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(J.P. MOCZULSKI/J.P. MOCZULSKI FOR THE GLOBE AND MAIL)
(J.P. MOCZULSKI/J.P. MOCZULSKI FOR THE GLOBE AND MAIL)

Eye on Equities

High-yielding Just Energy primed to outperform: CIBC Add to ...

Just Energy Group Inc.’s dividend yield is just wonderful, at 11.4 per cent. But that hasn’t given shareholders much to celebrate.

The stock is down more than 25 per cent year-to-date and its technical profile, complete with the dreaded "death cross" formation, has Related contentsome chartists warning investors to stay clear.

CIBC World Markets Kevin Chiang has a different take. He today upgraded the natural gas and electricity seller to “sector outperformer,” citing attractive valuation and its oh-so-appealing yield.

His bullish view is supported by Just Energy’s fiscal second-quarter results reported on Tuesday, which saw gross profit of $103-million, above his expectations, thanks to a growing customer base. It also reaffirmed its guidance that gross margin and adjusted EBITDA will rise by 5 per cent year over year in fiscal 2012 - and expressed a commitment to its dividend.

“JE's strategy continues to be to diversify its product line, which will allow it to grow its customer base, and its adaptability has been a key competitive advantage over its competitors,” Mr. Chiang wrote in a research note. “While the economic outlook remains uncertain, we believe JE is well positioned to manage in this slow-growth environment.”

Upside: While more bullish on the stock, Mr. Chiang cut his price target by $2 to $13 to reflect the weak natural gas price environment.

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Aecon Group Inc.’s operations are still in turnaround mode, CIBC World Markets Inc. analyst Paul Lechem commented after the construction firm reported third-quarter earnings that slightly missed analysts’ forecasts. But he sees robust earnings growth ahead. “Significant upside exists in 2012 based on expected market and operational improvements,” Mr. Lechem said.

Upside: CIBC upgraded Aecon to “sector outperformer” and increased its price target by $2.50 to $13.50.

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CIBC World Markets Inc. analyst Brian Quast isn’t impressed with Minefinders Corp. Ltd’s decision to build a mill to complement the existing heap leach operation at its Dolores gold and silver mine in Mexico. “We believe the mill size of +6,500 tonnes per day is too large for the deposit, which ultimately results in a lower net asset value and increases execution risk,” he said.

Downside: CIBC downgraded the stock to “sector underperformer” and slashed its price target by $3 to $16.

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Canaccord Genuity analyst Scott Chan believes CI Financial Corp. , which Tuesday reported earnings that largely met Street expectations, is positioned well for a market recovery. “We continue to favour CI in the mid- to large-cap asset manager space and remains our only buy-rated stock,” Mr. Chan said, pointing to higher growth estimates for next year.

Upside: Mr. Chan raised his price target by $1.25 to $22.75.

Related: CI Financial profits rise despite net redemptions

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Raymond James Ltd. analyst Ben Cherniavsky downgraded Finning International Inc. to “market perform” from “outperform” following the heavy equipment distributor's third-quarter results. While earnings were slightly ahead of his forecasts, he believes the company’s troubled new ERP parts system is clouding its financial outlook. “We advocate a switch into ‘strong buy’-rated Toromont , which we believe offers investors similar end market exposure with less near-term risk and uncertainty,” he said.

Downside: Mr. Cherniavsky maintained a price target of $25.

Related: Finning posts third-quarter profit of $35-million

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