Inside the Market's roundup of some of today's key analyst actions
Arc Resource Ltd. (ARX-T) has sold its Saskatchewan assets to Spartan Energy and investors "should be pleased with the transaction," says Raymond James analyst Jeremy McCrea.
"Beyond the accretive metrics, the sale of the Saskatchewan assets furthers ARC's focus on its five core plays and its high net back Montney assets in particular. Moreover, the sale will strengthen ARC's already industry leading balance sheet. ARC's healthy balance sheet will be well positioned to, we suspect, accelerate the pace of development in core Montney plays. To that point, ARC explicitly stated during its investor day that it has built in flexibility to its 2017 budget and is able to meaningfully increase its capital spending early in the year. We suspect that a significantly larger budget will be announced with an updated budget and guidance in February. In addition to the budget increase, ARX is reviewing its DRIP(dividend reinvestment program) , which, if suspended, would also enhance per share metrics," the analyst said.
"With no activity planned on ARC's Saskatchewan assets, we have been modelling the play at PDP (proved, developed, producing) value. The $700 -million transaction value is $340-million above the estimated PDP value, creating 90 cents per share (with 353.5 million shares fully diluted outstanding). As a result, our NAV (net asset value) plus risked upside and target have increased by 90 cents," the analyst said.
He increased his price target to $29.40 from $28.50 and maintained his "outperform" rating.
Suncor's (SU-T;SU-N) production, capex and cash cost guidance were all in line with expectations, says Desjardins Capital Markets analyst Justin Bouchard.
"As a result, our estimates are basically unchanged. Of note, Suncor's 2017 budget assumes ongoing cash costs decline at its oil sands operations and at the Syncrude project, improved reliability at the Syncrude project, and the completion of the Hebron and Fort Hills projects on time and on budget," he said.
He maintained his "hold" rating on the stock and kept his price target at $41 (Canadian).
Raymond James has lowered its estimates for Empire Co. Ltd. (EMP.A-T) after recent inflation numbers and reports show its competitors had gained in market share.
"We are modestly lowering our Empire estimates on the combination of the recent inflation backdrop, and recent competitor reports which detailed share gains in quarter, that were ahead of our expectations," analyst Kenric Tyghe wrote.
"In our opinion, the combination of high levels of promotional intensity and continued consumer trade down to discount, increase the value (and imperative) that targeted promotional activity of a loyalty currency that is resonating (not ricocheting) with consumers, which is likely an incremental challenge in the quarter. Our revised expectations assume Food Retail SSS (same-store sales) decrease at a faster pace than previous, despite higher levels of investment, as reflected in our slightly lower gross margin assumption," the analyst said.
The analyst kept a "Market Perform" rating on the stock and a $20 target price.
"Our Food Retail SSS is lowered from a decrease of 0.9 per cent to a decrease of 1.6 per cent, on our revised expectations of the traffic and basket trends, given market dynamics. We now expect sales of $5.994-billion versus $6.036-billion previously."
"We are lowering our gross margin estimate, and are now assuming gross margin compression of 31 bp (basis points) to 24.0 per cent, versus 20 bp previously. Our gross profit expectation is lowered from $1.453-billion to $1.439-billion."
"Our F2Q17 EPS is lowered from $0.31 to $0.28 on the combination of lower gross margins, reduced expense leverage, and our SSS growth reduction. We expect EBITDA in the quarter to be $251.3-million."
In other analyst actions:
J.P. Morgan raised its price target on Best Buy (BBY-N) stock to $46 (U.S.) from $35.
Goldman Sachs initiated coverage on Superior Energy Services (SPN-N) at neutral.
Macquarie downgraded Citi (C-N) from Outperform to Neutral with a price target of $57.
Macquarie upgraded Goldman Sachs (GS-N) from Neutral to Outperform with a price target of $245.
Citi downgraded Gap Inc. (GPS-N) from Neutral to Sell with a price target of $25.