West African-based mineral driller GeoDrill is a “pure play on one of the hottest mining regions globally,” according to Cormarck Securities Inc. analyst Maggie Johnson.
Ms. Johnson is initiating coverage on GeoDrill, which operates a fleet of 27 drilling rigs. She likes the company’s aggressive growth plans and potential to almost double its rig fleet and EBITDA over the next two years.
Not only does the company carry far less exploration and financing risk than many of its competitors operating in the region, says Ms. Johnson, it has the youngest rig fleet in the industry. Combined with its concentration in multi-purpose rigs and its geographically condensed operation, this enables very high utilization and profitability, she explains.
“Longer term, we believe that GeoDrill is a prime takeout target, particularly if current low valuations persist,” says Ms. Johnson. “Under this scenario, we believe GeoDrill could garner $5.50 per share.”
Upside: Ms. Johnson is initiating coverage with a ‘buy’ rating and a $5 (CAN) price target.
MacDonald, Dettwiler and Associates has exceeded analysts’ fourth-quarter 2011 estimates, but not enough to warrant a change in rating or price target, according to National Bank Financial analyst Nikhil Thadani.
The company raised its 2012 dividend to $1.30 a share (from $1.00) in 2011, and Mr. Thadani expects an increase to $1.50 a share in 2013. However, MDA is awaiting a decision from the Canadian government regarding a RADARSAT mission, which threatens to create a funding gap risk that could hurt the stock in the future.
Upside: Mr. Thadani is reiterating his ‘outperform’ rating and $55 (CAN) price target
Quebecor Inc.’s Vidéotron posted positive fourth-quarter 2011 financial results that were offset by wireless results that missed Desjardins Securities Inc. analyst Maher Yaghi’s expectations.
Vidéotron’s revenue in the quarter was $635-million (CAN), up 7.4 per cent year-over-year. It also beat expectations on all fronts in its core cable business. However, wireless results were below expectations in every regard, says Mr. Yaghi.
Downside: Mr. Yaghi is reiterating his ‘buy -- average risk’ rating and $39.50 (CAN) price target.
Bank of Montreal’s first-quarter 2012 earnings per share exceeded the estimates of CIBC World Markets Inc. analyst Robert Sedran, but not enough to avoid a lowered price target.
While BMO reported core cash earnings per share of $1.42 -- above Mr. Sedrans’ estimate of $1.32 -- the good news ends there.
“We continue to forecast improvement in the U.S. business, especially as the progressing integration unlocks expense synergies,” he says. “Our estimates, however, already include reductions beyond the minimum targets outlined by the bank, which makes further upside more difficult to achieve, in our view.”
“We continue to see better value in the larger Canadian banks at this time.”
Downside: Mr. Sedran is maintaining his rating of ‘sector underperformer’ and is lowering his price target by $1 to $62 (CAN).
Market reaction to Progressive Waste Solutions' disappointing fourth-quarter results was likely overdone and provides investors with a value opportunity, says analyst Walter Spracklin of RBC Capital Markets.
The company’s EBITDA of $126-million (U.S.) was below Mr. Spracklin’s estimate of $140-million, but he believes reaction to the share price is overdone due to the likelihood that the new CEO’s guidance was intentionally conservative, evidenced by his assumption that both commodity prices and economic conditions will remain at 2011 levels.
“Investors should take advantage of market over-reaction,” he says. “... we believe the market is focusing in on the weak 2012 guidance and ignoring the 2013 upside potential.
Upside: Mr. Spracklin is reiterating his ‘outperform -- average risk’ rating and raising his price target by $2 to $25 (U.S.).