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Canadian National Railway Co. stock is up more than 2 per cent today in the wake of the company's better-than-expected first-quarter results and improved earnings outlook. Analysts are making it clear they see further upside from here.

Several raised their price targets and the results issued after market close Monday were positive enough for Canaccord Genuity analyst David Tyerman to upgrade the stock to "buy" from "hold."

Earnings per share rose 32 per cent from a year earlier to $1.18, handily beating the mean Street estimate of $1.03. CN exceeded expectations on both sales and margins, and hiked its earnings per share growth guidance to 10 per cent from "up to 10 per cent."

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Analysts think CN is being conservative and actual growth will come in higher. "We had a hard time constraining our 2012 EPS forecast increase to a 14 per cent increase," commented Canaccord's Mr. Tyerman. "Judging from analyst comments on the conference call, there is considerable belief that CN should do much better than its official guidance."

Mr. Tyerman raised his price target by $6 to $91, adding that "we believe CN is a good investment for strong EPS growth and related dividend growth."

CIBC World Markets Inc. analyst Jacob Bout raised his price target by $2 to $92 but maintained a "sector performer" rating.

UBS analyst Hilda Maraachlian was slightly more cautious, reiterating a "neutral" rating and $86 price target. She thinks the stock is already priced for future earnings growth.

"We acknowledge the momentum in the stock will likely be positive following the quarter. However, CN's valuation at 13.2 times price to earnings on our 2013 estimate vs. the group at 11.9 times remains expensive in our view," Ms. Maraachlian.


Baja Mining Corp. said projected capital costs have risen $246-million to $1.389-billion at its El Boleo copper-cobalt-zinc project in Mexico.

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Analysts speculate the company may have to issue new stock - which would dilute the value of shares - or sell a stake in the project to raise the additional funding.

Raymond James Ltd. analyst Adam Low downgraded Baja to "market perform" from "outperform" to reflect "our unease regarding the many moving parts at the company, some of which are moving in the wrong direction, and our uncertainty over the company's ability to fund the cost increase."

Downside: Mr. Low cut his price target to 85 cents from $1.90. Canaccord Genuity analyst Gary Lampard slashed his price target to $1 from $1.65.


Mirabela Nickel Ltd. reported that first-quarter nickel production dropped 16 per cent from a quarter earlier and reduced its output guidance for the full year by 5 per cent. UBS analyst Matt Murphy also noted that Mirabela's quarter-end cash balance of $60-million was below his estimates. Given his forecasts that the company will have negative operating cash flow, he expects it will have to raise additional equity, diluting share value.

Downside: Mr. Murphy cut his price target by 75 cents to $1.25.

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Desjardins Securities Inc. analyst Maher Yaghi downgraded Quebecor Inc. to "hold" from a "buy," noting that its shares have risen 15 per cent year-to-date. While he views the company's decision to invest in wireless positively, he notes it has more debt than peers and advises investors to wait for a better entry point.

Upside: Mr. Yaghi has a $39.50 price target.


While remaining bullish on the long-term fundamentals of the Northern Bleached Softwood Kraft pulp market, Raymond James Ltd. analyst Daryl Swetlishoff downgraded Canfor Pulp Products Inc. to "outperform" from "buy." He cited uncertainty over Chinese pulp inventory levels and the potential for this to impact medium-term pricing.

Upside: Mr. Swetlishoff also cut his price target by $1.50 to $17.50.

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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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