Talisman Energy Inc. shares sunk to fresh three-year lows this week, not an entirely surprising development given the miserable state of natural gas prices. But Raymond James analyst Rafi Khouri believes the time has arrived for investors to start piling back into the stock -- especially given his expectations that the oil and gas producer will return to growth mode next year.
He upgraded Talisman to "outperform" from "market perform" and nudged up his net asset value estimates for the company.
Talisman held an investor meeting in New York Wednesday in which it provided an overview of its assets and strategy. Mr. Khouri noted that Talisman will see stagnant growth this year, but activity will pick up in 2013 thanks to its diversified asset base.
"We expect this medium-term growth to come from Southeast Asia, Colombia and other exploration areas, as well as North America unconventional gas, once prices recover. Success from its exploration portfolio could also spearhead growth going forward, particularly in Colombia and Papua New Guinea," Mr. Khouri said in a research note.
"While the main message/goal for its North Sea and North American business units were to improve operating efficiencies and reduce costs, Talisman did highlight Southeast Asia as a stable cash flow generator, with projected growth from new projects. The company is also quite active in its international exploration business unit this year, with plans to test the current portfolio by the end of 2013," he said.
Upside: Mr. Khouri maintained a price target of $13 (Canadian).
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Nexen Inc. is "too cheap to ignore," maintained Canaccord Genuity analyst Phil Skolnick as he upgraded the energy producer to "buy" from "hold." He notes its shares are down 22 per cent since the end of 2008, the biggest underperformer of its peer group, and there's plenty of reasons why things will improve from here, including continued reliability at its Buzzard field in the North Sea and the ramp up of its Long Lake oil sands operations in Alberta. As well, "the company has had a cultural shift and has a much greater emphasis and understanding of the importance of managing expectations and hitting production guidance," he said.
Upside: Mr. Skolnick has a $24 (Canadian) price target.
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Investors that are interested in small-cap, turnaround stories should buy shares in ZCL Composites Inc. , argued Raymond James analyst Ben Cherniavsky. He upgraded the manufacturer of liquid storage systems to "outperform" after the company posted earnings per share in its latest quarter of 6 cents, obliterating his forecast for a penny profit. "Management has delivered effective cost controls, higher margin performance, and a solid 48 per cent increase in backlog to $52.9-million (up from $35.8-million last March)," he said.
Upside: Mr. Cherniavsky raised his price target to $4.85 (Canadian) from $3.50.
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Some analysts are raising their price targets on Tim Hortons Inc. despite the coffee chain reporting first-quarter profit per share that was a couple cents shy of Street expectations. Desjardins Securities analyst Keith Howlett notes that the earnings shortfall was due to factors -- including high commodity prices -- that will reverse during the year. Meanwhile, same-store sales growth remains brisk considering overall weak Canadian retail spending.
Upside: Mr. Howlett raised his price target by $2 to $60 (Canadian) while Raymond James analyst Kenric S. Tyghe jacked up his by $4 to $52.
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While Quebecor Inc. reported first-quarter results that were in line with consensus expectations, the company is starting to face more intense competition in its cable division from Bell's IPTV offering, noted Desjardins Securities analyst Maher Yaghi. "We believe Quebecor's new strategy to subsidize cable set-top boxes will cause some pressure on cash flows in the coming quarters," Mr. Yaghi said as he maintained a "hold" rating.
Upside: Mr. Yaghi raised his price target to $41.20 from $39.50.
Editor's note: A previous version of this story incorrectly identified Raymond James analyst Rafi Khouri. This version has been corrected.
Darcy Keith