Solutions was rated new "buy" at Laurentian Bank by equity analyst Michael Glen. The 12-month target price is $5.00 (Canadian) per share.
- Cenovus Energy Inc. was rated new "overweight" at JPMorgan by equity analyst Phil Gresh. The target price is $36.00 per share.
- Fluor Corp. was downgraded to "market perform" from "outperform" at Wells Fargo by equity analyst Justin Ward.