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Desjardins Securities Inc. analyst Michael Goldberg has downgraded Bank of Montreal in the wake of its disappointing fourth quarter, believing that investors will be better off putting their money elsewhere in the financial services sector.

Lowering his rating to a "hold" from a "buy" was partly a reaction to the weakness the bank experienced in its capital market division - but also its decision not to hike its dividend. BMO held its quarterly dividend at 70 cents and Mr. Goldberg had expected a two-cent hike.

He lowered his fiscal year 2012 earnings per share forecast to $5.20 from $5.45.

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BMO made $897-million in the final quarter of 2011, up from $739-million a year earlier. But the numbers were helped substantially by the addition of Midwestern U.S. bank Marshall & Ilsley, which was purchased in a $4.1-billion deal that closed in July.

"The good news for BMO was that the M&I acquisition looks like a winner as far as it adds diversity to earnings," Mr. Goldberg said in a research note. "The bad news was capital markets were weak and need that diversity, and the integration costs of digesting the M&I acquisition were high. Management views earnings as not high enough yet to support a dividend increase."

He now expects the bank to hike its dividend by a couple of cents after the fiscal second quarter of 2012, with another two-cent hike arriving in the fourth quarter of fiscal 2013.

Downside: Mr. Goldberg cut his price target by $1.50 to $68.50.


Petrominerales Ltd. reported disappointing results from three exploration wells on block 31 at the Deep Llanos basin in Colombia. As a result, UBS analyst George Toriola said he sees "significant risk to the company's ability to grow production and reserves" and believes its odds of exploration success on the block have significantly declined.

Downside: Mr. Toriola slashed his price target by $12 to $23 but maintained a "buy" rating.

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Raymond James Ltd. analyst Gary Baschuk downgraded Orvana Minerals Corp. to "market perform" from "outperform," citing lower-than-expected grades at the EVBC mine in Spain. "We believe the market has taken a 'wait and see' attitude until grades more consistent with reserves can be consistently reported," he said.

Downside: Mr. Baschuk cut his price target to $2.90 from $4.75.


Canaccord Genuity analyst Michael Graham has initiated coverage of Google Inc. with a "buy," expecting continued strong growth and profitability. "Google still offers stable exposure to the most durable trends in tech: Internet usage, online advertising and commerce, smart phone penetration, mobile commerce, and social networking," he said.

Upside: Mr. Graham set a $725 (U.S.) price target.

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Internet radio is going to thrive and Pandora Media will enjoy robust and ultimately profitable growth, predicted Canaccord's Mr. Graham. But he sees several near-term headwinds, including increasing competition and higher costs for music content.

Upside: Mr. Graham initiated coverage with a "hold" rating and $13 (U.S.) 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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