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AGF under pressure, should invest cash: analyst

Inside the Market's roundup of some of today's key analyst actions. This post will be updated with more analyst commentary during the trading day.

Mutual fund sales at AGF Management Ltd. are improving but the money manager needs to invest its cash pile and boost the performance of its funds, says CIBC World Markets analyst Paul Holden, who has raised his share price target for the company.

The Toronto-based company is lifting gross sales by offering new funds, but assets under management are slipping due to poor fund performance, Mr. Holden said. The company has $360-million in cash, a "significant" amount that Mr. Holden said is earning no return.

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"There are no material changes to our outlook," Mr. Holden wrote in a research note. "Based on the current path, we see the company treading water in terms of [assets under management] and earnings in [fiscal year] 2014."

Target : Mr. Holden raised AGF's share price target to $12.50 from $11.75 and maintained a "sector performer" rating.

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Lower fertilizer prices have prompted BMO Capital Markets to reduce Agrium Inc.'s share target.

The Calgary-based company, like other agricultural companies, is expected to fetch reduced prices for its crop nutrients through to 2015, analyst Joel Jackson wrote in a research note on Thursday.

Agrium said this week its potash sales will be 30 per cent lower and its fertilizer unit will see a 64-per cent drop in profit in the third quarter. The global market for potash was shaken in the summer by the breakup of an eastern European marketing cartel. OAO Uralkali's decision to go it alone is expected to weigh on prices for the crop nutrient that has seen big growth in demand from emerging markets trying to boost crop production to feed growing populations and changing tastes.

Mr. Jackson cut his forecast for Agrium's earnings for the fiscal years 2013 to 2015. The company's shares have fallen by 11 per cent on the Toronto Stock Exchange this year.

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Target : Mr. Jackson reduced Agrium's share price target to $90 from $95 and maintained a "market perform" rating.

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BMO Capital Markets has raised Canadian National railway's rating and share price target, citing the company's rising crude-by-rail shipments and market victories over rival CP Rail in intermodal and auto contracts.

"CN Rail is quickly climbing our preferred railroad stock list," analyst Fadi Chamoun wrote in a research note on Thursday.

CN's shares have risen by 13 per cent this year on the Toronto Stock Exchange. According to Bloomberg, 75 per cent of the analysts that cover the company rate it a "hold" with an average 12-month share price target of $106.

Mr. Chamoun is more optimistic, with a $119 target. He expects CN's revenue growth to exceed 8 per cent next year and earnings per share to rise by the "mid– to high teens." He said the company has the capacity to boost its dividend even faster than its earnings.

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CN's domestic rival Canadian Pacific Railway Ltd. is undergoing a shakeup under new chief executive Hunter Harrison, who has vowed to improve efficiency and profitability.

The companies compete for port and grain traffic as well as for the growing business of moving crude oil amid a shortage of pipeline capacity.

Target: Mr. Chamoun raised his share price target to $119 from $115 and maintained a rating of "outperform."

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Ur-Energy has joined the "prestigious" uranium producers' club, and an analyst at Cantor Fitzgerald says the company's mine in Wyoming "has plenty of upside."

"We were impressed when we visited the state of the art facility at Lost Creek in July, and are now equally impressed with the initial production numbers," analyst Michael Wichterle wrote in a research note on Thursday.

Ur-Energy said this week that its Wyoming mine's recovery rate is an annualized 800,000 pounds of uranium. Ur-Energy is listed in Toronto and New York and headquartered in Colorado. Its shares have risen by 34 per cent this year.

Target: Mr. Wichterle has a "buy" rating on Ur-Energy with a price target of $1.55.

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Credit Suisse analyst Antonio Gonzalez has upgraded Brazilian brewer AmBev to "outperform" and raised his stock price target to 100 reals ($46 Canadian).

In a research note on Thursday, Mr. Gonzalez said Latin America's largest brewer is among the economically hard-hit region's best companies, with the lowest premium relative to the broader market in three years.

The analyst points to AmBev's retail dominance and its ability to offer discounts to bars and restaurants that counter beer-price inflation that is a worry for the entire industry.

"On a global context, AmBev also scores relatively well vs. the largest brewers in the planet," he wrote, noting it holds second place on Credit Suisse's Global Beer Scorecard, which ranks brewers by volume growth, market power and risk profile. (SABMiller ranks first.) The company's American Depositary Receipts trade on the New York Stock Exchange.

Mr. Gonzalez cautions the brewer is vulnerable to any possible larger government tax grab, and that consumer staples stocks have been buoyed by low interest rates to premium levels that might become unsustainable.

Target: Mr. Gonzalez upgraded AmBev to "outperform" from "neutral" and raised the share price target to 100 reals from 83.

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