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Canadian Pacific locomotives sit in a rail yard in Montreal in this file photoRyan Remiorz/The Canadian Press

RBC Dominion Securities Inc. analyst Walter Spracklin downgraded Canadian Pacific Railway Ltd. shares, saying activist investor Bill Ackman's decision to sell down his stake indicated that the stock offers limited upside.

"We are downgrading CP shares as the implied total return to our 12-month target of $104 is –22 per cent," Mr. Spracklin wrote in a research note. Monday's decision should be "a catalyst for investors to refocus on the fundamentals, which we consider to be: 21 per cent annual EPS growth to 2016, driven by an improved operating ratio (from 77.2 per cent in 2012 to 66.6 per cent in 2016) and revenue growth of 6.1 per cent annually out to 2016."

"However, based on yesterday's share price, we estimate that the market has been aggressively pricing in an operating ratio closer to 60 per cent and revenue growth at the very top end of the range," he said. "We believe the company has made significant and important strides in improving its operations, and we believe there is still more to come. However, a share price that builds in realistic expectations for this improvement in our view would be below $110."

"Going forward, we expect CP will see its investor base shift away from momentum-driven catalyst investors and more toward long-term holders. We believe these holders, however, will want to see more upside value in CP's shares than what exists today."

Outlook : Mr. Spracklin cut his rating on the stock to "underperform" from "sector perform" and has a price target of $104.


Valeant Pharmaceuticals International Inc. could save $800-million in costs after buying Bausch & Lomb Inc., said Canaccord Genuity Corp. analyst Neil Maruoka.

"We see approximately $765-million in cost synergies achieved by the end of 2014, which does not include potential tax savings. Because our R&D and selling, general and administrative expenses synergy estimates remain well below Valeant's target (and we have conservatively assumed 65 per cent gross margins for B+L), we believe that there remains the potential for upside to our estimates," he wrote in a research note.

"Our 2014 cash EPS estimate increases 22.9 per cent to $8.24 per share and our 2015 estimate increases 36.6 per cent to $10.11 per share."

Outlook : Mr. Maruoka has a price target of $112 (U.S.) on the stock and rates it "buy."


CIBC World Markets Inc. analyst Perry Caicco is warning that caution is warranted in the run-up to the first-quarter results from Hudson's Bay Co., expected on June 12.

Mr. Caicco had estimated The Bay would increase same-store sales by 4.3 per cent; he is dropping that forecast to 3.5 per cent after examining results from other north-east department store retailers, which have displayed weather-related sales weakness.

But Mr. Caicco is still bullish on the retailer. He figures it has real estate worth $14.85 a share and says its core business is undervalued.

Outlook: Mr. Caicco has a price target of $20 on the stock and rates it a "sector outperformer".


A successful foray across provincial borders is adding to the appeal of CVTech Group Inc., according to Pierre Lacroix, an analyst at Desjardins Securities Inc.

The company, which provides services to electric utilities, has landed $25-million in contracts in Ontario, a brand new market for the Quebec-based firm.

Mr. Lacroix says the expansion provides promising growth opportunities, which together with potential acquisitions in new markets and recent takeover interest, should drive the share price higher.

Outlook: Mr. Lacroix is raising his price target for CVTech to $1.70 a share from $1.50 and rates it a "buy" with above-average risk.


New Gold Inc. will be faced with higher capital expenditures if its offer to acquire Rainy River Resources is accepted. That will push out the timeline for a dividend or other return in capital, says Alec Kodatsky, an analyst at CIBC World Markets Inc. But he says the price appears reasonable for the acquisition.

Outlook: Mr. Kodatsky is lowering his price target for the shares to $11 from $12 and continues to rate them as a "sector performer".

Eye on Equities will be updated throughout the day

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