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Heavy haulers at a Suncor oil sands mine. Suncor is one of many energy firms reporting this week. (Suncor)
Heavy haulers at a Suncor oil sands mine. Suncor is one of many energy firms reporting this week. (Suncor)

Suncor's 2013 production target ‘way too conservative’: analyst Add to ...

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

Suncor Energy Inc. late Monday announced an unexpectedly low production target for 2013, which “seems way too conservative,” said Canaccord Genuity analyst Phil Skolnick.

The company said it expects oil output in 2013 to rise by 8 per cent, to 570,000 to 620,000 barrels per day. It plans to spend $1.2-billion on growth projects in the oil sands next year, nearly half of its earlier expectations.

“We believe Suncor is not only taking a more conservative approach toward capital allocation, but also toward guidance,” he wrote in a research note, adding that the company was likely “trying to factor in an ultimate worst-case scenario in which every one of its divisions has an unplanned outage.”

Mr. Skolnick said he expects production to show “strong” 10 per cent annual growth and that Suncor will generate about $2.75-billion of free cash flow, which is “far superior to any of the other seniors/integrateds in our coverage universe and can support a large dividend increase.”

Upside : Mr. Skolnick has a $45 price target on the stock and a “buy” rating.

Read more:Suncor scales back 2013 oil sands spending plan

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RBC Dominion Securities analyst Jonathan Atkin upgraded SBA Communications Corp., an operator of wireless communications infrastructure in the U.S., to a “top pick” from “outperform.”

He believes SBA will benefit from all four U.S. national carriers ramping up their 4G offerings next year. As well, “the tower business remains fundamentally decoupled from any macro pressures, as wireless 4G is a competitive necessity for the major carriers.”

Upside: Mr. Atkin raised his price target to $85 (U.S.) from $71.

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M Partners analyst Adam Seanor reiterated a “buy” rating on Sprott Inc. after the company announced Monday it will wind down the Flatiron Market Neutral fund following significant losses in November. Sprott completed the acquisition of Flatiron just four months ago.

“Although this situation is unfortunate, we continue to believe that the Flatiron acquisition was a good acquisition and a sound strategic decision. This will likely have a negative impact on sales for the next few quarters for Sprott and that is reflected in our adjusted numbers,” Mr. Seanor said.

Upside: Mr. Seanor trimmed his price target by 50 cents to $4.75. 

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Saputo Inc.’s acquisition of Dean Foods’ Morningstar unit diversifies its U.S.-based manufacturing, “but falls short of improving its ability to achieve international growth,” said CIBC World Markets analyst Mark Petrie.

“Though volume growth has been solid, we see limited prospects for vast improvements in operating efficiency and margins,” he said. “Perhaps most importantly, this deal gives Saputo a strong platform to defend its Canadian earnings and export from the U.S. in the event Canada loosens supply management.”

Upside: Mr. Petrie raised his target price on the stock to $50 from $49 and rates Saputo “sector perform.”

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Legacy Oil & Gas Inc. investors will remain squarely focused on operating performance over the next few quarters, and “could take one or two more quarters of solid operating results to see compelling momentum back in the name,” said Raymond James analyst Kristopher Zack.

The company is considering issuing a dividend, and “while we expect that the market will ultimately pay a premium for the yield, our sense is that multiple expansion for the emerging yield and growth companies will be earned over time with demonstrated operating performance within a sustainable model – that is, exhibiting the right balance between netbacks, decline rates and reinvestment efficiencies,” he said.

Downside: Mr. Zack lowered his rating to “outperform” from “strong buy” and has a $11.50 price target on the stock.

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

 

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