Inside the Market's roundup of some of today's key analyst actions
Bank of Nova Scotia is winning praise - and several price target hikes - from analysts today after reporting a solid fourth quarter on Tuesday.
Earnings per share of $1.25 beat the consensus forecast of $1.22 in a quarter that saw the company complete three acquisitions: ING Direct in Canada, Crédito Familiar in Mexico and a stake in Colombia’s Colfondos AFP. The earnings contribution from ING has already exceeded expectations.
“Scotia has a history of generating robust organic growth augmented by acquisitions that often generate an attractive return on invested capital,” commented Desjardins Securities analyst Michael Goldberg in a research note. “With the acquisition of ING Direct, it looks like Scotia is again delivering instant gratification.”
“Scotia’s balanced expansion has also added to the diversity and stability of its earnings, supporting its dividend growth. This discipline, diversity and effective execution justify its premium valuation.”
CIBC World Markets analyst Robert Sedran echoed this sentiment, commenting that “our positive investment stance on this bank continues to be based on its ability to better overcome slowing growth in the domestic retail sector affecting all banks, both through acquisitions and organic growth.”
Canaccord Genuity analyst Mario Mendonca agreed that strong financial results from the bank’s international assets, and the impressive ING Direct results to date, support strong earnings per share growth to come.
Targets: Desjardins Securities raised its price target by $4 to $69; CIBC raised its target by $3 to $67, and Canaccord raised its target by $2 to $69. The average 12-month analyst target is $65.11, according to Bloomberg data.
AGF Management Ltd.’s shares have risen about 34 per cent over the past two months - but further gains may be harder to come by, warns GMP Securities analyst Stephen Boland.
Over the past year, the departure of a star fund manager and underperformance of a number of key funds has led to a slew of institutional and retail redemptions. “While we had believed the majority of redemptions had slowed, recent monthly assets under management declines may indicate that outflows have continued,” said Mr. Boland, who downgraded the stock to “hold” from “buy.”
While AGF has sufficient capital to support its dividend, Mr. Boland does not expect earnings per share to cover its funding over the next two years.
“Management has been adamant that the dividend will not be lowered but with the further erosion in the institutional segment we believe that investor concerns around the dividend may increase. Despite the robust yield and buyback, we are unsure this can move the stock higher in the medium term,” he said.
Targets: Mr. Boland cut his price target by 50 cents to $12. The average Street target is $11.40.
RBC Dominion Securities analyst Robert Kwan upgraded Pembina Pipeline Corp. to “outperform” from “sector perform,” believing there’s “compelling value” from its projects that are coming to fruition.
Pembina this week announced about $1-billion in infrastructure projects that Mr. Kwan believes have “good economics.” Meanwhile, Pembina’s existing crude oil, condensate and natural gas liquids pipelines are full.
“From a pure timing perspective, we believe that investors should accumulate positions while being mindful that a roughly $300-million common equity issuance is likely to occur within the coming months,” he said.
Targets: Mr. Kwan raised his price target by $4 to $35. The average price target among analysts is $33.71.
Wajax Corp.’s dividend could be at risk, warned Desjardins Securities analyst Benoit Poirier after the mobile equipment supplier reported soft fourth-quarter results.
Wajax’s adjusted earnings per share of 84 cents was below consensus expectations of 92 cents, largely due to weakness in its power systems and industrials segments, which have been hurt by lower levels of oil and gas rig activity in Western Canada.
While the company declared a monthly dividend, future payouts could be difficult if current trends continue and the company’s financial position deteriorates further, Mr. Poirier said.
“While we believe there are nice growth opportunities ahead for Wajax, including new product lines with Hitachi and Bell Equipment, we expect the stock to be under pressure following management’s cautious outlook going into 2013, as investors digest the declining backlog and potential dividend cut,” he said. “We believe margin upside is somewhat limited from current levels and that the shares are fairly valued.”
Targets: Mr. Poirier cut his price target to $43 from $48 and reiterated a “hold” rating. The average price target is 42.44.
Small-cap, growth-oriented investors with a high-risk tolerance looking for indirect oil sands exposure should take a look at Athabasca Minerals Inc., said Stonecap Securities analyst Chris Blake.
Athabasca is focused on the development of sand and gravel pits and industrial mineral projects in Alberta. Mr. Blake believes it provides exposure to a number of growth trends, including oil sands infrastructure development and three gravel pits that are just starting to ramp up.
He initiated coverage with an “outperform” rating.
Targets: Mr. Blake set a $2 price target. No other analysts cover the stock, according to Bloomberg.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities