Transat A.T. (TSE:TRZ.B), Canada's largest tour operator, had its target price raised at Desjardins Capital Markets, Canaccord Genuity and CIBC World Markets in the wake of posting better-than-expected earnings for the third straight quarter on higher prices and improved margins.
Desjardins increased its target to C$18, from C$15, with a "buy–aaverage risk" rating, from "buy–above-average risk".
"We maintain a positive stance as we see more upside due to cost-cutting and margin-improvement initiatives," Analyst Benoit Poirier wrote in a note emailed to investors today.
Canaccord Genuity analysts said they continue to recommend buying Transat to benefit from substantial profit rebound potential, driven mainly by cost reduction. "The outlook indicates further gains this winter," Analyst David Tyerman said in a note yesterday.
Canaccord boosted its target to C$19.25, yet lowered its near-term forecast, as the outlook for the first half of 2014 appears less robust than it expected.
CIBC World Markets, which maintained a "sector performer" rating on the stock, upped its price target to C$14.25 from C$11.75. The firm expects Transat to post a breakeven winter while continuing to benefit from its cost-cutting strategy.
"The company continues to face headwinds related to increasing competition over the coming years and a weakening [Canadian dollar] this winter," wrote analyst Kevin Chiang in a note yesterday. "Earnings visibility for [Transat] remains challenged," he added.
Montreal-based Transat said in a statement yesterday that its net profit tripled to C$54.7 million, or C$1.40 per share, in the fourth quarter ended Oct. 31, from C$16.6 million, or 43 Canadian cents per share, a year earlier. Revenue rose 6 percent to C$808.6 million.
Analysts on average had looked for earnings of C$1 per share on revenue of C$764 million, according to Thomson Reuters.
Transat, which offers discounted air fares and vacation packages, also posted its first full-year profit since fiscal year 2010 as initiatives such as capacity cuts at its airline, Air Transat, showed results.
"The higher average selling prices offset [Transat's] decision to reduce capacity on all its markets," the company said in the statement.
Shares of Transat were down 0.4 percent to C$13.92 at 2:48 p.m. in Toronto today. The stock has more than doubled this year, giving the company a market value of C$545 million.