A woman speaks on her cell phone in front of a Rogers Communications Inc. sign in TorontoMark Blinch/Reuters
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.
The sell-off in Rogers Communications Inc. has created "an ample margin of safety" against more bad news, according to Bank of America.
Even though further downward revisions to 2015 earnings are likely in light of the telecom's disappointing first-quarter results and the Canadian Radio-television and Telecommunications Commission is likely to introduce regulations that favour new entrants, analyst Glen Campbell doesn't think this will cause the company much pain.
"We consider RCI is uniquely positioned to offset the impact of such a [regulatory] regime by establishing a network-sharing arrangement with Wind," he wrote.
Rogers has underperformed compared to the other two big telecoms by a substantial margin in 2015, and Mr. Campbell sees much room for free cash flow to improve over the coming years as the company restructures or divests unprofitable operations.
"We project that free cash flow yield will reach 10 per cent by 2020E, with Cable and Wireless earnings before interest, taxes, depreciation, and amortization flat," he said. "Current cash flow is depressed by high current spending on cable network upgrades, losses on conventional media and other ventures."
The analyst also notes that this stock is unloved amongst his colleagues, with just six out of 24 rating the stock a "buy."
Mr. Campbell upgraded the stock to "buy" from "neutral" and maintained a price target of $47.75 (Canadian).
The average analyst price target is $45.84.
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Agrium Inc. will face bigger headwinds in the first half of 2015 than previously anticipated, said Citigroup in downgrading the stock on Wednesday.
In listening to the recent conference calls from Monsanto Co., E.I. du Pont Nemours and Co., and Syngenta AG, analyst P.J. Juvekar got a sense that crop protection inventories are high, which would adversely affect Agriuim.
He expects acute weakness in its retail business, which accounted for 64 per cent of adjusted earnings before interest, taxes, depreciation, and amortization in 2014, in the near-term.
"In our view, crop protection chemicals and crop nutrients are the most at risk segments (~76 per cent of sales), while seeds are unlikely to repeat the +30 per cent increase in profits seen in 1H14 due to higher competition and lower corn acres planted," said Mr. Juvekar. "Given that farmer incomes are expected to be down ~32 per cent according to USDA, we think growers are likely to spend less at the retail store to conserve cash."
He added that Agrium's guidance for full-year 2015 appears to be overly optimistic, particularly at the upper end of the expected profit range.
The analyst downgraded the stock to "sell" from "neutral" and reduced his price target to $95 (U.S.) from $111.
The average analyst price target is $119.31.
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BMO Capital Markets analyst David Maris said he does not see shares of Mylan N.V. underperforming in the near future following an offer from Teva Pharmaceutical Industries Ltd. to buy the company for $82 (U.S.) per share.
Accordingly, Mr. Maris upgraded Mylan from "underperform" to "market perform."
Teva estimated the proposed deal will raise earnings per share by close to 30 per cent by the third year following the deal and would generate almost $2-billion in synergies.
It comes as Mylan is reportedly considering another offer for Perrigo Co Plc after an initial bid of $205 (U.S.) per share was rejected and deemed to undervalue the Dublin-based company.
"While we have previously had an 'underperform' rating on Mylan, preferring Actavis and Teva over Mylan, we respect that Mylan has been executing on the strategy it has set out," he said "We do not know how hard Mylan will fight this bid from Teva, and we do not know what Mylan shareholders will do. Mylan will need to convince investors that the future with Perrigo and further time is better than the combined Teva deal. This might be a challenge given the sector M&A frenzy and the logic that consolidation brings synergies that get delivered shareholders."
Even if rejected, Mr. Maris said such offers often forces management to articulate clear strategies for the future.
"We believe the likelihood is Mylan shareholders will extract more from Teva or Mylan will successfully defend against the Teva deal with an even more compelling future," he said.
The analyst raised his price target to $82 (U.S.) from $75. The analyst consensus is $66.14.
Meanwhile, Teva Pharmaceutical Industries Ltd. (TEVA-N) was downgraded to "market perform" from "outperform" at BMO Capital Markets. The 12-month target price is $75 (U.S.) per share.
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CIBC World Markets analyst Robert Bek reinstated coverage of TVA Group Inc. following the closing of its acquisition of 14 magazines and three websites from Transcontinental Inc for $55-million (Canadian) and the addition of recently acquired Vision Globale, a Quebec-based production company.
Mr. Bek is maintaining his "sector underperformer" rating and said: "We continue to anticipate headwinds in the core TV business, and much more volatility at Vision Globale going forward."
He lowered his price target to $6 from $8.50. The analyst consensus is $6.56.
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Though first quarter earnings per share and margins for Chipotle Mexican Grill Inc. beat analyst expectations, a slight miss with its same-store sales is likely to exert pressure on share prices, said Credit Suisse analyst Jason West.
SSS increased by 10.4 per cent versus a 12-per-cent estimate. Coupled with the company's expectation that comparable SSS will moderate through the next two quarters due to pricing and traffic, Mr. West is lowering his 2015 and 2016 earnings-per-share estimate from $17.52/$20.89 (U.S.) to $17.23/$20.50.
"While the SSS result and outlook was somewhat disappointing, we are not panicking given: 1) we knew [comparables] would be difficult in the upcoming quarters, 2) [management] has a track record for conservatism, and 3) the macro backdrop, a growing marketing budget, and throughput initiatives should provide support to comps," he said. "Also, shares had already been trading off the recent highs due to concerns around [second-quarter/third quarter comparables."
Mr. West is lowering his price target to $770 from $785 (U.S.). The consensus is $745.88.
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Due to "near-term investment concerns," Accountability Research Corp. is downgrading Dollarama Inc. to "hold" from "buy."
The firm says the discount retailer's share price has been helped as investors shy away from energy stocks. However, "its valuation is at risk from continued [foreign exchange] headwinds and slowing longer term store growth. We expect greater upside from [rival] Dollar Tree [DLTR-Q] over the next 12 months," said analyst Mark Suarez.
While the evenutal increase in the price of oil lifting the loonie will help Dollarama, "the company would still face a 6- to 12-month drag from purchase commitments made when the dollar is low. Dollarama's pricing power would help to partially mitigate this drag," the analyst said.
The retailer ended fiscal 2015 with 81 net new stores, higher than the 75 estimate by the Mr. Suarez, who exoects 75 new stores again in fiscal 2016. But ARC expects "that pace to slow as management moves towards its overall target of 1,400 stores in the Canadian market (up from 1,200 previously)."
Mr. Suarez raised his fiscal 2016 earnings per share estimate to $2.58 and now has a $3.03 EPS estimate for fiscal 2017.
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In other analyst actions:
Rogers Communications Inc. was upgraded to "buy" from "neutral" at Bank of America.
Black Diamond Group Ltd. was downgraded to "market perform" from "outperform" by Raymond James.
Trican Well Service Ltd. was lowered to "underperform" from "market perform" at Raymond James.
Encana Corp. was initiated with a "buy" rating at Nomura.
Catamaran Corp. was lowered to "hold" from "buy" at Maxim Group.
Amazon.com Inc. (AMZN-Q) was downgraded to "hold" from "buy" at BGC Partners. The 12-month target price is $375 (U.S.) per share.
Counsel Corp. (CXS-T) was rated new "buy" at Laurentian Bank. The 12-month target price is $3.10 (Canadian) per share.
Dollarama Inc. (DOL-T) was downgraded to "hold" from "buy" at Accountability Research. The target price is $76 (Canadian) per share.
Firm Capital Mortgage Investment Corp. (FC-T) was raised to "buy" from "hold" at TD Securities. The 12-month target price is $13.50 (Canadian) per share.
First Quantum Minerals Ltd. (FM-T) was raised to "top pick" from "buy" at Salman Partners. The 12-month target price is $30.30 (Canadian) per share.
Halogen Software Inc. (HGN-T) was rated new "buy" at TD Securities. The 12-month target price is $13 (Canadian) per share.
UrtheCast Corp. (UR-T) was rated new "speculative buy" at Clarus Securities. The 12-month target price is $4 (Canadian) per share.
Altera Corp. (ALTR-Q) was downgraded to "neutral" from "overweight" at Piper Jaffray by equity analyst Ruben Roy. The 12-month target price is $42.00 (U.S.) per share.
Alcatel-Lucent (ALU-N) was raised to "outperform" from "market perform" at Sanford Bernstein by equity analyst Pierre Ferragu. The 12-month target price is $6.21 per share.
Chipotle Mexican Grill Inc. (CMG-N) was downgraded to "market perform" from "outperform" at Raymond James by equity analyst Brian Vaccaro.
ConocoPhillips (COP-N) was downgraded to "hold" from "buy" at Edward Jones by equity analyst Brian Youngberg.
Catamaran Corp. (CTRX-N) was downgraded to "hold" from "buy" at Maxim Group by equity analyst Anthony Vendetti.
Gran Tierra Energy Inc. (GTE-T) was raised to "speculative buy" from "Market Perform"
Marriott International Inc. (MAR-N) was raised to "buy" from "neutral" at MKM Partners by equity analyst Christopher Agnew. The 12-month target price is $100.00 per share.
Nokia OYJ (NOK-N) was raised to "outperform" from "market perform" at Sanford Bernstein by equity analyst Pierre Ferragu. The 12-month target price is $10.35 per share.
Transocean Ltd. (RIG-N) was downgraded to "sell" from "hold" at Edward Jones by equity analyst Rob Desai.
RSP Permian Inc. (RSPP-N) was rated new "buy" at Wunderlich by equity analyst Irene Haas. The 12-month target price is $34.00 per share.
Scholastic Corp. (SCHL-N) was downgraded to "hold" from "buy" at Gabelli & Co. by equity analyst Barry Lucas.
Stellus Capital Investment Corp (SCM-N) was rated new "neutral" at Janney Montgomery by equity analyst Mitchel Penn. The 12-month target price is $14.00 per share.
STMicroelectronics NV (STM-N) was rated new "buy" at Craig-Hallum by equity analyst Anthony Stoss. The 12-month target price is $13.00 per share.
Targa Resources Corp. (TRGP-N) was downgraded to "equal-weight" from "overweight" at Capital One Securities by equity analyst Charles Marshall. The 12-month target price is $112.00 per share.
Tribune Media Co. (TRCO-N) was rated new "hold" at Jefferies by equity analyst John Janedis. The 12-month target price is $63.00 per share.
With files from Bloomberg News