RE:RE:RE:New 52 week high oldtimer21:
Company News Alert
Today's analyst upgrades and downgrades (RTGAM)
Darcy Keith
Inside the Market’s roundup of some of today’s key analyst actions. This file will be updated during the trading day. For breaking analyst actions prior to market open every day, read our Before the Bell morning report.
CIBC World Markets analyst Arthur Grayfer initiated coverage on eight of Canada's largest energy companies, with Suncor Energy Inc. and Canadian Natural Resources Ltd. being his favourites.
Here's his recommendations on all the stocks, along with a brief snapshot of commentary on each:
Canadian Natural Resources Ltd. Initiates coverage with a "sector outperformer" rating and 12- to 18-month price target of $49 (Canadian).
"Canadian Natural stands out amongst its peers for multiple fundamental reasons and from a valuation perspective. The company has a meaningful land position with a balanced portfolio of synthetic crude oil/light oil, heavy oil and natural gas, which offers decades of growth visibility... CNQ has a consistent track record of dividend increases (about 14 consecutive years). We expect the expanding free cash flow profile to fund long-term growth initiatives and support the return of capital to shareholders through continued dividend increases and share buybacks."
Suncor Energy Inc. Initiates coverage with a "sector outperformer" rating and $44.50 (Canadian) price target.
"There are multiple facets to Suncor's strategy, which, together, are expected to result in strong per share performance and a return of capital to shareholders: capital discipline, improved reliability, cost control, access to premium pricing, and the pursuit of the most efficient growth...With this strategy, we estimate CAGR (compounded annual growth rate) production into the end of the decade to be about 5 per cent, although we expect EPS and CFPS (cash flow per share) to show CAGRs of about 8 per cent and 7 per cent, respectively. The asset base is also expected to result in meaningful free cash flow generation, which will fund the return of cash to shareholders."
Cenovus Energy Inc. Initiates coverage with a "sector performer" rating and $34 (Canadian) price target.
"Cenovus is one of the preeminent SAGD (Steam Assisted Gravity Drainage, an enhanced oil recovery technology) operators in Western Canada. The company has demonstrated strong operational and capital efficiencies in its SAGD operations and has growth visibility for decades to come with about 13 billion billion barrels of recoverable oil sands resource. ... Cenovus has lost its premium valuation and we do not believe that premium will be regained unless the market refocuses on growth, as opposed to free cash flow generation. Cenovus offers above-average per share growth (accelerating after 2015), but below-average free cash flow generation."
Husky Energy Inc. Initiates coverage with a "sector performer" rating and $38 (Canadian) price target.
"Historically, Husky Energy was not known as a growth entity, with production declining through the latter half of the previous decade. That perception has changed over the last few years and the company has begun to consistently execute on its growth plans... Over the next few years, Husky's growth will comprise multiple projects across multiple jurisdictions focused on heavy oil, light oil and premium-priced natural gas. This “portfolio” approach to growth allows the company a number of levers to achieve its growth objectives."
Encana Corp. Initiates with a "sector performer" rating and $24 (U.S.) price target.
"After splitting from CVE (Cenovus Energy) in 2009, ECA struggled to achieve its growth plans. The company had a vast land base of ~11 million net acres but lacked strategic direction. In 2013, Doug Suttles, the newly appointed CEO, executed a comprehensive evaluation of ECA's management and assets.... While we believe ECA's new strategy is appropriate, as it should allow for improved focus, capital discipline and cost control, three of the five plays are in the early stages of development and we would want to see evidence of successful execution before upgrading our rating."
Imperial Oil Ltd. Initiates with a "sector performer" rating and $60 (Canadian) price target.
"IMO has a track record of focusing on total shareholder returns via large share buybacks with consistent dividend increases, the highest ROCE (return on common equity) measure among its peers, strong ties to ExxonMobil, and long-term growth visibility, all of which have been drivers of its premium cash flow valuation... While we view IMO as a quality, core holding among Canadian integrateds, we believe the stock has a substantial portion of its growth priced in and is fairly valued."
Talisman Energy Inc. Initiates with "sector underperformer" rating and $11 (U.S.) price target.
"Talisman has strong assets in Southeast Asia and the Americas, and some exciting prospects in Colombia, the Duvernay and Kurdistan. However, the company is still mid-realignment and we expect it to be unable to fund its growth objectives and dividend from cash flow until late in the decade."
Canadian Oil Sands Ltd. Initiates with a "sector underperformer" rating and $22.50 (Canadian) price target.
"Canadian Oil Sands is a pure-play investment option for exposure to an oil sands mining operation in the Athabasca Fairway... As a result of various reliability issues, COS has regularly fallen short of achieving its production guidance, with project utilization averaging about 82 per cent since the beginning of 2007. Guidance in 2014 is 82 per cent, which we believe is achievable and should bode well for managing expectations. ... We believe utilization will improve, however there is uncertainty around timing and have chosen to be cautious in our approach. In our view, the current dividend will be funded from debt over the next few years unless utilization improves or prices remain at current levels."
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