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One in five mortgages in Mexico are through Scotiabank, and the bank recently closed a deal to buy Credito Familiar, which adds 145,000 customers for the bank in the region. (Keith Dannemiller)
One in five mortgages in Mexico are through Scotiabank, and the bank recently closed a deal to buy Credito Familiar, which adds 145,000 customers for the bank in the region. (Keith Dannemiller)

BMO’s favourite bank pick for investors? Scotia Add to ...

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

Bank of Nova Scotia has invested heavily in Latin America over the past decade. BMO Nesbitt Burns analyst John Reucassel thinks it’s all going to pay off.

Mr. Reucassel raised his price target on Scotiabank today as he reiterated his belief that the stock has the most favourable outlook among the Canadian banks.

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Scotia over the last couple of days held a Latin America investor conference that reviewed the growth prospects of its operations in countries such as Peru. With a mostly younger population with less debt, and much higher economic growth potential, Scotia is pegging a big part of its future in the region.

“The bank made a positive impression on the growth potential in its LatAm markets,” Mr. Reucassel said in a research note today. “Ultimately, Scotia’s ability to reach its growth targets rest with two inter-related factors. Specifically, can these LatAm countries grow to their potential and can Scotia participate in this growth? While the bank cannot control the first factor, we believe that the bank has the management, platforms and capabilities to fulfill the second factor.

“Stability in the management team and the length of experience amongst the bank’s LatAm operators also provides us with confidence that this group can continue to execute as they have over the last five years,” he added.

Upside: Mr. Reucassel raised his price target to $64 from $61, reflecting his higher conviction that the bank can deliver above-average earnings per share growth over the next few years.

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Methanex Corp. this week struck a 10-year natural gas supply agreement with Chesapeake Energy to feed its Louisiana methanol project.

Canaccord Genuity analyst Steve Hansen called this a “momentous” event for the methanol producer “that greatly enhances our visibility into the company’s future capacity growth and commensurate margins.”

Upside: Mr. Hansen upgraded Methanex to “outperform” and increased his target price to $38 (U.S.)

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Citing a weaker outlook for dissolving pulp prices, a slower-than-expected ramp-up of production at the Thurso pulp mill in Quebec, and higher costs to come, RBC Dominion Securities downgraded Fortress Paper Ltd. to “sector perform” from “outperform.”

Analyst Paul C. Quinn noted that the Thurso ramp-up continues to be “bumpy,” and said he’s “growing increasingly less confident that management will be able to achieve its targeted cost position at Thurso.”

Downside: Mr. Quinn cut his price target by $2 to $12 (Canadian).

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RBC Dominion Securities analyst Walter Spracklin upgraded rail transporter CSX Corp. to “outperform” from “sector perform” on the belief that the plunge in coal prices is nearing its end.

CSX management this week forecast a modest 5 to 10 per cent decline in thermal coal volumes in 2013. While that’s still below last year’s level and down about 40 per cent from 2010, “we are encouraged that we may finally be witnessing the bottom of the coal market decline this year,” said Mr. Spracklin.

Upside: Mr. Spracklin raised his price target by $2 to $27 (U.S.).

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Autodesk Inc. should be a good investment play on the global economic recovery, said RBC Dominion Securities analyst Matthew Hedberg. He thinks the software designer should see “an outsized benefit” from a pickup in economic activity thanks to its global exposure to construction and manufacturing.

“While the exact timing of when the company will begin to see a revenue uplift is unknown, we believe investors may give Autodesk the benefit of the doubt due to improving macro indicators and look to margin improvements versus revenue outperformance in the short term,” he said.

Upside: Mr. Hedberg upgraded Autodesk to “outperform” from “sector perform,” and jacked up his price target to $50 from $33.

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

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