Bank of Nova Scotia beat Street estimates in its latest quarterly earnings and is being awarded with at least one analyst upgrade.
Canaccord Genuity’s Mario Mendonca raised his rating to “buy” from “hold,” citing not only the more upbeat-than-expected financials in the second quarter, but also the recent decline in the share price. Over the past six months, Scotiabank has significantly underperformed -- by 900 basis points -- Toronto-Dominion Bank and Royal Bank of Canada, two peers that Mr. Mendonca already had rated as buys.
He also cited two other key reasons for the upgrade: Scotiabank halting market share losses in domestic commercial landing; and very strong loan growth in its international business, as recent acquisitions performed better than expected. “In the context of a slowing domestic consumer, BNS’ international business is viewed as especially attractive,” he said.
Scotiabank reported core cash earnings per share of $1.18 in the second quarter, up 3 per cent from a year earlier and three cents better than consensus. International earnings of $399-million were up 22 per cent from a year ago.
Domestic retail net income, meanwhile, was up 24 per cent year over year on 5.4 per cent revenue growth. That marked quite a turnaround, given the retail results were stronger than its peers after being weaker for five consecutive quarters.
Mr. Mendonca warned, however, that the retail division feat is unlikely to be repeated. “We do not view the bank as having the scale advantages of TD and RY,” he said.
Upside: Mr. Mendonca also raised his price target by $3 to $61.
Oil and jet fuel prices have tumbled in the past month, and that should boost near-term profitability at Transat A.T. Inc. , said Canaccord Genuity analyst David Tyerman. “Revenues are likely to remain strong for some time as already-sold tickets, which were sold with prices reflecting the fuel costs at the time of sale, will not be re-priced, and new ticket price adjustments typically take time,” he said.
Upside: Mr. Tyerman upgraded Transat to a “buy” from “hold” and raised his price target by 25 cents to $7.50.
A recent visit to Silvercorp Metals Inc.’s Chinese assets has Raymond James analyst Brad Humphrey feeling bullish on the company. The high-grade flagship SGX mine “continues to impress” on the cost side and should ensure the company generates positive cash flows even at much lower metal prices, he said. But he does suspect that hitting the grades forecasted by the company for fiscal 2013 might be challenging.
Upside: Mr. Humphrey maintained his “outperform” rating and trimmed his price target by $1.50 to $11 (U.S.).
Citing recent share price weakness, a solid business outlook for the second half of fiscal 2012 as well as for 2013, and attractive valuation metrics vs. peers, Desjardins Securities upgraded CGI Group Inc. to a “buy.” “CGI continues to generate abundant free cash flow, a large portion of which is returned to shareholders via share buybacks while the remainder is retained and reinvested in profitable growth opportunities,” said analyst Maher Yaghi.
Upside: Mr. Yaghi raised his price target by $1 to $24.
A preliminary economic assessment has demonstrated the potential for a mid-tier gold mine at Sabina Gold & Silver Corp.’s Back River project in Nunavut. “We believe that the project remains highly prospective for new discoveries of similar, if not better, grade, which should have a further positive impact on the project economics,” commented Desjardins Securities analyst Brian Christie.
Upside: Mr. Christie maintained a “buy” rating but reduced his price target by $1.25 to $6.75 based on revised valuations of the property.