The exterior of the Potash Corp. Rocanville potash plant on Nov. 3, 2010, near Rocanville, Sask.
CIBC World Markets Inc. analyst Jacob Bout today upgraded Potash Corp. of Saskatchewan Inc. to "sector outperformer," but also trimmed his price target citing expectations of a growing surplus in potash markets.
Mr. Bout believes 2012 global potash demand will be approximately 57.5 million tonnes, representing 3 per cent growth from estimated 2011 demand of 55.6 million tonnes. But supplies are growing quickly because of the expansion and redevelopments of existing facilities, known as brownfield projects.
Potash Corp. has already announced first-quarter 2012 production shutdowns at its Lanigan, Rocanville, and Allan mines in an effort to manage supply, highlighting the cyclicality of potash demand and Potash's status as the swing producer, according to Mr. Bout.
He lowered his 2011 and 2012 earnings per share estimates.
Upside: Mr. Bout, who previously rated the stock as a "sector performer," cut his price target to $60 from $65.
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CIBC World Markets Inc. analyst Jacob Bout has downgraded Viterra Inc. to "sector performer" from "sector outperformer," citing the stock's strong price appreciation in 2011. But he still sees a robust sales future for Viterra, particularly as the Canadian Wheat Board loses its monopoly on wheat and barley. "With the dissolution of the CWB likely to happen by August 2012, Viterra has already begun offering contracts for wheat and barley and has secured service agreements with the railways," he notes.
Upside: Mr. Bout maintained a $14 price target.
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National Bank Financial analyst Kris Thompson has come down hard on Cambridge, Ont.-based Com Dev International Ltd. , announcing that the space hardware manufacturer's track record "does not warrant investment" in the stock.
Citing a run of poor earnings, risky acquisitions to drive revenue growth in the U.S. and a series of problem contracts that continue to plague the company, Mr. Thompson does not mince words.
"We're concerned that management is pursuing U.S. mergers and acquisitions because those operations are underperforming," he says. "With the exactEarth business unprofitable until the end of fiscal 2013, a flat commercial market, a weak civil market and U.S. M&A on the horizon, we don't see any reason to stick around for more negative surprises."
Downside: Mr. Thompson downgraded Com Dev's rating to "underperform" from "outperform" and lowered his price target to $1.75 (Canadian) from $2.40.
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Analyst Nicholas Campbell of Canaccord Genuity is maintaining his "speculative buy" recommendation on shares of Batero Gold Corp. as the company released promising drilling results from its Colombian Batero-Quinchia mine.
He is expecting an initial resource of at least 7 million ounces of gold, with longer-term potential for the project to develop into a 10 million ounce gold resource.
Upside: Mr. Campbell is maintaining his 12-month target price of $10 (Canadian) per share.
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Investors should stay clear of DragonWave Inc. in the wake of the company's acquisition of Nokia Siemens Networks' microwave backhaul business, warns National Bank Financial analyst Kris Thompson. "This deal is a major undertaking and will transform DragonWave into a much larger vendor that should be more competitive against larger vendors," Mr. Thompson says. But it may take more time than DragonWave is forecasting to realize the financial benefits and, in the meantime, the deal will require significant working capital and restructuring costs.
Downside: Mr. Thompson downgraded the stock to "underperform" from "sector perform," and cut his price target by 50 cents to $3 (U.S.).
Darcy Keith