Caterpillar equipmentScott Olson
Caterpillar Inc. shares have posted impressive gains this year, with robust global demand for heavy equipment leading to blowout fourth-quarter results in January.
But there are signs that the blue chip will struggle to keep the momentum going in its sales department.
Raymond James Ltd. analyst Theoni Pilarinos notes that Caterpillar's latest dealer stats -- while still respectable -- indicate a slowdown in machinery and engines sales growth. Machinery sales in February slowed to 21 per cent from 27 per cent in January, while engines sales growth decelerated to 13 per cent from 22 per cent.
While dealer stats provide a good directional indicator of sales, they can't completely predict demand for Caterpillar's products. But Ms. Pilarinos also notes that Caterpillar has reported order cancellations for large mining trucks from U.S. thermal coal customers. And China's recent lowering of economic growth expectations also casts a cloud on prospects for mining equipment demand, a key market.
"We continue to believe CAT is still well poised for growth given its key construction markets (i.e. the U.S. and EU) still remain well below their peak levels; a record backlog of $30-billion; and solid execution and operational performance. More immediately, however, we believe the aforementioned factors warrant a more conservative multiple on the stock and we are trimming our target accordingly," she said in a note.
Upside: Ms. Pilarinos cut her price target by $10 to $130 (U.S.) but maintained an "outperform" rating, adding that she's encouraging long-term investors to hold on to their shares.
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Oracle Corp. had a respectable fiscal third quarter, but the tech giant is not growing particularly rapidly, said Canaccord Genuity analyst Richard Davis. "Despite an extended discussion to the contrary, the firm is facing a tougher group of competitors" in software architecture and Oracle "is playing catch-up for now," he said.
Downside: Mr. Davis raised his price target by $2 to $30 (U.S.) and maintained a "hold" rating.
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The improved standing of Counsel Corp.'s mortgage lending subsidiary Street Capital reflects well on the company's stock, says Industrial Alliance Securities Inc. Fred Westra.
The fourth-quarter 2011 ranking of Canadian mortgage lenders reveals that Street Capital moved up three spots to fifth position, with a market share of 7.5 per cent. The move comes at the expense of Canada's large banks, which are displaying weakness in the mortgage lending sector.
"Generally, banks saw the highest decline in market share in Q4/11," says Mr. Westra. "The top 10 lenders held 81.4 per cent vs. 84.0 per cent in Q3/11, exhibiting growth from smaller lenders such as ICICI and Equitable Trust."
Scotiabank was the only large financial institution to buck the trend, increasing its share by 2.7 per cent to 16.3 per cent and ranking first.
Upside: Mr. Westra reiterated his "buy" rating and $1.55 target price.
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High transport costs and water disposal issues forced Bankers Petroleum Ltd. to miss fourth-quarter 2011 expectations, notes UBS Investment Research analyst George Toriola.
Bankers reported fourth-quarter diluted cash flow per share of 11 cents versus Mr. Toriola's expectations of 17 cents. He expects elevated costs to continue until sufficient water disposal capacity is implemented.
"Increasing produced water volumes are expected to result in increasing operating costs and operating intensity as the company continues to optimize oil and water volumes across the producing wells," he says.
Upside: Mr. Toriola maintained his "buy" rating and $7 price target. Dundee Securities Corp. analyst Alex Klein downgraded the company to "neutral, high risk" from "buy" and cut his price target by $1.10 to $7.60.
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WestFire Energy Ltd.'s proved reserves at year-end 2011 increased 111 per cent on a per share basis, resulting in solid growth in the company's net asset value, noted CIBC World Markets Inc. analyst Adam Gill. He upgraded WestFire to "sector performer" from "sector underperformer."
Upside: Mr. Gill raised his price target by $1 to $7.50.
Darcy Keith