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As Viterra shares sink, Canaccord says buy

Shares of Viterra Inc. are down more than 5 per cent today after the company reported disappointing fourth-quarter earnings late Wednesday, but Canaccord Genuity analyst Keith Carpenter thinks investors should go against the grain and use this as a buying opportunity.

He's even going a step further, selecting Viterra as one of Canaccord's top investing ideas right now in Canada.

Viterra's fourth-quarter adjusted earnings per share of 5 cents was less than consensus estimates of 9 cents. But revenues of $3.1-billion beat expectations and the company boosted its semi-annual dividend by 50 per cent to signal confidence in the future. The company commented that the global grain supply and demand fundamentals look strong for 2012 and Viterra expects to benefit from the expected end of the Canadian Wheat Board's monopoly later this year.

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Mr. Carpenter agrees there's plenty of reason for optimism. Margins and marketing share are "tweaking higher," and the company is seeing strong movement of grains through its grain handling assets.

"We believe the upcoming first-quarter results will provide a strong catalyst for the shares as grain handling volumes continue to be robust in both Canada and Australia," he said.

"Given our expectations for continued strong earnings throughout our forecast period, earnings that should not exhibit the same level of volatility as we are witnessing in the fertilizer segment, positive margin upside potential with the removal of the CWB marketing monopoly, and our belief that Viterra will likely be an acquisition target, we continue to recommend that investors add to their weightings in the shares of Viterra," he said.

Mr. Carpenter reiterated his "buy" rating and added Viterra to Canaccord's "focus list," a short list of stocks that it considers the best investing ideas of its research team.

Upside: Mr. Carpenter reiterated his $14 price target.


Concerns over IP network developer BroadSoft Inc.'s billings appear overblown and the company should be able to meet or exceed its 2011 fourth-quarter estimates, argues Brigantine Advisors analyst Kevin Dede.

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Prior quarters of year-over-year sales increases in the 60 per cent range had some analysts calling BroadSoft's growth unsustainable. Mr. Dede believes the company is well positioned to post sales growth in the 20-per-cent-plus range this year, in line with his models.

"The [skeptical]analysis is not misdirected, in our humble opinion," he says, "but despite the quarterly reduction in deferred revenues, billings have increased sequentially for the past two quarters and we suspect they should again in the December quarter."

Despite a steady retreat from a March, 2011 high of $52 (U.S.) to the current price of around $31, Mr. Dede believes the company's stock will benefit from broad IP network deployments at customers covered by the more than 450 service provider networks BroadSoft serves.

Upside: Mr. Dede reiterated his "buy" rating and $42.50 (U.S.) price target.


Northern Freegold Resources Ltd. has announced the first resource for the Revenue deposit at its Freegold Mountain project in the Yukon. The inferred resource of 1.1 million ounces of gold, 10.2 million ounces of silver, and 287 million pounds of copper "is very positive for the company as it is on the upper end of its guidance," commented Michael Fowler, analyst with Loewen, Ondaatje, McCutcheon Ltd. He notes the Freegold Mountain project benefits from being road accessible and near a power line, unlike many other projects in the territory.

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"Given the company's large and growing resource base, we believe Northern Freegold remains undervalued, trading at a value of approximately $8 per gold ounce (excluding copper, silver and molybdenum credits). This compares with an industry average of about $35 per ounce of gold," he said.

Upside: Mr. Fowler continues to rate the company as a "speculative buy" with a $1.44 per share target price.


Analysts are raising their price targets on Finning International Inc. after the company announced the acquisition of the Bucyrus distribution business in South America, Canada, and the U.K. from Caterpillar for $465-million (U.S.). "The addition of Bucyrus' hydraulic & rope shovels, drills, and draglines gives Finning a complete range of mining equipment, making it a one-stop shop for its customers," noted Canaccord Genuity analyst Yuri Lynk.

Upside: Canaccord raised its price target by $5 to $33; CIBC hiked its target by $2 to $30; and Canaccord Genuity increased its target by $4.50 to $29.50.


Canaccord Genuity analyst Jeff Rath has upgraded Garmin Ltd. to a "buy" from "hold." While the company's core portable navigation device business is showing signs of peaking, other business segments are gaining traction, and the company's 4 per cent dividend yield will reward investors for waiting for improved financial results, commented analyst Jeff Rath.

Upside: Mr. Rath raised his price target to $47.50 from $37.

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About the Authors
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

Streetwise editor

Jody White is the web editor for Streetwise. He previously worked as a senior editor at Canadian Business Online and has written for MoneySense Magazine, Maclean's, the National Post and other national publications. More

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