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A customer walks out of a Canadian Western Bank branch in Calgary in this file photo.TODD KOROL/Reuters

Inside the Market's roundup of some of today's key analyst actions

Laurentian Bank Securities Equity Research boosted its price target for Canadian Western Bank (CWB-T) due to rate increases from the Bank of Canada and its strong earnings momentum.

"CWB's share price is up 16 per cent since we upgraded our recommendation in April, 2017, and earnings momentum is now strongly in the company's favour: two rate rises should support rising NIMs [net interest margins] over the next two quarters, PCLs [personaland commercial loans] continue to trend down (20bps [basis points] in Q3/F17 versus the historical average of 18bps and a peak of 28bps in F2016) and the outlook is for loan growth to resume to a double-digit pace in the near term. The primary variable that could impact NIM expansion is the extent to which CWB will need to use more expensive broker-originated deposits as loan growth increases, but this is of secondary concern," said analyst Marc Charbin.

"Consequently, CWB has regained a small premium to the 'Big 6' as there is more and more evidence to support higher-than-average EPS [earnings per share] growth rates. The consensus estimate indicates EPS should grow at an average of 11 per cent in F2018 and F2019 over F2017, compared to an average of 6 per cent for their larger peers. CWB's premium over F2018 EPS is currently 0.7 times, but the 10-year average for this metric is 1.8 times, so there is a historical precedent for continued share price appreciation. In the past, the premium valuation has been tied to strength in energy prices, but if CWB can continue to generate growth outside of Alberta (Ontario specifically), energy prices will matter less and less."

He increased his price target to $39 from $36 and kept his "buy" rating.

"We have revised our estimates to reflect increasing NIMs in Q4/17 and Q1/18, with this metric reverting to historical average in F2019E. The result is an increase of F2018E EPS to $2.98 (from $2.83, versus consensus of $2.79)."

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Canaccord Genuity Global Research cut its price target for Pacira Pharmaceuticals (PCRX-Q) as recent data "show a modest return to growth in year-over-year Exparel sales and volume comps, but quarterly performance remains well under our already modest expectations," said analyst Dewey Steadman. Exparel is a long-lasting pain relief medication.

"Given we're now two months into the quarter and we should be seeing some impact from the DPS partnership, we think 3Q/17 and FY/17 Street estimates need to come in meaningfully as Exparel performance has not aligned with 2H/17 expectations. That said, we're still hopeful that volumes and revenue could accelerate as the year progresses due to Pacira's efforts to secure hospital system access and a ramping of the DePuy-Synthes (DPS) collaboration in the waning months of 2017," the analyst said.

"We're lowering our 3Q/17 and FY/17 Exparel estimates yet again, and we now sit significantly below company guidance of $290-million to $310-million for FY/17 Exparel revenue. Likewise, our DCF-driven price target is lowered," he said.

He kept his "buy" rating on the stock but cut his price target to $44 (U.S.) from $48.

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Pattern Energy Group Inc. (PEGI-Q;PEGI-T) said that its Gulf Wind project in Texas was spared by Hurricane Harvey and its Santa Isabel project in Puerto Rico did not sustain material damage to its wind turbines from Hurricane Irma or Maria.

"Just as importantly, PEGI evacuated the project well ahead of the Irma and Maria hurricanes, which allowed its employees to be with their families and make safe arrangements. The company's focus has now turned to supporting the Puerto Rico Electric Power Authority's (PREPA) broader efforts to restore the grid and provide much needed power to communities," said Raymond James analyst Frederic Bastien, as he lowered his estimates for the company in the wake of the hurricanes.

He trimmed his cash available for distribution (CAFD) estimate for 2017 to $1.78 (U.S.) from $1.90 with a 2018 estimate of $2.05 and a 2019 estimate of $2.40.

He kept his "outperform" rating and $27 (U.S.) target price.

"We reiterate our constructive view on Pattern Energy after the company quantified the likely impact of the recent natural disasters and below-average wind conditions on its 3Q17 results. These setbacks notwithstanding, we believe PEGI is on the right path to grow CAFD in a healthy, stable and sustainable manner. Supporting our call are the recent deals struck with PSP Investments and Riverstone to not only improve access to capital, but also facilitate future potential drop-down acquisitions. Accordingly, we see today's pullback in the share price as an attractive buy-on-weakness opportunity," the analyst said.

"The guidance balances the storm-related disruptions just experienced, the potential for extended electric grid outages in Puerto Rico during 4Q17, and wind conditions that were below the long-term average in 3Q17. For the quarter, management now expects CAFD of $5-million to $11-million, down from a range of $12-million to $14-million. To be on the safe side and since our previous CAFD forecast of $165-million sat at the top-end of PEGI's annual guide, we opted to trim our official estimate to $155-million," he said.

"Our target is based on an EV/EBITDA multiple of 13.0 times our 2018 estimates. While this is greater than the prevailing average of 10.9 times for U.S. Yieldcos, we feel it is justified based on PEGI's solid track record of CAFD growth, premier assets and strong management."

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Desjardins Capital Markets has downgraded Intact Financial Corp. (IFC-T) due to risks with the Ontario personal auto insurance market and its recent acquisition of OneBeacon, but boosted its target price.

"We are changing our recommendation to 'sell' from 'hold' for three main reasons: (1) valuation (and -0.5 per cent total return to our target price), (2) risks with the OneBeacon (OB) acquisition, and (3) lingering concerns with the Ontario personal auto insurance market," said analyst Doug Young.

However, he raised his price target to $100 from $98.

"1. IFC trades at 2.4 times BV [book value] or 2.2 times our 3Q17 BV estimate, which includes OB. Historically, IFC has traded on average at 2.0 times since going public. It trades at 14.2 times our 2018E operating EPS versus 11.5 times and 11.2 times for the big Canadian banks and lifecos, respectively.

2. There are a few items to consider with OB: It paid full value (1.7–1.8 times BV all in); the acquisition is not expected to be accretive to operating EPS for 24 months; the acquisition comes with increased risks, in our view (eg. entry into the U.S., and a highly fragmented and competitive U.S. specialty market); and it will take time for IFC to fix various issues (goal is a low 90 per cent combined ratio within 24–36 months).

3. We have concerns with the Ontario personal auto insurance market (about 15–20 per cent of IFC's premiums, pro forma OB). Management expects IFC's Canadian personal auto insurance combined ratio to decline in the mid-single-digit range in 2017, driven mostly from reforms in Ontario and other pricing and risk-mitigation actions; however, this is already baked into our expectations. For instance, we are forecasting a Canadian personal auto combined ratio of about 95 per cent in 2H17, and 94.4 per cent in 2018 versus 99.9 per cent in 2016. Also worth noting, 2018 is an election year in Ontario, an auto insurance could become a hot topic."

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RBC Capital Markets boosted its price target for BlackBerry Ltd. (BBRY-Q;BB-T) after the company's second quarter results came in above expectations.

"Second quarter results were above expectations. The upside stems from an earlier than expected IP licensing deal and higher SAF [system access fee] revenue. In comparison, enterprise software and BTS were essentially in line with our expectations. IP appears likely to be a material contributor to software growth 2H/FY18E. The limited visibility to growth of enterprise software and BTS keeps us on the sidelines," said analyst Paul Treiber.

He kept his "sector perform" rating but boosted his price target to $10.50 (U.S) from $9.50.

"Second quarter non-GAAP revenue was $249-million (-29% year over year), above RBC at $218-million and the street at $220-million. As a result, adjusted EPS was $0.05, above RBC/street at $0.00. The beat stems from higher licensing, IP and other revenue ($56-million versus RBC at $35-million) and SAF revenue ($37-million versus RBC at $29-million). The SAF upside reflects collections of overdue balances and SAF is expected to fall to $20-million Q3," he said.

"M&A is a potential catalyst. BlackBerry has $2.6-billion total cash ($4.85/ share). After share repurchases, we believe BlackBerry can deploy up to $1.6-billion on acquisitions. We believe acquisitions may be accretive to adj. EPS and the stock," he said.

"We're rolling forward our target valuation from CY18E to CY19E. Our target valuation for BlackBerry's "company total" software is based on 3.5 times CY19E EV/S [enterprise value to sales) (previously 3.5 times CY18E EV/S), which compares to enterprise security software peers at 3.1 times. The premium, in our view, is justified given stronger FTM software growth (17 per cent versus peers at 4 per cent). We believe the quality of software growth has a material impact on valuation; growth skewed to enterprise software and BTS would be accretive to valuation, whereas contribution from IP licensing, handset licensing and professional services would be dilutive, in our view."

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