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Pipelines feed crude oil into in the tank farm at the Enbridge Pipelines oil terminal facility in Hardisty, Alta (Larry MacDougal/Larry MacDougal/CP)

Pipelines feed crude oil into in the tank farm at the Enbridge Pipelines oil terminal facility in Hardisty, Alta

(Larry MacDougal/Larry MacDougal/CP)

Eye on Equities

Enbridge rally not yet out of fuel: CIBC Add to ...

Enbridge Inc. shares have already rallied 30 per cent in the past year, making for some very content shareholders who also benefit from the pipeline giant’s nearly 3 per cent dividend yield.

CIBC World Markets Inc. analyst Paul Lechem thinks the stock price has further room to travel north now that the company has revealed ambitious plans to expand pipeline capacity in the south.

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Enbridge is proposing the 585,000-barrel-a-day Flanagan South pipe to Cushing, Okla., from Flanagan, Ill., near Chicago; and a twinned Seaway pipeline system that would move 850,000 barrels from Cushing to near Houston. Cushing is the major crude hub that has seen a glut of product that has pushed down North American prices relative to international values.

Mr. Lechem notes that both pipeline systems are nearly fully contracted to move oil for terms of five to 20 years, easing concerns that the added capacity will go unused at a time when many other pipeline proposals are on the table.

He estimates that the two projects will keep the company’s growth trajectory fully intact and increase annual earnings per share by 20 cents when they are fully in service in 2015.

“Enbridge is targeting 10 per cent EPS growth through 2015, and with these projects, we would expect that growth rate to continue well into the back half of the decade,” Mr. Lechem said in a research note.

Upside: Mr. Lechem raised his price target by $3 to $44 and maintained a “sector outperformer” rating.

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RBC Dominion Securities Inc. analyst Jonathan Atkin has downgraded Verizon Communications Inc. to “sector perform” from “outperform.” He cites an expected slowdown in wireless customers who pay for services after they are used, due in part to more iPhone-enabled competitors. “We see few sustainable catalysts given a flatter postpaid growth trajectory and a weaker starting point for 2012 wireline margins,” Mr. Atkin said.

Downside: Mr. Atkin kept his $40 (U.S.) price target.

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Alliance Grain Traders Inc. , which has seen a sharp decline in its share price over the past year, reported a disappointing fourth-quarter. Earnings before interest, taxes, depreciation and amortization of $9.20-million was well below consensus expectations of $16-million, as sluggish demand forced the company to sell product at lower margins.

Despite low inventories, currency uncertainties in certain markets have many global purchasers cautious in their purchase of pulse crops, noted CIBC World Markets Inc. analyst Jacob Bout. “We are decreasing our estimates to reflect more modest gross margins in 2012 as a result of a changing sales mix (both product and regional) due to continued economic uncertainties,” he said.

Downside: Mr. Bout cut his price target by $4 to $21 while maintaining a “sector performer” rating.

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Lake Shore Gold Corp. had a tough fiscal 2011, reporting a loss of three cents per share when some on the Street were expecting a profit. While the company is expecting higher production in fiscal 2012, Canaccord Genuity analyst Wendell Zerb is concerned its capital expenditure commitments of over $160-million may potentially strain the company’s balance sheet.

Downside: Mr. Zerb cut his price target to $1.75 from $2.05 and maintained a “hold” rating.

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M Partners analyst Adam Seanor is maintaining a “buy” rating on Sprott Inc. ahead of the fund company’s earnings release on Thursday morning, but will be keeping a close eye on the company’s outlook. All of Sprott’s funds were in positive territory up to Feb. 29, but March has been challenging. For instance, Sprott’s Canadian Equity Fund is down 8.7 per cent month-to-date, he noted.

Upside: Mr. Seanor has a $7.75 price target.

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