Concerns over WestJet overdone, says analyst

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Inside the Market's roundup of some of today's key analyst actions.

Concerns over growing pains at WestJet Airlines Ltd. are overdone, say RBC Dominion Securities analyst Walter Spracklin. "With the recent decline in share price, we now consider the shares to be attractively valued and we would recommend accumulating at current levels," said Mr. Spracklin.

While factors such as a spike in fuel prices remain a risk, Mr. Spracklin said that "given the share price decline, we believe these risks have now been built into the share prices."

"With a solid balance sheet and a management team we view as among the best operators in the airline industry, WestJet is set to deliver profitable growth in the coming years through new growth opportunities," he added.

Target: Mr Spracklin has raised his price target to $24 from $23 and upgraded his rating to "outperform" from "sector perform."

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Karnalyte Resources Inc.

Following yesterday's surprise announcement by Russia's OAO Uralkali that is pulling out of the Belarus Potash Company Cartel, observers are predicting potash prices will fall.

While that might mean mega-projects such as BHP Billiton Ltd.'s Jansen mine will be put on hold, others such as Karnalyte Resources Inc.'s Opex mine near in Eastern Saskatchewan still have potential, said Cantor Fitzgerald analyst Peter Prattas.

"Karnalyte Resources is more advanced versus all of its peers ... and stands to be a prime beneficiary of a turnaround in potash prices," said Mr. Prattas.

Target: Mr. Prattas lowered his price target to $10 from $14 but reiterated his buy rating for the company.

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Agrium Inc.

The shakeup in the potash market has also caused John Hughes, Desjardins Capital Markets, to reduce his price target for agricultural supplier Agrium Inc. by more than $10.

In the wake of the the breakup of the BPC cartel, which controlled 40 per cent of global potash exports, Mr. Hughes has reduced Agrium's projected potash price by $25 (U.S.) a tonne to $360 a tonne.

However, he notes that potash sales "are not the one of Agrium's larger revenue drivers, accounting for 13 per cent of [earnings before tax.]"

Target: Mr. Hughes has cut his price target to $113.65 from $125, but maintained a "buy-average risk" for the company.

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Alliance Data Systems Corp.

Alliance Data Systems Corp., the loyalty and transaction-based marketing firm, saw adjusted earnings per share increase 13.15 per cent compared to the same quarter last year.

With revenue of $1.03-billion (U.S.) the company came in just shy of the $1.04-billion that Credit Suisse analyst George Mihalos was calling for.

"The fly in the 2014 ointment," is the loyalty business, said Mr Mihalos, which is "the only segment that appears to be stalling a bit heading into 2014."

However, the pipeline of new business in private-label credit cards continues to grow, said Mr. Mihalos, and is likely to add $2-billion in receivables when fully ramped up.

"We believe ADS is well positioned to drive long-term high-single-digit organic growth, translating to sustainable low-mid teens," he said.

Target: Mr. Mihalos has set a price target of $208 and rated the company as "outperform."

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Manulife Financial Corp.

This morning's announcement that Manulife Financial Corp. has signed an agreement to sell its life insurance operations in Taiwan to CTBC Life Insurance Co. has left Michael Goldberg, an analyst with Desjardins Securities, less than impressed.

Overall, the transaction is not material for Manulife, said Mr. Goldberg.

The sale instead reflects a shift for the company, from "the capital-intensive life insurance business" to "Manulife's burgeoning asset management franchise in Taiwan," he said.

Details of the sale have yet to be released, but more information should be forthcoming when Manulife reports its second quarter earnings on Aug. 8.

Target: Mr. Goldberg is maintaining his "buy-above-average-risk" rating price target of $18.50.