Aimia Inc. is poised to enter a new era in 2014 with TD Bank as its new partner and long-standing ally CIBC both offering credit cards linked to Aimia’s Aeroplan rewards.Ryan Remiorz/The Canadian Press
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
Investors have failed to recognize Cott Corp.'s advances in its transition away from soft drinks and toward new categories and customers, CIBC World Markets analyst Perry Caicco said.
As the world's largest manufacturer of private-label soft drinks, Cott's shares have suffered from a shift in consumer preferences.
But the company is in the midst of an unheralded transformation, Mr. Caicco said.
"Cott is a misunderstood company. Investors are still focused on the dynamics of the traditional North American carbonated soft drink market, even though Cott is rapidly re-making itself into a more balanced beverage company with a variety of products, packages, channels and customers," he said.
Cott has aggressively expanded its contract manufacturing business, which allows the company to improve utilization of existing production assets and reduce exposure to declining soft drink consumption.
"Regardless of whether the current trendy beverage switches from energy drinks to stevia-infused sodas to goji-berry teas, contract manufacturing means Cott can be more reactive," Mr. Caicco said.
Meanwhile, the company has slashed its costs and reduced debt, which has helped stabilize earnings while pursuing acquisitions.
However, the company slightly missed analyst expectations on third-quarter earnings. Mr. Caicco lowered his price target to $9 (U.S.) from $10, while reiterating a "sector outperformer" rating.
The analyst consensus price target for Cott over the next year is $9.28, according to Thomson Reuters data.
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Uncertainty about possible regulations reducing interchange fees in Canada has significantly hurt shares in Aimia Inc. in recent weeks. But the worst fears are already priced in the shares and investors should expect a modest relief rally, said Industrial Alliance Securities analyst Neil Linsdell, who upgraded his rating to "strong buy" from "buy."
The government is expected to comment on possible changes to interchange rates - what banks receive for credit card purchases - shortly. Interchange fees fund the gross billings that are collected from CIBC and TD, so any significant reduction to the fees collected by the banks could reduce the amounts that they are willing to pay Aimia to issue Aeroplan Miles. Mr. Linsdell estimates that TD and CIBC collectively represent just under 25 per cent of Aimia's gross billings.
Shares in Aimia are trading near $15, down almost $5 from mid-August.
"Aimia has shown tremendous creativity over the years in managing their loyalty programs, such that we expect even a significant reduction (10 per cent) to interchange fees, could be managed between their partners and in potential modifications or adjustments to the Aeroplan program. As such, we believe that the recent price decline has been overblown, and that any kind of clarity on potential regulation will likely lead to a relief rally," he said in a research note.
His price target was maintained at $20 (Canadian). The analyst consensus price target over the next year is $19.38.
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Mixed third-quarter results from Canam Group Inc. prompted a downgrade from Raymond James analyst Frederic Bastien.
Third-quarter earnings per share of 25 cents was 2 cents short of Mr. Bastien's target and a nickel off consensus
"Although we were encouraged to see the U.S. joists and steel deck business improve and backlog hit a new high during the quarter, competitive pressures in Ontario and an equipment malfunction in Quebec are clouding the firm's outlook for the near term," he said. "Accordingly, we feel compelled to remove Canam from our list of high-conviction ideas for the time being. We are still of the opinion that over a two- to three-year period, the fabricator and its shareholders will profit handsomely from the recovering US non-residential construction market."
Mr. Bastien downgraded Canam Group to "outperform" from "strong buy" and lowered his target price to $15.00 from $17.00.
It was also downgraded at Cormark Securities, to "buy" from "top pick," with a price target of $14 (Canadian).
The analyst consensus price target is $16.30, according to Thomson Reuters.
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The outlook for Lundin Mining Corp. remains positive, says CIBC World Markets analyst Tom Meyer.
On Wednesday, Lundin reported lower-than-expected third-quarter adjusted earnings per share of 5 cents (U.S.) versus Mr. Meyer's estimate of 10 cents and consensus of 8 cents.
Operating earnings came in at $43-million versus Mr. Meyer's expectation of $55-million, while copper production of 13,366 tonnes for the quarter missed his estimate by 19 per cent.
"The outlook for the company remains positive and, in our view, this is correctly reflected in the present valuation," he says.
Mr. Meyer maintains his "sector performer" rating and $6 price target.
Separately, Dundee Securities reiterated Lundin Mining as a "buy" with a price target of $8.50 (Canadian). "LUN remains our top pick in the sector and we believe it deserves a premium given its strong financial condition and the lower development risk compared to its peers," said Dundee analyst David Charles.
The analyst consensus price target is $6.84, according to Thomson Reuters.
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Despite missing third-quarter estimates, the future looks positive for Agnico Eagle Mines Ltd., says Desjardins Securities analyst Michael Parkin.
Agnico reported adjusted earnings of $4.2-million (U.S.) or 2 cents per share, missing Mr. Parkin's estimate of 11 cents per share and consensus of 15 cents.
"Overall, Agnico missed estimates on an adjusted EPS basis; however, we believe the market will look through the relatively weak 3Q14 earnings to the expectation for a strong 4Q14 and 2015," says Mr. Parkin. "Our conviction in our estimates has increased, the bulk of the operations are posed for stronger quarters to come and the balance sheet is improving."
He maintains his "buy" rating and boosted his target price to $46 (Canadian) from $42. The analyst consensus price target is $38.88, according to Thomson Reuters.
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In other analyst actions:
Raymond James downgraded Horizon North Logistics to "market perform" from "outperform" and cut its price target to $3.75 (Canadian) from $6.50. AltaCorp Capital Research downgraded its rating to "sector perform" from "outperform" and also slashed its price target, to $3.50 from $6.50.
Raymond James downgraded Taseko Mines to "market perform" from "outperform" and cut its price target to $2.30 (Canadian) from $2.75.
RBC Dominion Securities downgraded Atco to "underperform" from "sector perform" with a price target of $49 (Canadian).
AltaCorp Capital Research initiated coverage on Rocky Mountain Dealerships with an "outperform" rating and $12.50 (Canadian) price target.
FBR Capital Markets upgraded Visa to "outperform" from "market perform" with a price target of $260 (U.S.).
Argus upgraded Juniper Networks to "buy" from "hold" with a price target of $33 (U.S.).
Credit Suisse downgraded Kraft Foods Group to "neutral" from "outperform" and cut its price target to $58 (U.S.) from $63.
Credit Suisse upgraded Sprint to "neutral" from "underperform" with a price target of $6 (U.S.).
With files from Bloomberg
Darcy Keith