Friday'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.

Investors weren't celebrating Thursday as Canadian Imperial Bank of Commerce reported better-than-expected fiscal third-quarter results, pushing shares down 2.2 per cent for the day. But analysts today, mostly pleased with the results, are pushing price targets in the opposite direction, and at least one analyst sees the potential for the bank to be more aggressive in buying back stock.

Despite most big Canadian banks reporting strong earnings growth and beating Street expectations for third quarter profit, the sector has lost ground this week. Bank shares had a strong run-up prior to their earnings, and their failure to react positively to the results suggest expectations may have been too high.

But many analysts still expect stock gains over the next 52 months. For CIBC, BMO Nesbitt Burns raised its price target to $105 (Canadian) from $100 and maintained an "outperform" rating. "CIBC is on a path that should allow it to continue to generate sustainably good returns over time," commented BMO in a research note this morning.

Desjardins Securities raised its target on CIBC to $114 from $110 and maintained a "buy" rating.

CIBC reported earnings per share of $2.23, 2 cents above consensus expectations. Desjardins analyst Doug Young commented that there were a number of encouraging trends within the Personal & Commercial (P&C) banking operation.

"There were three takeaways from the Q3 FY14 results, in our view," said Mr. Young in a research note. "First, Canadian P&C banking trends were encouraging and demonstrate how management continues to execute against its plan. Second, with a CET1 ratio of 10.12 per cent, above management's minimum 10.0 per cent target, CIBC could be more aggressive on stock buybacks, in our view. Management's priority is to use capital to (1) fund organic growth, (2) pursue acquisitions - primarily in wealth management, and (3) return capital to shareholders through dividends and buybacks. Third, it is still unclear what the normal quarterly run rate drag from corporate will be going forward. Overall, it was a good quarter."

CIBC's CET1 ratio of 10.12 per cent is the second highest ratio among peers, and this cushion combined with the bank's capital generation could support further stock buybacks, Mr. Young added. CET1, or Common Equity Tier 1 Capital, is a measure of a bank's financial strength and compares a bank's core equity capital with its total-risk-weighted assets.

The bank has applied to renew its share repurchasing plan, which expires on Sept. 18. It would permit to buy back up to 8 million shares, or 2 per cent of outstanding shares. Under its old plan, it repurchased 4 million shares, Mr. Young noted.

Also on the Street, Credit Suisse raised its price target on CIBC to $115 from $110 while affirming a "neutral" rating. And UBS hiked its target to $109 from $105 and reiterated a "neutral" rating.

CIBC shares on the TSX this morning opened down 0.2 per cent at $103.01.

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A booming trade in drilling for the energy sector mostly offset continued weakness in Energold Drilling Corp.'s mineral drilling business, Beacon Securities analyst Michael Mills said as he upgraded the stock to a "buy" from a "hold."

On Thursday, the company reported third-quarter earnings that came in close to analyst expectations, the result of a 250-per-cent increase in energy related sales year over year, even though mineral drilling sales dropped by 40 per cent.

"We believe this demonstrates that the diversification strategy, first undertaken in 2011, is bearing fruit during this harsh mineral exploration downturn," Mr. Mills said. "Management is working hard to generate additional revenues from its energy division, with prospective opportunities internationally."

He raised his target price to $2 (Canadian) from $1.75.

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A number of analysts reinstated coverage of AltaGas Ltd. with target price hikes following the completion of a deal with Painted Pony Petroleum Ltd. to develop its Montney gas resources in British Columbia.

"In our view, this strategic alliance demonstrates AltaGas' ability to compete with its arguably more integrated peers for green field natural gas and natural gas liquids infrastructure projects," CIBC World Markets analyst David Noseworthy said.

He raised his target price on AltaGas to $57 (Canadian) from $52 while maintaining a "sector outperformer" rating.

Meanwhile, National Bank Financial, BMO Nesbitt Burns, and RBC Dominion Securities all raised their targets on AltaGas stock to $55 from $53. TD Securities increased its target to $57 from $55.

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In other analyst actions:

Credit Suisse raised its price target on Toronto-Dominion Bank to $66 (Canadian) from $63 and maintained a "neutral" rating. UBS raised its target to $63 from $61 and maintained a "buy" rating.

Credit Suisse raised its price target on Avago Technologies to $105 (U.S.) from $75 and maintained an "outperform" rating.