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Eye on Equities

Happy holidays seen for RIM Add to ...

It should be a merry Christmas for Research in Motion Ltd., judging by the latest checks into store sales conducted by Canaccord Genuity.

RIM slashed the price of its Torch smartphone in half to $99 (U.S.) at AT&T in November, driving up the number of unit sales. Canaccord checks also indicated steady sales of both the BlackBerry Style at Sprint and the Bold at Verizon.

With the latest evidence of strong sales in both North America and international markets, analyst T. Michael Walkley raised his BlackBerry forecasts for the November quarter to 14.3 million units from 14.1 million. He believes this will translate into better bottom-line performance as well, as he raised his pro-forma earnings per share estimate for fiscal 2011 - which began at the start of March, 2010 - to $6.13 from $6.06 and his fiscal 2012 estimate to $5.69 from $5.54.

All this should mean a nice early Christmas gift to shareholders in the form of strong earnings, he suggests, when the company reports on Dec. 16.

That said, Apple clearly continues to be a formidable competitor. Canaccord’s November checks also revealed continued strong sales of the iPhone 4, which was still the bestseller at AT&T despite the steeply discounted Torch and the new Windows 7 smartphones. IPad sales are also very strong, and Canaccord boosted its fourth-quarter sales estimate for the tablet to 6.3 million from 5 million.

Upside: Mr. Walkley raised his RIM target price by $2 to $57 (still below today's trading price), but maintained his “hold” rating, due to the increasingly competitive landscape and the risk of high-end smartphone share losses in 2011.

Reitmans (Canada) Ltd. third-quarter earnings came up short of expectations, but “a great balance sheet” and the possibility of another dividend hike still makes the stock very attractive, said Versant Partners analyst Neil Linsdell. The retail environment should remain difficult through the holiday period, but Reitmans is trading at a discount to much less profitable Canadian and U.S. peers, he said.

Downside: Mr. Linsdell trimmed his target price by 50 cents to $22 but maintained a “buy” recommendation.

Viterra Inc. has announced an initial dividend of 10 cents per share annually, an action TD Newcrest analyst Cherilyn Radbourne argues will open up a new group of investors to the company. While some may be disappointed the dividend was so modest, Ms. Radbourne believes Viterra has considerable capacity to generate free cash flow and the payout ratio should increase over time.

Upside: Ms. Radbourne hiked her target price by $1 to $11.50 and upgraded her rating to “buy” from “hold.”

SXC Health Solutions Corp. has agreed to buy privately held MedfusionRx for $100-million in cash, “yet another smart acquisition by SXC at a great price,” said Versant Partners analyst Tom Liston. The deal will more than double SXC’s specialty pharmacy operations revenue and add 15 to 17 cents to adjusted earnings per share in fiscal 2011, he said.

Upside: Mr. Liston hiked his target price by $3 to $48 a share and maintained his “buy” recommendation.

Foot Locker Inc.’s latest quarterly results significantly beat the consensus view, as the company’s multi-year turnaround strategy picks up speed, said UBS analyst Michael Binetti. While price-to-earnings valuation is above the long-term average, the company is set to benefit from solid trends in the footwear business and better apparel sector performance, he said.

Upside: Mr. Binetti hiked his 12-month target price by $5 (U.S.) to $20.

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