Inside the Market’s roundup of some of today’s key analyst actions
Transportation and logistics company TFI International (TFII-T) posted “impressive” second quarter results and Desjardins has boosted its target price on the stock.
“TFII reported impressive second quarter results, with further encouraging signs of operational improvement. Adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] of $187-million beat our forecast of $153-million. Management also increased its 2018 EBITDA guidance to $635-million to $645-million (from $610-million to $615-million) to reflect the solid operational performance. TFI remains confident in its ability to improve margins across all divisions. Consequently, we maintain our bullish stance on the name. Our target is now $48 (was $41) and we maintain our Buy rating,” said analyst Benoit Poirier.
The median price target is $43, according to Zack’s Investment Research.
“Management increased its outlook to reflect the solid improvement in its business and the robust market conditions in the trucking industry. Consequently, management increased its 2018 EBITDA guidance to $635-million to $645-million (from $610-million to $615-million initially). On top of that, management continues to expect improvement in profitability across all segments during the year. For the U.S. TL segment, management continues to see gradual improvement throughout the year as contractual rates increase along with the renewal process,” he said.
“Raising [our] target to $48 (from $41) following the increase in our estimates and valuation multiples to reflect recent improvement in all business segments. Our new target is based on the average of three valuation methods: (1) a 16.0 times multiple on our 2019 adjusted EPS estimate, (2) a 7.75 times EV [enterprise value]/EBITDA multiple on our 2019 EBITDA estimate (7.5 times previously), and (3) a DCF [discounted cash flow] value of $48.16 (was $40.52).”
Also, CIBC raised its price target on TFI to $47 from $45; National Bank of Canada raisesd its target to $49 from $44; and TD Securities raised its target price to $53 from $45 and boosted its rating to buy from hold.
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After Maple Leaf Foods Inc. (MFI-T) reported softer-than-expected second-quarter results, Canaccord Genuity cut its price target on the company.
“Maple Leaf reported softer-than-expected Q2/18 earnings results. Revenue of $909-million was below last year at $926-million. EBITDA of $92-million was below our estimate of $101-million, and last year at $103-million. The EBITDA margin declined to 10.1 per cent from 11.2 per cent last year and was below our 10.5 per cent estimate. Adjusted EPS of $0.34 was below our $0.39 estimate and last year at $0.41,” said analyst Derek Dley.
“Revenue was negatively impacted by lower values for fresh pork and volume declines in prepared meats following the initial phase of its rebranding initiative. This was offset partially by growth in the company’s sustainable meats platform, and increased sales of U.S. plant-based proteins which continue to generate robust growth year over year,” he said.
“As anticipated, Maple Leaf was unfavourably impacted by increased costs associated with its rebranding and product reformulating initiative, along with a more challenging commodity complex. Processor spreads narrowed in the quarter to US$7.65/CWT from US$12.75/CWT last year, which coupled with a rise in pork belly prices, challenged margins during the quarter. The company commented that margins were impacted by roughly 200-250 bps split evenly between the food renovation initiative and a more challenging pork processing environment,” he said.
He kept his “buy” rating but reduced his price target to $35 from $36. The median is $39.
“Our target price represents 10.5 times our 2019 EBITDA estimate of $423-million, which we have reduced from $433-million to reflect the softer-than-expected results this quarter. In our view, Maple Leaf continues to offer investors an attractive growth profile at an inexpensive valuation, given the company’s leading market share, healthy balance sheet, and strong FCF [free cash flow] generation,” he said.
CIBC also cut its price target to $38 from $39.
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Cameco Corp.'s (CCO-T; CCJ-N) decision to extend the suspension of two of its uranium projects has led Raymond James to increase its price target on the company.
“We believe Cameco provides investors with lower-risk exposure to the uranium market given its diversification of low-cost mines. These mines are supported by a portfolio of long-term contracts that provide some downside protection in periods of depressed spot uranium prices while maintaining optionality to higher uranium prices. In addition, the company has multiple operations curtailed that can be brought back should uranium prices increase. While we acknowledge the CRA [Canada Revenue Agency] dispute as a risk, given Cameco’s highquality assets and contract portfolio, we rate the shares ‘outperform,’ ” said analyst Brian MacArthur.
He boosted his price target on the company to $16 from $15.50. The median is $13.25.
Second quarter 2018 results showed “adjusted EPS was -$0.07, below consensus estimates of -$0.01. As expected, CCO continued to meet contractual commitments using inventory/market purchases in 2Q18, generating operating cash flows of about $57-million. At quarter end, Cameco had about $837-million in cash/short-term investments and about $1.5-billion in debt,” he said.
“Cameco has decided to extend the suspension of McArthur River and Key Lake for an indeterminate duration, resulting in a permanent layoff of about 550 site employees. Cameco expects its share of costs to maintain both sites to be $5-6-million per month once layoffs take effect. To further decrease costs, Cameco will reduce its corporate office workforce by about 150. As a result, Cameco expects to incur between $40-45-million in severance costs in 3Q18. In addition, Cameco’s JV partner, Orano, has agreed to extend the suspension, and Cameco has agreed to extend Orano’s repayment of up to 5.4 million lbs of uranium concentrates until 2023,” he said.
“Cameco expects 2018 uranium production of 9.2 million lbs and now forecasts sales of 34-35 million lbs (previously 32-33 million lbs) at average unit cost of sales of $40-42/lb (previously $38-40/lb) due to severance costs associated with the continued suspension of McArthur River/Key Lake. Even after drawing down its excess inventory to target levels (~4.5 months), Cameco needs to buy 2-4 million lbs in the market in 2018 to meet its commitments. In 2019, Cameco expects to produce 9 million lbs, and has commitments to purchase 5-6 million lbs. To meet its 2019 commitments of 25-27 million lbs, Cameco expects to purchase 9-11 million lbs of uranium in the market,” he said.
" Our target is based on a 50/50 weighting of: i) a 1.25 times multiple (within its 5-year historical range of about 0.6-1.3 times) to our NAVPS [net asset value per share] estimate; and ii) a 13.5x EV [enterprise value]/NTM [next 12 months] EBITDA multiple (within its five-year historical range of about 7-20 times) to our NTM EBITDA forecast."
As well, RBC raised its target price to $16 from $15.
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Intel Corp. (INTC-Q) reported strong second quarter results, but Citi Research sees some challenges ahead.
“{Thursday] after the close, Intel reported 2Q18 results and guided 3Q18 above consensus due to strength from the enterprise and PC end markets. However, with a host of margin headwinds and numerous signs of the peak we are downgrading Intel from Buy to Neutral and lowering our price target from US$64 to US$50,” said Citi analyst Christopher Danely.
“Intel 2Q18 revenue was US$17-billion (up 6 per cent QoQ quarter over quarter), above our US$16.9-billion estimate (up 5 per cent quarter over quarter) and Consensus due to strength from enterprise. Gross margins increased 70 basis points QoQ to 63.0 per cent above our 62 per cent estimate due to mix. EPS of US$1.04 was above our and Consensus estimate of US$0.97 due to higher sales and margins. Intel guided 3Q18 revenue to US$18.1-billion (up 7 per cent QoQ), above our prior US$18.0-billion estimate (up 6 per cent QoQ) and Consensus of US$17.6-billion (up 4 per cent QoQ) due to seasonality. Intel guided 3Q18 operating margins to 34.0 per cent, above our prior 33.5 per cent estimate due higher sales,” he said.
“The 10nm debacle and rapid increase in low-margin wireless and memory revenue are lowering margins in 4Q18 and beyond. We believe this will drive INTC multiple to the low end of its range and it could go even below the low end of 12 times. We are downgrading Intel from Buy to Neutral as margin headwinds are creating a peak in Intel margins/EPS and the stock multiple should remain under pressure,” he said.
“We are raising our Intel C18 revenue and EPS estimates from US$70.0-billion and US$4.17 to US$70.1-billion and US$4.24, our C19 revenue and EPS estimates from US$69.5-billion and US$3.77 to US$73.0-billion and US$4.18 and our C20 revenue and EPS estimates from US$70.4-billion and US$3.79 to US$75.0-billion and US$4.26,” he said.
“We lower our price target on Intel from US$64 to US$50 based on 12 times our C19 EPS estimate of US$4.18 as we expect the multiple to fall to the low end of the range due to margin pressure,” he said.
The median target is US$60.
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After Teck Resources Ltd. (TECK.B-T) reported stronger than expected second quarter results, CIBC Research boosted its price target on the stock to $46 from $45. CIBC kept its “outperformer” rating for the stock.
The median price target is $44.
“We tweaked our model to reflect modest increases in 2018 copper and zinc production, lower copper cash costs and lower coal operating margins in line with TECK’s guidance. We also updated our 2019-20 WTI [West Texas Intermediate] forecast to US$75 and US$70/bbl, up from US$68.50 and US$65/bbl, respectively and increased our WTI/WCS differentials (to US$26/bbl from US$22/bbl), in line with our Oil & Gas team,” said analyst Oscar Cabrera.
“We left TECK’s ownership of Quebrada Blanca 2 (QB2) unchanged at 90 per cent, but acknowledge that the company’s willingness to sell down to a 60 per cent or 70 per cent stake in Q4/18 improves the probability of a supplemental dividend (and/or share buyback) in 2018. We view the completion of QB2 permits in Q3/18 plus the sale of the mine’s stake and supplemental dividend/buyback in Q4/18 as TECK’s main nearterm catalysts,” he said.
“The main changes to our model include: 1) revised WTI and WTI/WCS differentials; 2) higher 2018 copper and zinc production; 2) higher 2018 coal capex; 3) revised Q3/18 met coal and Red Dog zinc sales in accordance with guidance; and 4) included Q2/18A financial and operational results,” he said.
“TECK shares trade at a 17 per cent and 19 per cent discount respectively to its diversified mining peer averages of 5.3 times 2019E EV/EBITDA and 0.9 times P/NAV. We do not believe the discount is warranted due to TECK’s strong financial position (we estimate net debt/EBITDA under 0.6 times at the end of 2019) and free cash flow yield (average 11.5 per cent in 2018-19), plus increasing exposure to our preferred base metals, zinc and copper.”
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Raymond James has raised its price target on Aecon Group (ARE-T) after it posted solid results.
Analyst Frederic Bastien boosted his target price to $23 from $20.50 and kept his “strong buy” rating on the stock “to reflect the greater confidence we have in our above-consensus forecasts for 2H18 and 2019.”
"We reaffirm our bullish recommendation on Aecon Group after the firm produced solid operating results and grew its backlog to unprecedented levels in 2Q18. What we find particularly encouraging, above all, is the high level of continuity in the recent contract wins and the multitude of sectors from which they are derived. This, in our opinion, clearly shows that Aecon is the contractor best positioned to profit from Canada’s exceptional market opportunity. "
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In other analyst actions:
There have been a number of price targets on Amazon. Here is the link to that story.
* Agt Food and Ingredients Inc : BMO cuts target price to C$20 from C$22
* Atco Ltd : National Bank of Canada cuts target price to C$43 from C$45; TD Securities cuts target price to C$45 from C$46
* Boralex Inc : National Bank Financial cuts target price to C$25.5 from C$27
* Canadian Utilities Ltd : TD Securities cuts target price to C$35 from C$37
* Canfor Corp : TD Securities raises target price to C$42 from C$41
* Canfor Pulp Products Inc : TD Securities raises target price to C$28 from C$26
* Canntrust Holdings : Canaccord Genuity cuts price target to C$11 from C$12.50
* Cenovus Energy Inc : RBC cuts price target to C$17 from C$18
* Constellation Software Inc : BMO raises target price to C$1,030 from C$965
* Crescent Point Energy : Eight Capital cuts target price to C$13.50 from C$15; BMO cuts target price to C$13.50 from $15
* CRH Medical Corp : TD Securities raises target price to C$5 from C$4, raises to buy from hold
* Excellon Resources Inc : Cormark Securities cuts target price to C$2 from C$2.55
* Husky Energy Inc : Barclays raises price target to C$26 from C$24; RBC raises price target to C$24 from C$23; TD Securities raises target price to C$24 from C$23
* Innergex Renewable Energy : National Bank Financial cuts PT to C$18.5 from C$19
* K-Bro Linen Inc : Cormark Securities transfers coverage with C$38 target price and transfers coverage with market perform
* Linamar Corp : TD Securities raises to buy from hold
* Methanex Corp : Bernstein cuts target price to C$44.44 from C$44.64; RBC raises target price to $78 from $70;
* Mullen Group Ltd : CIBC raises price target to C$18 from C$17; RBC raises target price to C$18 from C$16; BMO raises target price to C$18 from C$16; Cormark Securities raises target price to C$19 from C$15 and raises to buy from market perform
* New Gold Inc : Eight Capital cuts target price to C$2 from C$3.50; BMO cuts target price to C$2.25 from C$4.50; Cormark Securities cuts target price to C$2.5 from C$3.25
* Northland Power : National Bank Financial cuts target price to C$27 from C$28
* Pinnacle Renewable : National Bank Financial cuts target to C$16.5 from C$17
* Power Corporation of Canada : Barclays cuts price target to C$31 from C$32
* Power Financial Corp : Barclays cuts price target to C$34 from C$36
* Precision Drilling : Cormark Securities raises target price to C$6 from C$5.5
* Storagevault Canada : Cormark Securities raises target price to C$3.4 from C$3.25
* Transalta Renewables : National Bank Financial cuts target to C$12.5 from C$13
* Western Energy Services Corp : RBC cuts target price to C$1.25 from C$1.5; Cormark Securities cuts target to C$1.1 from C$1.35