Thursday , August 5 2021

Analyst updates and downgrades on Tuesday



Within the market summary of some of today's major analyst stocks

Canaccord Genuity analyst Yuri Lynk expects Finning International Inc. (FTT-T) to overcome Toromont Industries Ltd. (TIH-T), its closest competitor, in the short term, citing an "extreme valuation differential."

This prompted Mr. Lynk to lower his rating for Toromont to "insure" the "purchase" based on his "record-breaking award."

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"With a 39% premium over the estimated price-earnings ratio in 2019, Toromont shares were rarely as expensive compared to Finning, which goes back to July 2011, immediately after the merger of Enerflex with Toromont," said the analyst . . "Our work shows that the overweight of Finning's shares in the current or near-current valuation differential led to a better performance than Toromont shares as the premium on the former tends to account for 19%.

"With this in mind, we recommend more risk-tolerant investors with a shorter investment horizon than Finning versus Toromont. However, over the long term, fundamentally motivated investors should continue to hold HOLD Toromont, given its strong management team, the almost unrivaled record of EPS and DPS growth, and financial flexibility. We class Finning a BUY, given its compelling relative appraisal, its attractive growth prospects and strong balance sheet. "

Pointing to industry-wide multiple compression, Lynk reduced its Toromont stock price target to $ 57, from $ 64. The average target on the street today is $ 64.71, according to Bloomberg data.

"Over the past 18 months, [next 12-month] the advanced P / E equipment group, measured by Caterpillar, Finning, Komatsu and Toromont, contracted 20 to 12 times, "he said. "This was largely achieved by stock prices, correcting itself dramatically in 2018, with Caterpillar, the thermoelectric plant, down 18%, Finning down 23% and Komatsu down 40%. Toromont shares, however, have done what they have done on average over the last 25 years and performed better in 2018. Due to this divergence in stock performance, however, we see an opportunity for Finning's stock to outperform to Toromont. in short time. "

With a "buy" rating, Lynk kept a target price of $ 33 for Finning's shares, which is 38 cents below the current consensus.

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Canaccord Genuity analyst Dalton Baretto sees three macro drivers determining the performance of commodity prices and related stocks.

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In a research note released on Tuesday, he pointed to the expiration of the 90-day truce between the United States and China, as well as the Brexit vote on March 29; movements of the American dollar, which he refers to as "The Greenback Boogie"; and overall economic performance outside the United States.

"We note that the negative results for commodity prices stemming from the deterioration of US-China trade relations or an Asian economic slowdown can be mitigated to some extent by further Chinese stimulus efforts; in fact, we have already seen public commitments by the Chinese government to support the economy, "he said.

"Given the uncertainty in the current macro environment and the admittedly low likelihood of our baseline scenario pre-empting (with risks on both the positive and negative sides), we prefer companies with strong company-specific catalysts that can demonstrate growth by 2020.

In response to changes in the company's commodity price deck and operating outlook, Baretto updated Hecla Mining Co. (HL-N) to "buy" hold, citing implied returns to its revised target of $ 3.25 (above $ 2.75). The average target on the street is $ 3.67.

"We remain focused on the integration of HL and the ramp-up of Nevada assets in 2019, where we anticipate 162,000 ounces of gold production versus just 35koz in 2018 post-acquisition mid-year," he said. "On other assets, we anticipate operations in much of steady state, and we note that we do not expect a solution to the Lucky Friday labor dispute in 2019. We expect production profiles and relatively stable costs at Greens Creek and Casa Berardi in 2019 and we expect to have more clarity about long-term mine plans for the assets of Casa Berardi, San Sebastian and Nevada throughout the year.

"From the financial point of view, we projected improvements in revenue, EBITDA and FCF in 2019 over 2018, driven by the expected ramp-up and cash generation (versus consumption) of Nevada's assets. However, we do not anticipate a significant improvement in HL's balance sheet during the year. "

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At the same time, Baretoo Ivanhoe Mines Ltd. (IVN-T) for "speculative buying" to "buy", pointing to greater geopolitical risks in the Democratic Republic of Congo due to its ongoing election. His target dropped to $ 7 from $ 8.50. The average is $ 6.82.

"Despite the 44 percent decline in the company's share price from a fundamental perspective, IVN has had a reasonable success in 2018," he said. "The company continued to advance all three projects, released exploration results in the DRC and significantly addressed its financial commitments and its geopolitical risk profile with the announcement of CITIC metals as a 19.5% partner priced at $ 3.68 per share. .

"Looking at 2019, the main challenge facing the IVN management team continues to be funding, with project debt financing packages to be negotiated across all three projects and another $ 550 million in funding to be identified over the next 5 years. The election currently under way in the DRC significantly increased the country's geopolitical risk profile, which we believe will further complicate funding efforts. "

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Walter Spracklin, an analyst at RBC Dominion Securities, Union Pacific Corp. (UNP-N) will "react favorably" to the hiring of Jim Vena as the new director of operations of the railway company.

Seeing a "line of vision for a major operational change at the UNP," Spracklin upgraded its stock rating to "outperform" industry performance.

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"We have known Mr. Vena very well since his time at CN, where he had a focus of operations throughout his 40-year career until his retirement as COO in June 2016," said the analyst. "It is important to note that Mr. Vena was in the CN throughout Hunter Harrison's term and was an important participant in the implementation of Precision Scheduled Railroading (from scratch) at the CN during that period."

"Previously, we were skeptical about the UNP's likelihood of successfully implementing the PSR, and the key to that skepticism was the absence of a C-suite manager with PSR experience – which has now been fixed. With an experienced PSR veteran now in the role of COO, we expect dramatic changes in the UNP – changes that we believe will encompass the core principles of PSR. "

Spracklin raised its target for Union Pacific shares to $ 179, from $ 151. The average is now $ 165.04.

"The changes we expect as a result of this announcement include: (1) a significant reduction in the workforce, (2) a significant reduction in locomotives, (3) a significant reduction in rail infrastructure (eg hump yards) and (4) a realignment Unfortunately, we expect, as a consequence, a significant degree of customer disruption and possible internal resistance, since we are of the opinion that PSR can not actually be implemented without these "side effects." Fortunately, these tend to be temporary, resulting in a more efficient and service-oriented railroad. "

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Desjardins Securities analyst Josh Wolfson says the guidelines and corporate updates for 2019 will be in the spotlight next season's fourth quarter results for 2018 for precious metals companies.

"With three full quarters, we see fewer surprises in the fourth quarter compared to the annual goals for 2018," he said in a research report released on Tuesday. "We project modest results more favorable than the guidance for Agnico Eagle (production / AISC), Torex (production) and Yamana (AISC), although in our view this materiality is low. We note a major focus on future guidance, where we anticipate revisions of guidelines for Agnico Eagle (2019/20 positive production, consistent orientation / consensus), Goldcorp (2019/20 production / costs, partially consistent with consensus) and Alamos / 20 production, partially consistent with consensus). We also anticipate that important updates will be provided by Agnico Eagle (Nunavut projects, reserves), Barrick (new orientation), Eldorado (Kişladağ financing, Lamaque ramp), IAMGOLD (Côté Gold decision), Kinross (Tasiast / Mauritania ramp-up Rainy River and C-Zone decision) and Torex (sub-sill ramp-up).

"Regarding consensus estimates, our forecasts reflect a greater surprise risk for Alamos (capital, production 2020), Franco-Nevada (production), Novo Ouro (production), Kinross (capital) and Yamana (capital). We also see the potential for greater volatility with Barrick (new guidance) and Goldcorp (perspective reviews). Although our Torex forecasts are in line with the consensus, we look favorably on the company's 2019 outlook. "

Mr Wolfson downgraded his rating to Eldorado Gold Corp. (ELD-T, EGO-N) to "hold" from "buy", hoping to see a drop in production in their results.

"Production is expected to decline over the previous quarter, reflecting a decline in production in Kişladağ, while costs are also expected to decline after weaker Q3 results at Olympias," he said. "So far, production has surpassed Kişladağ's expectations of leach irrigation success, which has regained more gold – a continuation of that success may represent an advantage for our forecasts.

"A critical update is expected to be the financial perspective of Eldorado, where liquidity decline due to the advance of Kişladağ's sulphide project of $ 520 million and the next maturity of Eldorado's $ 600 million bond, due to the 4Q20 , represent focus items. Potential options include debt refinancing, asset divestments, flow and / or offtake agreements and equity. Our current projections indicate that leverage ratios will increase sharply to critical levels in 1H19, with no change in the company's current outlook. "

Its target for equities is $ 5.50, rising from $ 5, but below the $ 8.09 consensus.

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Seeing "security" in their numbers, Joel Jackson, an analyst at BMO Nesbitt Burns, updated Nutrien Ltd. (NTR-N, NTR-T) to "outperform" market performance.

"In a dynamic where all fertilizer names are commercially atypical in similar multiples, and in volatile markets, NTR seems relatively safer with its diversified portfolio, stable Canadian investor base, less sensitivity to commodity price. fertilizers (due to Retail), strong balance sheet, and large amount of capital to redeploy (largely through repurchases), "he said.

Jackson maintained a $ 55 target, below the $ 62.82 consensus.

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In a preview of earnings season for gold stocks, Raj Ray of Desjardins believes that the optimism for a strong 2019 is the growth in the wake of a recovery in the price of gold in late December.

"2018 was a disappointing year for gold stocks in general, with the exception of some stocks within our coverage, namely KL Gold, Oceana and Wesdome, which significantly outperformed the industry," he said. "However, gold stocks showed signs of life at the end of 4Q18, driven by the price of gold, which started the quarter on a weaker note, but closed 4Q18 with a rise of almost 7.7%. It is too early to say whether the current rise in the price of gold is sustainable, but … we have a more constructive view in the short term, given the high macroeconomic uncertainties. "

"4Q18 results should limit a good year for most of our companies under cover. Most companies within our coverage are on track to achieve or potentially exceed their 2018 guidance, except the Golden Star (although it should achieve a reduced orientation) and TMAC (no guidance provided due to process plant problems early in the year). After a solid 3Q18, we expect another quarter of success for KL Gold in 4Q18, driven by Fosterville. "

Mr. Ray has lowered his rating for both Kirkland Lake Gold Ltd. (KL-T) and OceanaGold Corp. (OGC-T) to "hold" from "buy", seeing them as properly valued after a strong 2018.

"KL Gold and Oceana were two of the top performers in 2018, 85% and 54%, respectively, against GDX and GDXJ, which fell 9% and 11%, respectively," he said. "However, we believe that both stocks are currently valued based on our assumptions and therefore we are moving to Buy Hold. Although we continue to state that both KL Gold and Oceana are high-quality companies with strong assets, we believe that some of the more leveraged gold stocks, which have so far performed poorly, should outperform in relative terms if renewed gold price optimism continue in 2019. "

His target for Lake Kirkland rose by a loonie to $ 39. The average on the street is $ 38.80.

Mr. Ray's goal for OceanaGold went from $ 5 to $ 5.25, surpassing the consensus of $ 4.75.

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In response to Monday's announcement that its WorldView-4 satellite suffered a flaw that prevented image collection, BMO analyst Nesbitt Burns Thanos Moschopoulos downgraded the rating. Maxar Technologies Inc. (MAXR-T, MAXR-Q) for "outperform" market performance.

"We expect this development to have Maxar's EBITDA, leverage ratios, growth prospects and value to a potential buyer," he said.

Moschopoulos lowered his goal to $ 15 from $ 35. The average target on the street is $ 26.13.

"We believe that Maxar may be worth significantly more than the current price of its shares in a delivery, but in our view, there are some mitigating factors that may not favor value maximization in an M & E scenario," he said .

Elsewhere, Credit Suisse's Robert Spingarn lowered the stock to "underperform" from "neutral," with a $ 5.88 target of $ 17.

Spingarn said: "MAXR announced that WorldView 4, the company's newest satellite, was faulty and could hardly recover. This would result in the loss of $ 85 million in annual revenue, of which only about $ 10-15 million can be migrated to other satellites. We model the loss in annual EBITDA by about US $ 40 million (7% of the total). If the satellite is formally considered unrecoverable, its book value of $ 155 million will be amortized in the fourth quarter and eighth. There is $ 183 million in insurance, but its recovery and time are difficult to measure. Although stocks are down 31%, we still see undesirable stocks at this time and we have reduced our rating … We reduced our estimates from 2019/20 to $ 2.98 / 2.70. We were already worried about a dividend cut, which now looks more likely. "

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In other actions of the analyst:

Analyst at RBC Dominion Securities Paul Quinn demoted Conifex Timber Inc. (CFF-T) to "run sector" from "outperform" with a target of $ 3, down from $ 6 and below the consensus of $ 3.67.

Paul Quinn updated Acadian Timber Corp. (T-DNA) to "surpass" "run sector" with a goal of $ 18, falling by a loonie. The average is $ 19.75.

Robert Kwan of RBC reinstated the coverage of Enbridge Inc. (ENB-T, ENB-N) with an "outperform" rating and goal of $ 59. The average is $ 53.64.


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