Analysts turn more bullish on WestJet, Barrick Gold

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Market Blog's roundup of some of today's key analyst actions

WestJet Airlines Ltd., benefiting from solid domestic travel growth and fuel costs that are holding relatively steady, is trading near five-year highs. Even so, RBC Dominion Securities thinks the stock has yet to reach its cruising altitude.

Analyst Walter Spracklin believes WestJet's third-quarter results, to be released in early November, will once again show an industry-leading position in the Canadian aerospace sector. In the second quarter, it outpaced its Canadian counterparts in domestic traffic by posting growth of 7.9 per cent. That surprised some on the Street, and Mr. Spracklin believes the airline will continue the path towards beating expectations.

For both WestJet and Air Canada, "the key here is that despite fairly high expectations on the earnings front following strong second-quarter results, better-than-expected third-quarter data is likely to lead to another round of upward revisions to consensus estimates," Mr. Spracklin said in a research note.

"WJA remains our favourite name for investors looking for exposure to the cyclicality of the airline sector. With robust operating metrics and new growth opportunities, WJA remains well positioned," he said.

He raised his estimates for third-quarter and fiscal 2012 and 2013 earnings before interest, taxes, depreciation, amortization and rent – a measure of company cash flow.

Upside: Mr. Spracklin increased his price target on WestJet by $1 to $21 and reaffirmed an "outperform, above average risk" rating.

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Dundee Securities has added Barrick Gold Corp. to its list of top picks in the resource sector, believing the company will be one of the first producers to rally as investors regain their appetite for gold stocks.

"We expect a constructive market in gold and gold equities heading into the end of the year," said Dundee analyst Ron Stewart. "In such an environment, well-known, reliable large and intermediate producers tend to lead a rally. Being a household name in the gold sector, we expect that Barrick will outperform in the near-term in a sustained sector rally."

He projects Barrick produced 1.9 million ounces of gold in the third quarter, improving from 1.74 million in the second. And he thinks the company will consistently generate strong free cash flows starting next year, a key part of CEO Jamie Sokalsky's corporate strategy.

Upside: Mr. Stewart rates Barrick as a "buy" with a price target of $55.

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Sanford Bernstein downgraded Intel Corp. to "underperform" from "market perform" amid softening global PC demand and rising competition from rivals such as Advanced Micro Devices. Analyst Stacy Rasgon believes average selling prices for Intel's desktops could fall in the mid-single-digit range next year.

Downside: Mr. Rasgon also cut his price target by $4 to $20 (U.S.)

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Canaccord Genuity analyst Orest Wowkodaw downgraded British Columbia miner Taseko Mines Ltd. to "hold" from "buy" due to recent share price appreciation. He also believes that the risks associated with the ramp up of its Gibraltar operations, and permitting uncertainty at its New Prosperity project, could remain an overhang on the shares in the near term.

Upside: Mr. Wowkodaw raised his price target by 20 cents to $3.50.

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Media reports suggest CGI Group Inc., which earlier this year agreed to buy larger Anglo-Dutch IT rival Logica Plc, has outlined plans to eliminate up to 1,400 jobs in Europe, noted BMO Nesbitt Burns analyst Thanos Moschopoulos. He thinks this may translate into at least $75-million in annualized savings in operating expenditures. "We expect CGI to deliver EPS growth in the teens or better over the next three years as it absorbs Logica, and believe that the stock's valuation remains attractive relative to this growth," Mr. Moschopoulos said.

Upside: Mr.  Moschopoulos raised its price target to $30 and reiterated an "outperform" rating.

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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at #eyeonequities