Inside the Market’s roundup of some of today’s key analyst actions
The private equity overhang for Artizia (ATZ-T) is gone now that Berkshire Hathaway has sold its equity position in the retailer, which bought 6.33 million shares of that position. The change has led Canaccord Genuity to boost its estimates and target price for the stock.
“We are raising our F20 EPS estimate on ATZ to reflect the recent share reduction that ensued from Berkshire selling its remaining equity position, of which ATZ bought 6.33 million shares directly. This share reduction is driving our projected F20 EPS estimate up 6 cents to 99 cents from 93 cents previously, and our price target up to $23 from $21,” said analyst Camilo Lyon. The median target price is $21, according to Zack’s Investment Research.
“While the latter part of the fourth quarter (Jan-Feb) typically tends to be clearance-driven as stores make space for the spring floor set, we believe traffic continued to flow to ATZ as favourable winter weather in both the U.S. and Canada likely spurred increased traffic. Overall, we expect ATZ to have finished F19 on a solid note. As we look to F20, we see multiple catalysts across product, geography, marketing, and supply chain that should enable ATZ to deliver double-digit sales and EPS growth. We reiterate our 'buy’ rating,” the analyst said.
“With Berkshire having exited its full equity ownership position, the PE overhang has now been removed and overall liquidity in the shares has improved. We would not be surprised if ATZ’s next corporate action entails a dual listing in the U.S., a move we believe U.S. investors would welcome.”
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After Mosaic Capital Corp. (M-X) reported strong fourth quarter results, Canaccord Genuinty boosted its target price for the company.
Mosaic reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $8.9-million, up 71 per cent year over year, which was above Canaccord’s and consensus estimates of $7.2-million and $6.7-million, respectively.
“After a disappointing H1/18 performance, the company exceeded consensus estimates in H2/18. On the conference call, management stated it expects the strong performance to continue in Q1/19. We are forecasting Q1/19 EBITDA of $5.2-million, versus abnormally weak Q1/18 EBITDA of $1.8-million. As discussed above, Q1/19 should benefit from (1) better product mix and ramp-up at Mackow, (2) higher demand for SECON services, and (3) modest improvement in the Energy division’s performance. Further, Q1/18 should prove an easy comparable, as it was adversely impacted by multiple issues including weather and project deferrals, which should not recur in Q1/19,” said analyst Raveel Afzaal.
“We roll over our valuation period to 2019, driving our increased target price. We continue to use a 9.5 times EV [enterprise value]/EBITDA multiple, versus Mosaic’s historical EV/LTM EBITDA of 10.0 times. We maintain our 'speculative buy’ rating as we believe a couple more quarters of continued strong performance will be required for the market’s confidence to align with our estimates,” the analyst said.
He increased his target price to $5.75 from $5.50. The median target is $5.
Desjardins kept its “hold” rating on the stock but increased its price target to $5.25 from $5.
Desjardins expects that Boyd Group Income Fund (BYD-UN-T) to gain momentum this year after reporting strong results in the fourth quarter and it has boosted its target price on the stock.
“BYD reported 4Q18 adjusted EBITDA of $48-million (vs our $42-million and consensus of $44-million), mainly driven by stronger-than-expected SSSG [same-store sales growth] (reported 6.8 per cent (5.2 per cent normalized) vs our forecast of 2.5 per cent). Adjusted EBITDA margin came in at 9.6 per cent (vs our 8.6 per cent estimate), which was positively impacted by improved parts margins, higher operating leverage on favourable SSSG [same store sales growth] trends and expense accrual reductions, offset by lower DRP pricing and a higher mix of parts sales vs labour and the impact of the technician shortage,” said analyst David Newman.
He kept his “buy” rating and raised his target price to $151 from $138 “based on 13 times EV/EBITDA (was 12.5 times) on our revised 2020 estimates.” The media is $135.
“With the Boyd flywheel gaining momentum amid a fragmented market, we believe the upside potential could be significant. BYD also benefits from a strong management team known for its prudent allocation of capital, which should provide investors comfort, along with BYD’s strong cash flows, pristine balance sheet and the relatively recession-resistant nature of the collision repair industry,” he said.
CIBC also raised its target price on the stock to $161 from $132. Altacorp Research raised its price target to $155 from $135 and kept its “outperform” rating on the stock.
Power Corp. of Canada (POW-T) announced earlier this month that it would buy back up to $1.35-billion worth of shares and that has led CIBC to increase its target price for the company.
The SIB [substantial issuer bid] could reduce the share count by 9 per cent to 10 per cent. We are updating our EPS estimates and price target to assume a clearing price equal to the current share price ($30.58). Our 2019E EPS increase by 8 per cent and our 2020E EPS by 10 per cent," said analyst Paul Holden.
He kept his neutral rating and raised his target price to $34 from $30. The median is $34.
Ahead of AGF Management Ltd. (AGF-B-T) releasing results next Wednesday, CIBC increased its price target on the company.
“We think it will be challenging for AGF to outperform the broader market on organic growth and we don’t see the sale of Smith & Williamson coming quite yet. AGF is trading at 10.9 time 2019E FCF [free cash flow] versus CIX at 7.5 times and IGM at 11.5 times. No change to our ‘neutral’ rating,” said analyst Paul Holden.
“Our FQ1 earnings estimates come down on lower-than-forecast average AUM [assets under management]. However, ending AUM finished higher than forecast and our F2019 and F2020 estimates move higher as a result. Our price target increases from $6.00 to $6.50 based on the increase to our F2020 estimates,” he said.
The median price target is $6.50.
After Just Energy Group Inc. (JE-T) cut staff, CIBC updated its price target on the company.
Just Energy announced it was laying off 200 employees, or about 12 to 13 per cent of its staff, mainly in its core North American retail energy business.
“JE expects these reductions, which streamline functions/responsibilities in the organization, should deliver about $40-million of G&A savings annually. These reductions should not impact efforts in international markets, efforts to grow value-add products or sales channels. Rather, these reductions partially address the expenses in the core business that have become more bloated over the last few years (G&A has grown by 30 per cent over the past three years, while gross margin is up only 3 per cent). At this point, we don’t anticipate any capital investments to deliver this savings,” said analyst Mark Jarvi.
“These cuts bring associated severance costs (about $9-million) that will be spread out across the current quarter and future quarters. However, these costs will be excluded from JE’s adjusted EBITDA calculations and the company stated these costs will not impact its expectations to deliver adj. EBITDA of $200-million to $220-million in F2019 (our estimate is $199-million; consensus is $201-million),” he said.
“We’ve added an incremental approximately $15-million in G&A reductions into our F2020 estimate (JE previously guided to $20-million of savings in F2020), leaving some buffer. Additionally, we have reflected the severance costs associated with employee cuts and made tweaks to our working capital changes. Our F2020E adjusted EBITDA increases by 6 per cent; our valuation multiple is unchanged (6.5 times our F2020 adjusted EBITDA estimate) and our target increases to $5 [from $4.75].”
He kept his “neutral” rating on the stock. The median price target is $5.75.
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In other analyst actions:
* Minto Apartment REIT : RBC raises target price to C$21.50 from C$20