Capital markets are back in a big way, with trading volumes and financings racing ahead of year-ago levels.
What's a one-stop way to ride the rebound wave? TMX Group Inc. , which just hiked its dividend in October to yield 4.3 per cent annually, is one possibility.
CIBC World Markets Inc. believes the fourth quarter will be a huge one for TMX, as total equity trading volumes increased 24.5 per cent year-over-year and the total dollar value of financings rose 11 per cent.
Analyst Paul Holden raised his estimates for TMX today for the next two years to reflect a more bullish view of market conditions. He expects the company's fourth-quarter earnings per share will come in at 82 cents, up from his earlier projection of 70 cents. The Street's consensus is for adjusted EPS of 75 cents.
"In our view, TMX is an excellent way to benefit from a sustained recovery in the capital markets," Mr. Holden wrote in a note. "Costs are relatively fixed, providing lots of operating leverage."
He said valuations, at 11.6 times 2011 estimate earnings per share, are relatively modest, as the company has historically traded at around 15.5 times forecast EPS. "There is ample room for multiple expansion, particularly if market share in equity trading remains stable or improves through 2011," he said.
Upside: Mr. Holden hiked his price target to $46 from $38.75 and upgraded the stock to "sector outperformer" from "sector performer."
The fire that suspended production at Canadian Natural Resources Ltd. Horizon oil sands operation last week presents little downside risk to the stock in the longer term, said Canaccord Genuity analyst Phil Skolnick. Even in a worst-case scenario where repairs take nine months, insurance will mostly cover the costs and the stock is already trading at a discount to its peers, he said.
Upside: Mr. Skolnick maintained a $46 price target and rates the stock as a "buy."
Related: Canadian crude rises on oil sands blaze
Canadian National Railway Co. is likely to announce a more than 15 per cent hike in its dividend and a new share buyback program when it announces fourth-quarter results on Jan. 25, said BMO Nesbitt Burns Inc. analyst Fadi Chamoun. He believes CN may beat the consensus view on earnings amid strong shipment volumes.
Upside: Mr. Chamoun hiked his price target on CN by $2 to $73.
First Quantum Minerals Ltd.'s copper growth profile is one of the most attractive in the global mining sector, both for investors and potential acquirers, said TD Newcrest analyst Greg Barnes. The company appears set to become the next major global copper producer with output of one million tonnes annually by 2017, more than three times this year's expected output, even though there are political and operational risks, he said.
Upside: Mr. Barnes upgraded First Quantum to an "action list buy" rating and hiked his 12-month target to $150 from $122.
Related: UBS puts First Quantum on list of seven top stock picks
Raymond James Ltd. is recommending investors buy shares in Crocodile Gold Corp. based on its attractive growth profile, significant exploration potential and strong leverage to further increases in the gold price. The production and development company, focused on properties in northern Australia, is well funded and its gold output is expected to double to at least 200,000 ounces in 2012, said analyst Gary Baschuk.
Upside: Mr. Baschuk initiated coverage on the stock with a "strong buy" rating and a six- to 12-month target price of $2.40 a share.