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Apple set to beat the Street once again: RBC

Apple CEO Tim Cook speaks in front of an image of the iPhone 4S.


Expect Apple Inc. to once again beat Street expectations on Oct. 18 when it reveals its first quarterly results without Steve Jobs at the CEO helm, argue analysts at RBC Dominion Securities Inc.

Just by not as much as it often has in the past.

RBC is forecasting revenue to come in at $29.7-billion (U.S.) in the fourth quarter, up 46 per cent from a year earlier, and above the average analyst forecast of $29.2-billion. Apple's own guidance for the quarter was $23-billion.

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RBC expects earnings per share of $7.67, ahead of the Street expectation of $7.20, and trouncing Apple's guidance of $5.50.

If RBC's forecast comes true, it would equate to a 7 per cent earnings-per-share beat for the quarter.

That would be ample reason for most companies to celebrate. But this is Apple, which has beaten the Street by 31 per cent on average over the prior eight quarters, notes RBC analyst Mike Abramsky. He believes high expectations mean a more modest beat this time around.

RBC's latest checks show that iPhone 4 sales remained resilient ahead of the premier of the iPhone 4S. It estimates 19.5 million iPhones were shipped in the fourth quarter, up 39 per cent from a year ago and down a modest 4 per cent from the third quarter.

Robust sales are also expected to be reported for the iPad 2; RBC is forecasting 12.5 million in shipments, up nearly 200 per cent from a year ago and a 35 per cent gain from the third quarter.

"With a huge global iPhone opportunity and more tablet market growth ahead, we remain constructive on the shares, and view valuation (10x ex-cash) as compelling," Mr. Abramsky said in a research note.

Upside: RBC reiterated its $500 (U.S.) price target and "outperform-above average risk" rating.

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RBC Dominion Securities Inc. analyst Geoffrey Kwan has downgraded mortgage lender Equitable Group Inc. to "sector perform" from "outperform," citing lower growth forecasts, a smaller public float than its peers and less share liquidity. "In the near-term, we believe ETC's share price may be constrained by increasing macro headwinds and potential concerns regarding ETC's ability to deliver consistent EPS growth," he commented.

Downside: Mr. Kwan cut his price target to $26 from $35.


Alaris Royalty Corp. , a provider of alternative financing, has announced a further $22.4-million investment in KMH Cardiology LP and has raised its dividend by 12 per cent. Canaccord Genuity analyst Evan Minsky was positive on the moves, noting that Alaris expects to earn $3.3-million in each of the first two years under its new investment.

Upside: Canaccord raised its price target to $19.25 from $18.50 and reiterated a "buy" rating.

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An investment in Ivanhoe Energy Inc. is becoming riskier, said RBC Dominion Securities Inc. analyst Mark Friesen. He cited several areas of concern, including signs that development of the Zitong block in China may be slowing and a more difficult financing environment for its Tamarack heavy oil project in Alberta.

Downside: Mr. Friesen downgraded the stock to "sector perform-speculative risk" from "outperform" while slashing his price target by $1 to $1.50.


Shares in Aimia , the company formerly known as Groupe Aeroplan, have fallen far enough now that they should provide a modest positive return over the next 12 months when factoring in the dividend, said Versant Partners analyst Neil Linsdell. While upgrading Aimia to "neutral" from "sell," he continues to be concerned about rising redemption activity in the Canadian Aeroplan program and balance sheet liabilities.

Upside: Mr. Linsdell maintained a $10.50 price target.

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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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