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Tim Hortons struggles to regain investor enthusiasm

The shadow of Paul House, chief executive of Tim Hortons, is cast on the wall as he speaks at the iconic coffee chain's AGM in Toronto on May 10, 2012.

Chris Young/The Canadian Press

These are some of the key analyst actions on Bay Street today

The rally in Tim Hortons Inc. stock that brought it to all-time highs earlier this year fizzled out this summer, with shares down about 14 per cent since early May.

The company's second-quarter results, released last Thursday, failed to generate much excitement; though revenue rose 11.8 per cent, same-store sales growth in Canada was showing signs of fatigue amid a challenging macroeconomic and competitive environment.

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Analysts may best be described as cautiously optimistic. Of 17 analysts who follow the stock, seven rate it a buy, nine a hold, and one a sell. The average price target is $56.50, according to Bloomberg data.

One analyst who had been a little bit more enthusiastic than the consensus scaled back his expectations today. CIBC World Markets' Perry Caicco cut his price target by $5 to $57, while reiterating a "sector performer" rating.

While Tims is succeeding in selling more products to its existing customers and slowly introducing Americans to the brand, he's worried about what's on the horizon.

"Although THI is a low-risk investment, there are concerns over long-term growth in Canada and a comprehensive strategy for its future growth market, the U.S.," he noted in a research note.

He scaled back his earnings per share estimate for fiscal 2012 by a nickel, to $2.70, and reduced his forecast by an equal amount for 2013, now expecting EPS of $3.06.

He notes that organizational changes have been announced in preparation for the eventual appointment of a new externally sourced CEO.

For now, analysts are indicating that investors may have to wait for the next leader, or signs of more robust same-store sales growth, before the coffee chain's stock gets its next jolt of adrenalin.

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Agnico-Eagle Mines Ltd.

UBS has downgraded Agnico-Eagle Mines to "neutral" from "buy" because of its recent outperformance against peers. Shares are up about 20 per cent year-to-date, compared with a decline of 18.5 per cent for the S&P/TSX global gold index. UBS still likes the stock, however, for its low geopolitical risk -- Agnico-Eagle's operating mines are located in Canada, Mexico and Finland -- and it raised earnings per share forecasts for the company through 2014.

Upside: UBS hiked its price target to $46.50 (U.S.) from $44.

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ATS Automation Tooling Systems Inc.

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ATS Automation Tooling Systems reported fiscal first-quarter earnings that were in line with expectations, but Canaccord Genuity analyst David Tyerman is turning more bullish on the stock amid signals that strong sales growth will continue based on a record backlog in orders. "We are projecting very strong earnings per share growth from good sales growth plus margin expansion," he said.

Upside: Mr. Tyerman upgraded ATS to "buy" from "hold" and raised his price target to $10 from $8.75.

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Boardwalk REIT

Boardwalk REIT enjoyed solid results in its second quarter as rental revenue rose 3.7 per cent, allowing it to announce a second hike in distributions this year. Management also raised its guidance for the current quarter. Analysts are impressed, but cautious. "We maintain our view that Boardwalk is a top-tier Canadian," commented Desjardins Securities analyst Jenny Ma, but "we believe that its unit price fully reflects the REIT's near-term cash flow growth prospects."

Upside: Mr. Ma raised his price target to $67 from $65.80 and Canaccord Genuity's Mark Rothschild hiked his to $65.40 from $62.15. Both maintained "hold" ratings.

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Lone Pine Resources Inc.

While Lone Pine Resources appears to be back on track operationally at its Evi field in Alberta, Raymond James analyst Kristopher Zack expects this to be overshadowed by balance sheet concerns. In the absence of higher commodity prices, the company may need to sell assets or negotiate with its bank syndicate to relax a debt covenant, he said.

Upside: Mr. Zack downgraded the stock to "market perform" from "outperform" as he slashed his price target to $2.50 from $6.

For more analyst actions, investing news, actionable trading ideas and analysis, follow Darcy Keith on Twitter

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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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