Inside the Market’s roundup of some of today’s key analyst actions
CIBC Worlds Markets analyst Dave Popowich says Baytex Energy Corp. (BTE-T) is “ready to roll” after closing its acquisition of Raging River Exploration Corp. and has upgraded the stock to “outperformer” from “sector performer.” His 12-to-18-month target price is $7, versus Wednesday’s close of $3.93.
CIBC and other banks working on the Baytex deal were free to resume analyst coverage of the company Thursday, and the CIBC note, combined with an upgrade from ScotiaBank, likely contributed to Baytex gaining nearly 8 per cent in Thursday’s trading.
“In our view, the merger with Raging River is an emphatic statement of Baytex's re-entry to the ranks of the intermediate Canadian oil producers,” Mr. Popowich wrote. “Whereas the stock has recently occupied a niche on the fringes of investor mindshare due to its high financial leverage and modest growth capability, we believe the new entity stacks up favourably vs. the other mid-cap oil-weighted producers in our coverage universe, particularly considering its discounted valuation.”
Mr. Popowich uses a valuation method based on a multiple of debt-adjusted cash flow and says his price target, which offers 65 per cent upside, is still a discount to Baytex’ peer group.
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Analysts cut price targets on Just Energy Group Inc. (JE-T) after the company issued a mid-year update that suggested underwhelming second-quarter earnings.
The company blamed the high cost of hedging contracts for its second-quarter problems but said it would still meet its full-year guidance of $200 million to $220 million in “base EBITDA,” or earnings before interest, taxes, depreciation and amortization, further adjusted to remove additional expenses.
Analyst Nelson Ng of RBC Dominion Securities maintained his “outperform” but reduced his price target to $5 from $6, noting that if the company achieves the low end of its guidance, it would imply that about 75 per cent of its EBITDA would be generated in the second half of the year.
National Bank of Canada also reduced its price target to $4.50 from $5. Monday, prior to the company’s update, Canaccord Genuity cut its target price to $4.50 from $5.25.
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Laurentian Bank Securities resumed coverage of People Corp. (PEO-X), a human-resources consulting company, with a “buy” rating and $9.75 price target. The company closed Thursday at $7.99.
Analyst Chris Martino says People Corp. is the fastest-growing Canadian provider of group benefits, retirement and HR consulting services, with average annual revenue growth of 34 per cent over the past five years. EBITDA, or earnings before interest, taxes, depreciation and amortization, has grown an average of 47 per cent over the same period.
Mr. Martino calls the company “an established, disciplined acquirer in a fragmented space,” having made six acquisitions in the past two years with a total value exceeding $80 million. His target price of $9.75 is based on 13 times his estimate of 2020 EBITDA, adjusted upward by 35 per cent to reflect potential acquisitions.
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Solid earnings at Canadian Imperial Bank of Commerce (CM-T) prompted analyst Sohrab Movahedi of BMO Nesbitt Burns Inc. to raise his price target to $135 from $130. He maintained a “market perform” rating.
Mr. Movahedi credited CIBC for expense management as the bank’s $3.08 in earnings per share, adjusted to remove merger-related and non-cash amortization costs, topped his estimate of $3.00 and consensus of $2.94. “All operating segments beat our expectations, largely reflecting good expense management and revenue growth (organic and inorganic),” he wrote.
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In other analyst actions Friday:
* Greenspace Brands Inc: Laurentian Bank Securities cuts TP to C$1.90 from C$2
With files from Reuters
David Milstead