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Eye on Equities

New Flyer payouts seen in danger Add to ...

New Flyer Industries Inc.'s payout is in danger because of weak industry conditions, a higher tax rate and potential changes in corporate structure, Canaccord Genuity analyst David Tyerman said.

"NFI offers a high yield, but there is elevated risk to the distributions, and we believe other companies in our coverage universe offer better returns," he wrote in a research report, pointing out that the transit bus company's payout ratio exceeded 100 per cent for the second straight quarter.

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Downside: Mr. Tyerman cut New Flyer's price target to $8.75 from $10.25 and rates the units as a "hold."

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Bridgewater Systems Corp. earnings missed estimates in the first quarter, and the company faces a more challenging market environment, increased competition and budget pressures going forward, CIBC World Markets analyst Paul Lechem said.

However, the company is trying to diversify its revenue base, and downside is limited by its high cash balance of $3.33 a share, he wrote in a research report.

Downside: Mr. Lechem cut his price target to $7 from $8 a share and has a "sector underperfomer" rating on the stock.

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BCE Inc.'s Bell subsidiary continues to benefit from smart phone sales, rate increases in fixed-line phones, and cost cutting, RBC Capital Markets analyst Jonathan Allen said,

"Bell also surprised the market with another 5 per cent dividend increase and EPS guidance increase following the close of the CTV acquisition," he wrote.

Upside: Mr. Allen raised his price target from $37 to $40 on higher estimates and fixed-line valuations, citing strong first-quarter results. He rates the stock "outperform."

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Paladin Energy Ltd. first-quarter earnings came in a bit below expectations, but the company is "on the verge of tremendous growth" as the stage three expansion at its Langer Heinrich uranium mine in the Namib Desert comes on stream over the next few quarters, said CIBC World Markets Inc. analyst Ian Parkinson.

Mr. Parkinson noted he still has a favourable long-term view of the uranium market, but he believes the time line for investor returns has likely been lengthened by the Japanese nuclear crisis.

Downside: CIBC cut its price target on Paladin by 20 cents to $6.20, "due to continued strength of the South African rand and the Canadian dollar, as well as changes to our operating assumptions." But it maintained a "sector outperformer" rating.

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San Gold Corp. , which operates the Rice Lake project in Bissett, Man., may be able to beat its production guidance for the year, given improvement in ore throughputs in the current quarter, said CIBC World Markets Inc. analyst Barry Cooper. But much depends on whether grades improve as planned, and that will be a challenge as mined grades have so far fallen far short of those indicated by project reserves, he said.

Downside: Mr. Cooper, noting that he adjusted his modelling to assume a more modest build-up in production for 2012 and lowered cash flow multiples, cut his price target to $3.60 from $5.50.

 

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