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File photo of Torstar Corp. president and chief executive officer David Holland. (MARK BLINCH/REUTERS)
File photo of Torstar Corp. president and chief executive officer David Holland. (MARK BLINCH/REUTERS)

Analysts lower expectations on Torstar, Talisman Add to ...

Inside the Market's roundup of some of today's key analyst actions

Even with a dividend yield of about 6.5 per cent and a big drop in its share price this week, CIBC World Markets analyst Robert Bek isn’t recommending investors flock to Torstar Corp. Its third-quarter results were light of estimates for a second straight quarter, with revenues falling 6.2 per cent from last year. “The ad environment and print sentiment remain very challenged,” he said.

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The company said the advertising market for its stable of daily and weekly newspapers showed signs of improvement in July and August, before weakening again in September. At its Harlequin division, which publishes romance novels, a decline in revenue was “more than expected by the market share impact of the exceptional performance of a competitor’s bestseller and weak global economic conditions,” the company had said.

Upside: Mr. Bek cut his price target by $1 to $9 and reiterated a “sector performer” rating.

Read more: Torstar profit and revenue fall

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Citigroup has downgraded Talisman Energy Inc. to “neutral” from “buy,” according to Dow Jones Newswires. Citigroup cited Talisman’s lowered production forecasts and a lack of catalysts that are likely to propel the stock out of its recent slump.

Downside: Citigroup cut its price target to $12.50 from $16.

Read more: Battered Talisman Energy eyes a frugal future

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Labrador Iron Ore Royalty Corp. is a “safe harbour investment in iron ore” -- with a notable dividend yield, to boot, says Raymond James analyst Adam Low.

Investors get a “valuable minority stake in an established and growing iron ore complex,” as well as a 5 per cent annual dividend yield, based on forecast 2013 distributions to shareholders of $1.50/share, Mr. Low wrote in a research report. “We expect the shares to trade at a premium given its status as an established and growing producer, its scarcity value as one of two iron ore producers listed on the TSX, and its consistent payment of a substantial dividend yield.”

The dividend is supported by cash flows from Canada's largest iron ore miner, the Iron Ore Company of Canada, in which Labrador holds a 15 per cent stake. The payout also stems from a 7 per cent gross revenue royalty and 10 cent-per-tonne commission fee payable to Labrador on all iron ore products produced, sold, and shipped by the Iron Ore Company. Over the last 10 years the annual dividend has tripled in size.

Upside: Mr. Low rates the stock “outperform” and has a target price of $35 over the next six to 12 months.

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Software maker Open Text Corp. faces an uphill battle in generating licence revenue, which fell 14 per cent year-on-year in the September quarter, Cantor Fitzgerald analyst Tom Liston said.

“Macro headwinds,” including weakness in Europe, “make it all the more challenging for management to continue to grow the business,” he wrote in a research report. Open Text was aggressive when it came to cost cutting, “but needs to dramatically improve license revenue to offset maintenance attrition in order to maintain margins over time,” he said.

Downside: Mr. Liston lowered his 12-month target to $54 (U.S.) from $56 and maintains a “hold” recommendation on the stock.

Other analysts were less pessimistic.

“While the Q1 results are sour on the surface, we believe the company has the opportunity to convert operations into a sweet investment opportunity. The stock sell-off should be viewed as buying opportunity,” wrote National Bank Financial’s Kris Thompson. “We don’t expect the stock to trade below $50 for long, heading into a seasonally strong quarter and trading under 10 times earnings.” He has a $78 target on the stock.

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Martinrea International Inc. said its full-year earnings per share will not meet the low end of its previous guidance of $1.05 due to higher-than-expected costs. While the warning was largely priced into shares, CIBC World Markets analyst Todd Coupland said investors shouldn’t rush into buying shares. “MRE is inexpensive (relative to peers) and should stay there until positive margins can be reasonably forecasted,” he said.

Upside: Mr. Coupland cut his price target by $1 to $9 and reiterated a “sector performer” rating.

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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities

 

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