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Tuesday’s analyst upgrades and downgrades

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Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.

Canadian banks remain well-positioned to withstand revenue pressures through the second half of the year, much as they did in the first half, Barclays Securities analyst John Aiken said.

"There are few catalysts to drive stronger top-line growth," Mr. Aiken said, noting muted global economic growth and modest domestic loan growth. "To their credit, the Canadian banks have done their part, churning out steady earnings, as 2014 appears to be shaping up to be a 'slow and steady' type of year."

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Amid heightened geopolitical risks, Canadian bank stocks, with an average dividend yield of 3.4 per cent, remain a compelling defensive investment, the analyst said.

"Consequently, despite the ongoing challenging earnings environment, we believe the Canadian banks could continue to surprise to the upside, and along with it, supporting and even expanding upon current valuation levels."

He raised his target prices on all of the Big Six Canadian banks: Bank of Montreal to $84 (Canadian) from $80, Bank of Nova Scotia to $74 from $72, Canadian Imperial Bank of Commerce to $105 from $100, National Bank of Canada to $50 from $48, Royal Bank of Canada to $82 from $79, TD Bank to $59 from $56.

Mr. Aiken also raised his targets on Canadian Western Bank to $43 from $40, and on Laurentian Bank to $53 from $50.

He rates all of the above stocks as "equal weight" except for CIBC and Laurentian Bank, which he rates "underweight."

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Developments at Newmont Mining Corp. could soon spark investor interest in the company's shares, says CIBC World Markets analyst Alec Kodatsky.

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Mr. Kodatsky notes that Newmont's Nevada operations are performing well, and should result in noticeable growth in late 2015 once its Turf vent shaft and Long Canyon Phase I are commissioned.

"It's likely still too early for the market to pay for these projects, but we should begin to see them priced in as 2015 progresses," he says. "Long Canyon may re-emerge as a catalyst for NEM shares with the market having lost focus on this asset in recent quarters. NEM remains incredibly optimistic about the exploration potential here and a positive permitting decision later this year could help reinvigorate investor interest.

Mr. Kodatsky maintains his "sector performer" rating and $33 (U.S.) price target. The analyst consensus price target is $27.21 (U.S.), according to Thomson Reuters.

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Enercare Inc. is on track to close a significant complementary acquisition, but the company's stock is too expensive for a "buy" rating, Desjardins Securities analyst Chase Bethel said.

In July, the water-heater rental and sub-metering company announced a $550-million deal to acquire Ontario Home Services, Direct Energy's home and small commercial services business.

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Mr. Bethel reinitiated coverage of Enercare's stock with a reduction in his price target to $14 (Canadian) from $15.50, while maintaining a "hold" rating.

"Despite our positive view on the transaction, we believe the shares are fairly valued at current levels and recommend that investors wait for a better entry point," he said.

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Absolute Software posted record sales contracts in the fourth quarter, says Cantor Fitzgerald Canada Research analyst Blair Abernethy.

"Sales contracts came in at a record $30.7mn, well ahead of our $28.3mn estimate, up 17% y/y organically," says Mr. Abernathy. "EBITDA came in at $4.3mn (vs. our $3.5mn). Operating cash flow remained positive at $1.9mn and cash levels are a healthy $73.6mn ($1.47/share). While the company does not provide guidance, Absolute expects sales contracts and CFO to increase in FY15."

He described an "upbeat" earnings call during which Absolute's new CEO Geoff Haydon outlined Absolute's key areas of focus for the next year.

"1) monetization of its current product portfolio by expanding the number of platforms its persistent technology is embedded in, 2) leveraging of its Computrace technology and customer base to cross-sell its Absolute Manage and Absolute Service offerings, 3) strengthening of its product market focus and, 4) building of its brand recognition in the market."

Absolute also announced that it was increasing its dividend by 17 per cent to $0.07 per quarter (from $0.06 per quarter).

Mr. Abernethy maintains his "buy" rating and $11 target price. The analyst consensus price target is $8.43, according to Thomson Reuters.

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Credit Suisse analyst Hamzah Mazari is initiating coverage of Markit Ltd. with a bullish outlook on the stock.

A high barrier to entry, a solid balance sheet and an attractive valuation make this financial information services company compelling, says Mr. Mazari.

He is initiating coverage of Markit with an "outperform" rating and a $30 (U.S.) target price. The analyst consensus price target is $28.88 (U.S.), according to Thomson Reuters.

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In other analyst actions:

Almost Family Inc. was upgraded to "buy" from "hold" at Jefferies by equity analyst Brian Tanquilut. The 12-month target price is $33.00 (U.S.) per share.

American Express Co. was upgraded to "neutral" from "underperform" at Macquarie by equity analyst Vincent Caintic. The 12-month target price is $91.00 (U.S.) per share.

Brinker International Inc. was upgraded to "buy" from "hold" at Wunderlich by equity analyst Robert Derrington. The 12-month target price is $55.00 (U.S.) per share.

EV Energy Partners LP was upgraded to "strong buy" from "outperform" at Raymond James by equity analyst Kevin Smith. The 12-month target price is $49.00 (U.S.) per share.

Globus Medical Inc. was rated new "buy" at Gabelli & Co. by equity analyst Jennie Tsai.

Home Capital Group Inc. was rated new "Buy" at Laurentian Bank by equity analyst Marc Charbin. The 12-month target price is $63.00 (Canadian) per share.

Heartland Payment Systems Inc. was upgraded to "outperform" from "market perform" at Keefe Bruyette by equity analyst Steven Kwok. The 12-month target price is $56.00 (U.S.) per share.

Innocoll AG was rated new "overweight" at Piper Jaffray by equity analyst David Amsellem. The 12-month target price is $14.00 (U.S.) per share.

Ingersoll-Rand PLC was downgraded to "neutral" from "outperform" at Robert Baird by equity analyst Mircea Dobre. The 12-month target price is $65.00 (U.S.) per share.

The St Joe Co. was downgraded to "market perform" from "outperform" at Raymond James by equity analyst Buck Horne.

El Pollo Loco Holdings Inc. was rated new "hold" at Jefferies by equity analyst Andrew Barish. The 12-month target price is $30.00 (U.S.) per share.

Leucrotta Exploration Inc. was rated new "outperform" at Macquarie by equity analyst Ray Kwan. The 12-month target price is $4.00 (Canadian) per share.

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About the Author
Streetwise editor

Jody White is the web editor for Streetwise. He previously worked as a senior editor at Canadian Business Online and has written for MoneySense Magazine, Maclean's, the National Post and other national publications. More

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