(By Balaseshan) CIBC World Markets analyst Kevin Chiang upgraded the rating of Parkland Fuel Corp. (TSE: PKI) to "Sector Outperformer" from "Sector Performer", while lowering price target to $19.50 from $20.50.
While the company reported weaker-than-expected Q4 results, the stock was down 12.5%, and nothing suggested that PKI's longer-term story has been impaired, Chiang noted.
The analyst said his upgrade of PKI reflects: improved earnings visibility from 2014-plus, implying that PKI should trade at a higher multiple; a good avenue to play historically high differentials through 2013; compelling yield of 6.2%; coherent growth strategy; and improved balance sheet.
Chiang said PKI reported a lower-than-expected Q4 EBITDA of $41 million versus his estimate of $51 million and consensus of $52 million. Volumes were in line with his expectations and down 3% year-over-year. The biggest variance to his estimate was in the commercial non-fuel segment.
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The analyst tweaked his 2013 EBITDA slightly lower from $222.40 million to $220 million, reflecting weakness in oil & gas activity. He rolled out his 2014 EBITDA of $198 million as he accounts for the SU contract headwind, organic volume growth and cost cutting initiatives.
PKI is trading up 0.23% at $17.56 on Thursday.