Analysts are quickly ratcheting up their price targets today on Canadian National Railway Co. following the company's first-quarter earnings, which impressed the Street given the unusually tough winter operating conditions.
Despite the slow start to the year, and the headwinds imposed by higher fuel costs and a stronger Canadian dollar, the railway on Tuesday posted earnings slightly ahead of Street expectations. It also nudged up its guidance for the rest of the year - forecasting a 15 per cent rise in earnings per share in 2011, up from simply "double digits." It also boosted its free cash flow forecast to $1.2-billion from $850-million.
Analysts didn't find much to complain about.
"We continue to believe CNR is an excellent stock for investors looking for rock-solid performance and good growth prospects," said Canaccord Genuity analyst David Tyerman. He increased his price target by $3 to $83.
CIBC World Markets Inc. analyst Jacob Bout was slightly more bullish, hiking his price target by $3 to $85. "We believe CN's performance illustrates the flexibility of its network, and its ability to deliver a reliable service," he said, adding he expects this to act as a catalyst for further top-line growth and market share gains.
TD Newcrest analyst Cherilyn Radbourne said CN is gaining market share in grains and intermodal at the expense of Canadian Pacific Railway Ltd. , and its rival may find this difficult to reverse. She believes CN is well placed to pick up more volume from Canpotex when CP's exclusive contract with the potash exporter expires next year. She raised her price target by $1 to $86.
Elsewhere, UBS raised its price target by $1.50 to $81.50.
Rogers Communications Inc. also beat the Street in reporting quarterly results, but analysts - concerned with increasing competitive pressures - aren't nearly as impressed.
Rogers posted adjusted profit of 76 cents a share against the average Street view of 72 cents.
TD Newcrest analyst Vince Valentini cut his price target by $2 to $37, concerned with continued aggressive pricing and promotions from new wireless entrants. He also cited "fears" that the Conservative government will be re-elected next week and continue to push for spectrum auctions and foreign-ownership rules that support increased competition.
Canaccord Genuity analyst Dvai Ghose commented that "trends are deteriorating" at Rogers. These include wireless margin pressure, rising capital expenditures, weak cable growth and declining free cash flow. He maintained a "hold" rating and $36 price target.
Desjardins Securities Inc. analyst Maher Yaghi, noting Rogers reported little in the way of organic growth, maintained a "hold" rating and $41 price target.
Strong cheese prices should translate into sharply higher revenue this year for Saputo Inc. , and in the long term, the diary producer is likely to increase earnings through both operational efficiencies and acquisitions, said Canaccord Genuity analyst Candice Williams. But shares are already fairly valued, given their 16 per cent year-to-date rise and cheese prices have retreated from recent highs, she said.
Upside: Ms. Williams raised her price target by $3 to $44 and maintained a "hold" rating.
Canacol Energy Ltd. failed to find producible hydrocarbons in the K-2 well in Guyana and plans to permanently abandon the well. "In our view, the results from the K-2 well considerably reduce the chance of success in future exploration prospects in Guyana," said CIBC World Markets Inc. analyst Ian Macqueen.
Downside: Mr. Macqueen cut his 12- to 18-month price target by 25 cents to $1, but because he does not foresee any significant near-term downside risks, upgraded the stock to "sector performer" from "sector underperformer."
Fresh exploration results have materially boosted estimated resources at Western Potash Corp.'s Milestone project in Saskatchewan, and a pre-feasibility study due in the fourth quarter is likely to show favourable economics, said Wellington West Capital Markets Inc. analyst Robert Winslow. But financing the potential mine remains a key hurdle given a lack of deep-pocket partners in the already crowded potash arena in the province, he warned.
Upside: Mr. Winslow raised his price target by 20 cents to $1.25 and reiterated his "market perform" rating.
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