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National Bank Financial on King Street in Toronto. (Fernando Morales/The Globe and Mail)
National Bank Financial on King Street in Toronto. (Fernando Morales/The Globe and Mail)

Eye on Equities

Analysts hike price targets on National Bank - modestly Add to ...

Analysts are quickly penciling in higher share-price targets on National Bank of Canada following a stronger-than-expected earnings report late Tuesday and a much-heralded dividend hike.

But, judging by the new 12-month share price targets, shareholders may be in store for only modest returns over coming months.

National Bank's profit in the fiscal fourth quarter was $287-million, or $1.66 a share, a dime better than consensus forecasts. The quarterly dividend was raised 4 cents to 66 cents a share.

Canaccord Genuity analyst Mario Mendonca said the dividend increase was already priced into the stock but hiked his target price by $2 to $72 because of an increase in estimated 2011 earnings per share.

In contrast, Desjardins Securities analyst Michael Goldberg said the dividend hike was double his expectation and signals confidence in the bank's future earning power and the strength of its capital position. He indicated he would likely raise his target price of $70, and maintained a "buy" rating. Mr. Goldberg expects the bank to post lower loan loss provisions in fiscal 2011 and sees growth in net interest revenue. But trading revenue is expected to remain below previous peak levels.

TD Newcrest analyst Jason Bilodeau hiked his target by $1 to $71, and maintained a "hold" rating. He called the quarterly results "decent," but only sees modest total returns against its peers over the coming 12 to 16 months. "To us, the adjusted quarter looks like a reasonable base run-rate from which we see modest growth in 2011," he said.

Hathor Exploration Ltd. has released an updated resource estimate that places its 90-per-cent owned Midwest NorthEast uranium project "in an elite category of high-grade deposits in the Athabasca basin of Saskatchewan," said Canaccord Genuity analyst Eric Zaunscherb. Momentum is building in junior uranium equities as spot prices rise for the commodity, and Hathor has exposure to one of the most important discoveries of the past decade, he said.

Upside: Mr. Zaunscherb raised his target price by 50 cents to $5 and maintained a "speculative buy" rating.

Inmet Mining Corp. will acquire the remaining 30 per cent of the Las Cruces mine in Spain it does not already own from Leucadia National for $552-million (U.S.). Desjardins Securities analyst John Redstone said the transaction will boost Inmet's bottom line, as the project will reach full production next year just as copper prices rise to an average of $4 per pound.

Upside: Mr. Redstone hiked his price target to $85.80 (Canadian) a share from $79.75 and maintained his "buy-average risk" recommendation.

Lundin Mining Corp. has announced long-term expansion plans for its Neves Corvo mine after new drill results at the recently discovered adjacent Semblana copper deposit in Portugal. TD Newcrest analyst Greg Barnes estimates Semblana could contain more than 20 million tonnes of ore grading up to 4 per cent copper and raised his valuation for the project.

Upside: Mr. Barnes hiked his target price on Lundin by 50 cents to $8 and upgraded his recommendation to "buy" from "hold."

Descartes Systems Group Inc.'s latest quarterly results demonstrated "exceptional" fundamentals, with revenues rising 37 per cent year over year and earnings before interest, taxes, depreciation and amortization gaining 42 per cent, said Versant Partners analyst Tom Liston. With cash of $62.8 million (U.S.) on hand, the provider of software logistic management solutions is well positioned in the sector, he said.

Upside: Mr. Liston hiked his target to $8.40 from $7.75.

Athabasca Oil Sands Corp. intends to accelerate development of its Hangingstone and Dover West properties and plans an active winter drilling program. This is a positive, said TD Newcrest analyst Jeff Meunier, as the advanced timelines will allow the company to be strategically well positioned.

Upside: Mr. Meunier raised his target price by 50 cents to $13 and maintained a "hold" recommendation.

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