Shares of Manitoba Telecom Services Inc. slumped on Friday after two analysts downgraded their ratings.Joe Bryksa
Inside the Market's roundup of some of today's key analyst actions. This file will be updated often during the trading day so check back for new details.
Fears over the sustainability of Manitoba Telecom Services Inc.'s dividend have provoked an overly harsh sell-off, according to CIBC.
Unlike other telecoms, which have benefitted from inflows and higher valuations as the price of oil has collapsed, the demand for yield-oriented investments has not worked in Manitoba Telecom's favour.
The company's pension shortfall has become an anchor on the stock, which is down more than 12 per cent year to date.
Falling bond yields would usually aid a stock with a solid dividend yield, however, in this case, it has seemingly exacerbated the company's pension woes.
"Come May 7, when a refreshed strategy is set to be announced, we believe the most likely course of action will be a [dividend] cut of 40 per cent, given other options (capex cut, letters of credit, use of balance sheet) are not viable," said analyst Robert Bek.
The sale of its Allstream business would be an "ideal outcome," according to the analyst, but that doesn't look to be imminent.
Borrowing from Warren Buffett, Mr. Bek advises investors to "be greedy when others are fearful."
He upgraded the stock to "sector outperformer" from "sector performer" and boosted the price target to $28 (Canadian) from $27.
The average analyst price target is $26.65.
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Though the second quarter financial results for Shaw Communications Inc. met expectations, CIBC World Markets analyst Robert Bek said subscriber metrics were "well shy across the board."
Mr. Bek pointed to a CRTC decision that mandated that telecommunications providers could no longer require customers to provide 30 days of notice ahead of the cancellation of services.
"The end result was a catch-up quarter, effectively seeing subscriber losses come in worse than we had modelled," he said.
Shaw reported a decline in net cable television additions of 33,500, compared to a decrease of 19,300 during the same period in 2014; a drop in Internet additions of 4,400, versus an increase of 8,400 in 2014; and a drop of 16,600 in telephone service, versus an increase of 3,200 in 2014.
"We had expected Shaw's results to be modest, but solid, and these numbers were just that, when one-time effects were considered," he said.
He lowered his price target to $29 (Canadian) from $29.50, saying his forecast is "less optimistic." The analyst consensus is $29.80, according to Thomson Reuters.
At National Bank, Shaw was raised to "sector perform" from "underperform." The 12-month target price is $28.50 per share.
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After Gran Tierra Energy Inc.'s more than 50-per-cent rally from its February lows, the risk/reward proposition has diminished, says Canaccord Genuity.
"In the current volatile commodity price environment, we do not believe the potential upside merits an accumulation of additional Gran Tierra shares," said analyst Christopher Brown.
The company trades modestly above its risked net asset value, according to the analyst, while many of its peers trade below their base reserve values.
Gran Tierra does have $330-million in cash, but it is uncertain how it will be used.
"We note that even if the company were to deploy all of its $330-million of capital for a 20-per-cent return, it would only add about 28 cents per share of value to shareholders," Mr. Brown said.
The analyst lowered the rating on the stock to "hold" from "buy" and maintained a price target of $4 (Canadian). Meanwhile, the stock was downgraded to "market perform" from "buy" at Cormark Securities with a target price of $4.50 per share.
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Freight mix and incremental hiring and training costs are to blame for a year-over-year earnings decline for Norfolk Southern Corp., said Credit Suisse analyst Allison Landry.
Norfolk pre-announced first quarter for fiscal 2015 earnings per share of $1 (U.S.), below both Ms. Landry's estimate and the consensus of $1.26.
Ms. Landry said: "While the company specifically called out negative intra-commodity mix within its coal; metals and construction; chemicals; and automotive franchises, we suspect NSC saw the most severe hit to profits from weakness in its highly profitable export met coal business as export volumes were 'significantly lower' in the first quarter."
The company did see improvements in prices to five of its seven commodity groups, while seeing flat pricing in two others, but that was not enough to offset the mix effects.
Ms. Landry said another setback is the company's announcement that it expects performance metrics, including train speed and "terminal dwell" (the time loaded cars spend waiting to move), to normalize by the third and fourth quarters. It was previously expected that service level would be restored by May.
She dropped his target price to $100 (U.S.) from $107. The consensus is $111.
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Dundee Capital Markets analyst Brian Kristjansen said Penn West Petroleum Ltd.'s $321-million deal to sell royalty production and mineral title lands to Freehold Royalties Ltd. is "a relatively easy one."
Mr. Kristjansen, however, said the next deal, as Penn West aims to cut its debt, will be quite challenging -- the company's Manitoba assets, which he said "have declined precipitously" over the past two years.
"We continue to believe that Penn West's new management team is doing the right things with respect to improving corporate efficiencies and netbacks, reducing debt and focusing on core play economics, though the company is a large one and turning it around takes time," he said. "With production forecast to decline through our 2016 forecast horizon we are reiterating our sell recommendation."
With the reduced debt and limited impact on existing operations of the Freeland deal, the analyst raised his price target to $1.75 from $1.25. The consensus is $2.56.
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In other analyst actions:
Alcatel-Lucent was downgraded to "market perform" from "outperform" at Sanford Bernstein. The 12-month target price is $5.06 (U.S.) per share.
Laurentian Bank resumed coverage of Detour Gold Corp. with a "buy" rating and price target of $16.40.
GoPro Inc. as upgraded to "overweight" from "neutral" at Piper Jaffray.
Intel Corp. was raised to "outperform" from "sector perform" at RBC.
Vale SA was lowered to "neutral" from "overweight" at JPMorgan.
ArcelorMittal was rated new "buy" at Clarkson Capital Markets. The target price is $12 (U.S.) per share.
United States Steel Corp. was rated new "sell" at Clarkson Capital Markets. The target price is $18 (U.S.) per share.
BNK Petroleum Inc. was downgraded to "speculative buy" from "buy" at Cormark Securities. The target price is 75 cents (Canadian) per share.
Bellatrix Exploration Ltd. was downgraded to "market perform" from "buy" at Cormark Securities. The target price is $4 (Canadian) per share.
Claude Resources Inc. was rated new "buy" at Paradigm Capital. The 12-month target price is $1 (Canadian) per share.
Strategic Oil & Gas Ltd. was downgraded to "speculative buy" from "buy" at Cormark Securities. The target price is 20 cents (Canadian) per share.
Buffalo Wild Wings Inc. was rated new "outperform" at Cowen. The 12-month target price is $225 (U.S.) per share.
Chipotle Mexican Grill Inc. was rated new "outperform" at Cowen. The 12-month target price is $775 (U.S.) per share.
GoPro Inc. was raised to "overweight" from "neutral" at Piper Jaffray. The 12-month target price is $55 (U.S.) per share.
Habit Restaurants Inc. was rated new "market perform" at Cowen. The 12-month target price is $35 U.S.) per share.
Hi-Crush Partners LP was downgraded to "neutral" from "outperform" at Robert Baird. The 12-month target price is $42 (U.S.) per share.
Intel Corp. was raised to "outperform" from "neutral" at Wedbush. The 12-month target price is $37 (U.S.) per share. The stock was raised to "outperform" from "sector perform" at RBC Capital with a target price of $40 (U.S.) per share.
McDonald's Corp. was rated new "market perform" at Cowen. The 12-month target price is $100 (U.S.) per share.
NIKE Inc. was raised to "overweight" from "neutral" at Piper Jaffray. The 12-month target price is $115.00 per share.
Nokia OYJ was raised to "market perform" from "underperform" at Sanford Bernstein. The 12-month target price is $9.20 (U.S.) per share.
Panera Bread Co. was rated new "market perform" at Cowen. The 12-month target price is $170 (U.S.) per share.
Restaurant Brands International Inc. was rated new "market perform" at Cowen. The 12-month target price is $40 (U.S.) per share.
Rosetta Resources Inc. was downgraded to "underperform" from "neutral" at Macquarie. The 12-month target price is $17 (U.S.) per share.
Starbucks Corp. was rated new "outperform" at Cowen. The 12-month target price is $56 (U.S.) per share.