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Alcoa operations in Newburgh, Ind. (DANIEL R. PATMORE)
Alcoa operations in Newburgh, Ind. (DANIEL R. PATMORE)

Eye on Equities

UBS cuts price target on Alcoa Add to ...

UBS analyst Brian MacArthur has aggressively cut his price target on Alcoa Inc. ahead of the aluminum giant's second-quarter results on July 11, citing - among other factors - higher raw material, maintenance and energy costs in upstream operations.

He's forecasting earnings per share of 32 cents for the three-month period, above the 28 cents earned in the first quarter, but below consensus of 36 cents.

Mr. MacArthur also revised his earnings-per-share forecast for 2011 to $1.13 from $1.22, to reflect realized pricing, foreign exchange rates to date and rising costs. These rising costs in the industry also prompted him to temper his earnings expectations in 2012 and 2013.

Downside: Mr. MacArthur's price target is now $16.75 (U.S.), down from $19.50. He maintained a "neutral" rating.

Lululemon Athletica Inc. reported first-quarter earnings ahead of expectations, and positive sales momentum is likely to continue in the second, said RBC Dominion Securities Inc. analyst Howard Tubin. "Business at LULU remains strong despite headwinds in the retailing environment. Unfavourable weather in the U.S. and Canada, lean inventories, and an e-commerce transition, did not disadvantage the company in a meaningful way," he said.

Upside: Mr. Tubin increased his target to $105 (U.S.) from $88 and continues to rate the stock as "outperform-above average risk."

Related: Lululemon boosts 2011 forecast

Uranium One Inc. was upgraded to "buy" at UBS, but analyst Brian MacArthur kept his price target unchanged. Mr. MacArthur cited the stock's continued decline in price following the heightened worries over nuclear safety in the aftermath of the Japanese earthquake. But he also stressed the company's commitment to ongoing exploration of uranium deposits and how it offers "investors good leverage to uranium through its production growth."

Upside: Mr. MacArthur's 12-month price target is $4.80 (Canadian).

Related: Uranium miners slip on Germany’s nuclear exit

Methanex Corp. shares are down about 14 per cent since April 26, prompting UBS to upgrade the stock to "buy" from "neutral." Analyst Brian MacArthur noted that the largest producer of methanol, which already has 20 per cent of the global market, is meaningfully growing its production from facilities in Egypt and Medicine Hat.

Upside: Despite the upgrade, Mr. MacArthur cut his price target by $2.50 to $33.50 (U.S.) due to a slower ramp up of production from its Chilean operations.

Allan Potash Corp., has intersected a high-grade potash zone in a drill hole at its land position in Ethiopia, the most encouraging mineralization encountered to date, noted Michael Fowler of Loewen, Ondaatje, McCutcheon Ltd. "These zones are potentially economic and confirm the extension of mineralization towards the southwest of the property," Mr. Fowler said.

Upside: Mr. Fowler has a price target of $2 on the stock. He maintained a "hold" rating noting the stock's recent strong performance.

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