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RBC cuts Agrium outlook, hikes BCE target

Agrium‘s Carseland Nitrogen Operations facility near Calgary. CEO Mike Wilson said shareholders have embraced the company’s ‘highly successful integrated strategy.’

Dave Olecko/Bloomberg

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

Agrium Inc. was successful in defeating a boardroom challenge from dissident shareholder Jana Partners LLC. But fighting off the inclement weather from mother nature may be another matter.

The North American planting season is off to a slow start, courtesy of the cold weather and wet soil conditions in much of North America. That's translated into delayed purchases of the fertilizer sold by Agrium.

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RBC Dominion Securiites analyst Adam Schatzker today cut his 2013 earnings estimates today on Agrium to reflect spring's sluggish arrival. He now sees first-quarter earnings per share coming in at 98 cents, well below his last forecast of $1.43. For the full year, he brought down his estimate to $9.78 from $10.44.

But he still rates Agrium as an "outperform." And he believes that if Jana decides to offload its 7.5 per cent stake given that its nominees won't be sitting on the board, the action won't have any major impact on Agrium's share price.

"We continue to believe the spring planting season will be very strong, although the delay in planting will likely favour lower margin urea and UAN sales over higher-margin ammonia sales," said Mr. Schatzker.

Target: Mr. Schatzker lowered his price target by $10 to $110 (U.S.). The average analyst price target is $117.11 (U.S.), according to Bloomberg data.


BCE Inc. is on track to meet its 2013 guidance, but the stock's nearly 10 per cent rise so far this year leaves limited upside, says RBC Dominion Securities analyst Drew McReynolds.

Thanks to continued positive momentum in its wireless division, accelerating wireline data growth, and stable results at Bell Media, BCE should meet the mid-to-upper end of the earnings and free cash flow guidance ranges for 2013, he said.

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However, the shares trade at a valuation - based on forecasted enterprise value to earnings - that's already higher than Telus, and in line with Rogers, he points out.

"We expect another strong year for wireless and a stable year for Bell Media," Mr. McReynolds said in a research note. "Notwithstanding valuation and relative returns within our coverage universe, the three wireline developments that we are watching for to get more positive on the shares as 2013 progresses are: (i) better than expected acceleration in wireline data growth; (ii) a cyclical uptick in the business market; and (iii) improving residential Internet market share."

Target: Mr. McReynolds raised his price target by $3 to $47 (Canadian) and reiterated a "sector perform" rating. The average price target is $46.38.


Raymond James analyst Rafi Khouri upgraded Bankers Petroleum Ltd. to "outperform" from "market perform," believing now is a great time for investors to buy its shares.

"Despite what we consider to be a series of positive developments, including production growth slightly ahead of the targeted pace, an improved debt profile and, above all, the recent change in leadership, Bankers' stock is down 14 per cent over the past three weeks (compared to a 3 per cent decline for the TSX composite over the same period). In our view, this is a highly attractive entry point," he said.

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"Furthermore, we believe the possibility of a strategic joint venture to accelerate development of Bankers' considerable reserves has the potential to add meaningful value and that the market has been slow to recognize this."

Target: Mr. Khouri raised his price target by 50 cents to $4. The average target is $4.98.


GLV Inc. said its water treatment division, Ovivo, has won three major contracts worth a combined $85-billion.

"We haven't seen individual orders of this magnitude from the company since 2007," commented Raymond James analyst Frederic Bastien, who upgraded the stock to "outperform" from "market perform."

"To us, these awards suggest that Ovivo's strategy to refocus its business on fewer target markets is not only helping deliver improved execution, as we saw in fiscal third quarter 2013, but also driving more successful sales efforts."

Target: Mr. Bastien raised his price target to $4 from $2.50. The average target is $3.22.


Weak trends in the energy sector have prompted RBC Dominion Securities analyst Walter Spracklin to downgrade trucking and oilfiend services firm Mullen Group Ltd. to "underperform" from "sector perform."

"Overall, we like Mullen's competitive position in the oilfield services space and we like management's disciplined and judicious approach to managing growth. However, we cannot ignore the cyclical nature of the energy services business and the fact that we are currently on the wrong side of that cycle," Mr. Spracklin said. "We await for conditions to show signs of stabilization before getting more constructive on the shares."

Target: Mr. Spracklin also cut his price target by $3 to $19. The average target is $24.96.


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

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Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More


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