Bombardier Inc. is still facing some stiff headwinds in its aerospace division, but many analysts suggest that won't be enough to prevent shareholders from making some tidy returns over the next 12 months.
The company is set to report its fiscal third-quarter 2011 results on Thursday, with forecasts for earnings per share ranging from 7 to 11 cents. EPS in 2010's third quarter was 9 cents.
Citing a slower-than-expected aerospace recovery, Scotia Capital Inc. Monday reduced its fiscal 2011 and 2012 earnings before interest and taxes estimates by 2 per cent and 3 per cent, respectively. But analyst Turan Quettawala said the sector should improve in coming months, and while the company is trading in line with its rail peers, it's trading at a discount to its aerospace counterparts.
Despite trimming earnings estimates, Mr. Quettawala maintained his one-year price target on Bombardier at $7.50. "We remain bullish on BBD based on its attractive valuation and an expected recovery in aerospace, which should result in strong order flow, as well as a return to EPS growth over the next six to nine months," he said.
Feeling less bullish on the company, but still forecasting a 27 per cent return over the next 12 months, is Tim James at TD Newcrest. He lowered his 12-month forecast by 25 cents to $6 (U.S.) after conducting a review of the outlook for Bombardier's regional aircraft delivery.
Mr. James believes that several recent orders, combined with changing delivery requirements from Bombardier's customers, reduces the risk of production cuts in fiscal 2012. He is concerned, however, that this will leave a larger shortage of delivery demands starting in fiscal 2013.
Mr. James believes we are in the early stages of a civil aerospace recovery that will begin to benefit Bombardier earnings in fiscal 2012 and that shares could bounce off new aircraft orders. Meanwhile, he said the company's valuation appears compelling at 10.7 times fiscal 2012 earnings per share and 5.6 times earnings before interest, taxes, depreciation and amortization.
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Orbit Garant Drilling Inc. shares catapulted 29 per cent last week without any fresh news to account for it, said Beacon Securities Ltd. analyst Michael Mills. The surge appears to be speculative retail buying, he said, noting that the contract mineral drilling firm reported disappointing first-quarter results earlier this month.
Downside: Mr. Mills, who said the company's operations are now fully valued, downgraded the stock to a "hold" from a "buy" and raised his 12-month price target to $6.75 from $6.
Baja Mining Corp. is set to begin copper production from its 70-per-cent owned El Boleo project in Mexico in early 2013, which should coincide with a global supply deficit for the metal that could push inventories to critically low levels, said Canaccord Genuity analyst Gary Lampard. Baja has adequately addressed technical challenges surrounding the high clay content of the deposit, he added.
Upside: Mr. Lampard initiated coverage with a "buy" rating and a $1.55 price target.
Shares in Boardwalk Real Estate Investment Trust are down 12 per cent since the end of September, compared with only a 2-per-cent decline for the S&P/TSX Capped REIT index, noted BMO Nesbitt Burns Inc. analyst Karine MacIndoe. Fundamentals are generally stable in its core Alberta market, strong management is in place and there's high future growth potential from the deployment of excess cash, she said.
Upside: Ms. MacIndoe upgraded the stock to "outperform." Her price target is $47.50.
Parkland Income Fund will pay an annualized dividend of $1.02 a share upon its conversion to a corporation in January, down from its current $1.26 per unit distribution, noted TD Newcrest analyst Damir Cunja. TD believes it's a prudent decision that will allow for more financial flexibility, but the company's valuation remains ahead of fundamentals.
Downside: TD maintained its "reduce" recommendation and its 12-month target price of $9.