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Analyst blasts Loblaw for IT upgrade delay

Odlum Brown Ltd. analyst Stephen Boland said he was fairly pleased with Loblaw Cos. Ltd.'s financial performance in the third quarter, in which it posted a 2 per cent year-over-year increase in sales - its best showing in many quarters.

But despite applauding Loblaw's strong private labels, large market share and huge real estate holdings, he expressed disappointment that the company's implementation of its new IT system, known as ERP, will take longer than expected. The system, expected to provide Loblaw with a multitude of operational benefits - and in Mr. Boland's view a boost to its earnings recovery - is now expected to come online in 2014.

"Management has done an extremely poor job communicating its ERP timeline to the Street. As recently as August, we had been led to believe that the work would be completed in 2013 (prior to that we had expected it to be completed in 2012). This 2014 date seems to have caught everyone off guard, and it is a serious blow to our trust in management's candor," Mr. Boland said in a research note.

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"We still think management is doing a good job operationally, we are just very frustrated by their poor communication to the Street," he added.

Upside: Mr. Boland reiterated his "buy" rating and $46 price target.

Newalta Corp. , at an investor day meeting last week, said it aims to deliver at least 15 per cent annual growth for the foreseeable future, according to Canaccord Genuity analyst Sara Elford. This was higher than her 7.5 per cent to 10 per cent estimate for the company, which recovers saleable products from industrial waste. "Based on the value of most commodities today, the increasing global focus on sustainability, as well as continuously tightening regulations, the company appears to now be very uniquely positioned in a large industry whose competitive landscape is changing in its favour," Ms. Elford commented.

Upside: Ms. Elford raised her price target by $2 to $16 and reiterated her "buy" rating.

Atrium Innovations Inc. shares remain undervalued given that the company is well positioned with strong assets in the robust nutrition industry, contended Canaccord Genuity analyst Scott Van Winkle. Although he reduced his 2011 and 2012 earnings projections, he believes the shares have further to climb given consistent earnings and his expectations for resurgent sales trends in the direct-to-consumer market.

Upside: Mr. Van Winkle reiterated his "buy" rating and cut his price target to $17.50 from $22.

BioExx Specialty Proteins Ltd. , which has seen much of its stock value wiped out over the past year as it wrestles with problems in commercializing its canola-based protein technology, last week "begrudgingly" acknowledged it will seek a strategic partner, noted Raymond James Ltd. analyst Steve Hansen. Such a partner would help with capital, market presence and infrastructure needs, and in the meantime, the depressed share price could attract a takeover bid, he said.

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Downside: Mr. Hansen placed BioExx "under review" from "market perform" and suspended his target price of $1.

Enerflex Ltd. "is a story whose time has come," declared analyst Andrew Bradford of Raymond James Ltd. The oil and gas services company now has two quarters of improving margins under its belt, a major new contract in the Middle East, and is actively bidding on additional Middle Eastern, Australian and North American projects. He believes that valuations are reasonable and the stock is "under-owned."

Upside: Mr. Bradford upgraded Enerflex to a "strong buy" from "outperform" while raising his target price to $15.50 from $13.25.

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About the Author
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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