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Inside the Market's roundup of some of today's key analyst actions. This file will be updated often during the trading day so check back for new details.
AltaGas Ltd is unlikely to see the results of its growth potential in the near term, said CIBC World Markets analyst David Noseworthy in downgrading the stock to "sector performer" from "sector outperformer"
The company reported first-quarter earnings before interest, taxes, depreciation and amortization of $178-million, below the consensus estimate of $180-million. It also reported an adjusted earnings per share of 42 cents, lower than the consensus forecast of 45 cents, due to a weak result in its gas segment as its natural gas liquids margins and volumes as well as its gas volumes were lower than predicted.
"We believe ALA is a well-managed company with strong long-term growth opportunities; however, these opportunities are unlikely to materialize for another 8 - 12 months," Mr. Noseworthy said. "For this reason, we believe other energy Infrastructure companies with nearer-term catalysts will likely outperform over this period. Furthermore, ALA's power exposure is unlikely to improve meaningfully in 2015, and while natural gas liquids margins could strengthen with oil prices we believe there are better investment alternatives to gain exposure to this thesis."
The analyst said AltaGas' current power generation growth strategy will likely result in an expansion of its Blythe Energy Center in southern California. However, that move has been delayed as multiple power authorities and utilities reassess their needs in the wake of the state's newly revised renewable portfolio standard.
"While the likelihood of a Blythe expansion is undiminished, the timing of a contract has been pushed into 2016," he said.
Other major capital expenditure projects, including the Triton LNG and Pacific Northern Gas Looping projects in British Columbia, are unlikely to reach financial investment decision until at least 2016, according to Mr. Noseworthy.
He lowered his price target to $47 from $48 (Canadian). The analyst consensus price is $48.85, according to Thomson Reuters.
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Gildan Activewear Inc. is likely to reap the rewards of its $100-million cost-savings initiative while enjoying material earnings growth in the second half of the year, said Canaccord Genuity analyst Derek Dley.
Mr. Dley is forecasting first-quarter revenue of $621-million, an increase of 13 per cent year over year, and earnings per share of 23 cents, in line with Gildan's guidance and down from 32 cents last year, as it works off an inventory affected by higher cotton prices. He expects the company will cycle through that higher-cost inventory in the first half of 2015, leading to increased revenue later in the year.
The company is scheduled to report results on May 14.
"We continue to recommend Gildan as our focus list top pick, as the stock has historically performed well following lower-than-expected guidance, which we witnessed in early December," said Mr. Dley.
He added: "In our view, Gildan's status as the low-cost manufacturer should help the company achieve growth within both its branded and printwear operating segments. Also, potential acquisition opportunities along with cost-cutting initiatives and capacity expansion plans will support earnings growth over our forecast period."
Mr. Dley increased his target price to $35 from $33 (U.S.). The analyst consensus is $33.28.
He maintained his "buy" rating.
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Though the first-quarter results of Enbridge Energy Partners LP beat expectations, Credit Suisse analyst John Edwards is focused on a restructuring review to be announced in the middle of 2015.
Enbridge previously announced a plan to transfer control of $10-billion (U.S.) in pipelines to Enbridge Energy Partners, a U.S.-based subsidiary. The move is under currently under review, with financial terms and timing among the elements of the deal yet to be announced.
The company's first-quarter earnings before interest, taxes, depreciation and amortization was $432-million, ahead of the consensus forecast of $419-million. Discounted cash flow was three per cent higher than Mr. Edwards's estimate at $197-million, largely due to lower maintenance capital expenditures.
He raised his price target to $48 from $47 (U.S.). The consensus price from analysts is $40.79.
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Credit Suisse analyst Stephen Ju is focusing on the fiscal year 2016 guidance for Electronic Arts Inc. when the company reports fourth-quarter 2015 results on May 5.
Mr. Ju thinks the company's biggest "wildcard factor" is the scheduled Nov. 17 release of Star Wars Battlefront. He is forecasting the game to sell six million units, which he calls "conservative" as it coincides with the new Star Wars movie. EA's previous version of the game sold nine million copies.
The analyst also noted the importance of the addition of the company's Need For Speed and Battlefield free-to-play games for international release in fiscal 2017 and 2018, respectively. He also increased the growth trajectory of EA's mobile game revenue by $100-million per year.
Mr. Ju increased his price target to $68 (U.S.) from $56. He maintained his "outperform" rating.
The analyst consensus price is $58.70.
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A stronger-than-expected Canadian dollar will likely have a negative impact on Enerflex Ltd going forward, said Industrial Alliance Securities analyst Elias Foscolos.
"We forecast that approximately 75 per cent of EFX's revenue is derived from outside Canada. As a result currency changes have a substantial impact on its financial performance," he said.
The analyst noted that Enerflex plans to re-segment its geographic disclosure, making geographic comparisons "difficult." He is forecasting earnings per share of 27 cents in the first quarter, compared to a 30-cent consensus. The company's fourth-quarter 2014 EPS was 23 cents.
Mr. Foscolos lowered his price target to $20 from $21 (Canadian). The analyst consensus price target is $19.61. He maintained his "strong buy" rating.
"We classify Enerflex as a defensive stock for investors interested in investing in the energy service space due to its lower correlation with North American oil drilling activity," he said. "There are three reasons we continue to recommend EFX. First, it is trading at a low multiple compared to its peers. Second, it should exhibit EBITDA growth in 2015. Finally, its debt is very manageable."
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In other analyst actions:
Stifel upgraded Twitter (TWTR-N) to "hold" from "sell" and removed its price target of $36 (U.S.).
SolarCity (SCTY-Q) was downgraded to "neutral" from "outperform" at RW Baird and its price target was cut to $65 (U.S.) from $76.
Atlantic Gold Corp. (AGB-X) was rated new "speculative buy" at Canaccord Genuity. The 12-month target price is 70 cents (Canadian) per share.
BCE Inc. (BCE-T; BCE-N) was raised to "outperform" from "sector perform" at RBC Capital. The 12-month target price is $57 (Canadian) per share.
Linamar Corp. (LNR-T) was raised to "buy" from "hold" at TD Securities. The 12-month target price is $86 (Canadian) per share.
Ritchie Bros. Auctioneers Inc. (RBA-N; RBA-T) was raised to "buy" from "hold" at Jefferies. The 12-month target price is $30 (U.S.) per share.
Surge Energy Inc. (SGY-T) was rated new "buy" at Acumen Capital. The 12-month target price is $5.50 (Canadian) per share.
American Eagle Outfitters Inc. (AEO-N) was rated new "outperform" at RBC Capital. The 12-month target price is $20 (U.S.) per share.
Abercrombie & Fitch Co. (ANF-N) was rated new "underperform" at RBC Capital. The 12-month target price is $17 (U.S.) per share.
Ann Inc. (ANN-N) was rated new "sector perform" at RBC Capital. The 12-month target price is $40 (U.S.) per share.
Gap Inc. (GPS-N) was rated new "sector perform" at RBC Capital. The 12-month target price is $45 (U.S.) per share.
lululemon athletica Inc. (LULU-Q) was rated new "outperform" at RBC Capital. The 12-month target price is $77 (U.S.) per share.
Madison Square Garden Co. (MSG-Q) was raised to "outperform" from "neutral" at Macquarie. The 12-month target price is $100 (U.S.) per share.
Pinnacle West Capital Corp. (PNW-N) was raised to "sector perform" from "underperform" at RBC Capital. The 12-month target price is $66 (U.S.) per share.
Quantum Corp. (QTM-N) was raised to "outperform" from "market perform" at Northland Securities. The 12-month target price is $3 (U.S.) per share.
United Natural Foods Inc. (UNFI-Q) was rated new "buy" at Guggenheim Securities. The 12-month target price is $90 (U.S.) per share.
Urban Outfitters Inc. (URBN-Q) was rated new "outperform" at RBC Capital. The 12-month target price is $48 (U.S.) per share.
With files from Bloomberg News