Enbridge Inc. is the stock that keeps on giving. In the past 12 months, the company's shares have gained a solid 35 per cent, while over the past decade it’s gone up a whopping 250 per cent -- all the while handing out a nice-sized dividend.
But with the stock trading near all-time highs, can the good times keep flowing for the Canadian pipeline giant?
Desjardins Securities Inc. analyst Pierre Lacroix thinks so. He expects the stock will keep pushing into record high territory thanks to a strong growth rate this year and next as new projects get under way. Meanwhile, he believes Enbridge’s dividend yield of about 3 per cent will continue to act like a magnet for investors.
Enbridge on Friday reported fourth-quarter results that came in a little shy of Street expectations, but earnings per share for the full year still represented an 11 per cent growth rate from 2010. Management also reiterated its earnings per share guidance of $1.58 to $1.74 for 2012, representing growth of 12 per cent.
“Looking forward, we believe that ENB will be able to continue to sustain its strong growth pace through 2012 and 2013, which will provide ongoing support for the company’s valuation multiple,” Mr. Lacroix said in a research note.
He upgraded his recommendation to “buy” from “hold” while raising his price target by $3 to $42 (Canadian).
That target would equate to a price-to-earnings multiple of 22.5 times based on his 2013 earnings per share estimate. That may sound pretty expensive, but Mr. Lacroix notes that it was trading at 23 times in 2011 based on forward price to earnings, and an average of 19 times over the past six years.
“Given that its prospects remain as good as ever, and that we expect market conditions to remain favourable for dividend-paying stocks, we believe ENB’s stock (valuation) can again reach the high end of its historical range,” he said.
And further out, there’s reason to believe Enbridge’s growth rate will continue to impress, he said. “The combination of U.S. crude oil pricing discounts, a delay in Keystone XL and increased political will from the Canadian government to promote alternative markets for domestic crude oil, has created an opening for ENB to put forward major new infrastructure projects.”
CIBC World Markets Inc. analyst Alec Kodatsky has substantially slashed his net asset value and price target calculations on Agnico-Eagle Mines Ltd. after the gold producer announced a writedown at its Meadowbank mine and cut company-wide production forecasts over the next three years. He downgraded the stock to a “sector underperformer,” but added that “given the magnitude of the cuts, AEM is likely to meet its revised production outlook and the worst is over in terms of negative surprises.”
Downside: Mr. Kodatsky cut his price target by $11 to $43 (U.S.).
Imax Corp. “stands to benefit meaningfully” from an easing in film restrictions in China, said Canaccord Genuity analyst Aravinda Galappatthige, who reaffirmed his “buy” rating. China last weekend reportedly agreed to increase its quota on U.S. films and substantially raised the box office share that it allowed to be repatriated to the U.S.
“This represents a substantial boost to Imax both in terms of having additional flexibility to introduce more Hollywood titles to the Chinese market, but perhaps more importantly, leading to a higher DMR (Digital Re-Mastering) royalty for Imax in China,” he said.
Imax has 217 theatres either operating or planned for China, the fastest growing market in the world for films.
Upside: Mr. Galappatthige maintained a $32 (U.S.) price target.
Cott Corp. had an “ugly” fourth quarter due to persistently high prices for resin, which coats aluminum cans, and the company’s plans to raise prices to help offset the costs will hurt sales volumes going forward, said CIBC World Markets Inc. analyst Perry Caicco. “As well, the juice market is tough as huge apple juice price increases have dropped volumes by 20 per cent,” he commented.
Downside: Mr. Caicco cut his price target by $1 to $8 (U.S.) and reiterated a “sector performer” rating.
Fairfax Financial Holdings Ltd. saw a tough finish for the year, as large investment losses were incurred on the company’s equity hedges. CIBC World Markets Inc. analyst Paul Holden notes that the Fairfax portfolio is positioned to perform best when equities are struggling - and that hasn’t been the case. “We would not be surprised if the investment portfolio performs poorly again in Q1,” he said.
Downside: Mr. Holden cut his price target by $25 to $425 and maintained a “sector performer” rating.