ViterraTROY FLEECE
Shares in Viterra Inc. continue to rack up gains today after the grain handler early Wednesday beat the Street in reporting a near-doubling of earnings in the third quarter. Analysts suggest the stock hasn't peaked yet.
Profit rose to $123.3-million as revenue rose on the strength of its agri-products operations.
Canaccord Genuity analyst Keith Carpenter believes the agri-products segment will continue to do well thanks to strong fertilizer volumes and margins. Underpinning his optimism are expectations for solid grain volumes in Australia, where it owns ABB Grain Ltd., as well as firm prices and a favourable supply-demand dynamic for several crops.
"We would continue to accumulate Viterra shares at this price level," he said.
Meanwhile, Viterra stands to benefit if the federal Conservatives are successful in stripping the Canadian Wheat Board of its monopoly status. Mr. Carpenter expects the government to implement its post-CWB strategy in the fall of 2012, and by his calculations, Viterra could realize an additional 6.5 to 9.5 per cent in earnings once the board is fully deregulated.
"Investors should also take note that although this company was built on strategic acquisitions, we would not be surprised at a potential bid for Viterra at some point in the future by a larger player now that the Canadian industry is becoming deregulated," said Mr. Carpenter, who affirmed his "buy" rating and $14 price target.
Raymond James Ltd. analyst Steven Hansen upgraded the stock to "outperform" from "market perform" while raising his six- to 12-month price target by $1 to $13.50, citing an improved crop and margin outlook.
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This summer's drop in the share price of Astec Industries Inc. "presents a favourable risk/reward opportunity," maintained Canaccord Genuity analyst Eric Prouty. While concerns over the global economy persist, Mr. Prouty's research suggests that the road building engineering firm continues to enjoy solid growth in international sales, especially in mining.
Upside: Mr. Prouty upgraded Astec to a "buy" and maintained a price target of $40.
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Stock in Quebec-based steel fabricator ADF Group Inc. "screams value," argued Raymond James Ltd. analyst Frederic Bastien. The company is trading at only 0.5 times tangible book value even while boasting a net cash position of 62 cents per share. "Patient investors looking for a small cap, value-oriented opportunity should consider buying shares of ADF at current levels," he said.
Upside: Mr. Bastien rates the stock as an "outperform" with a price target of $2.50. Canaccord Genuity analyst Yuri Lynk, however, downgraded the stock to "hold" while slicing his price target by 50 cents to $1.75, arguing the industry is still oversupplied and the stock may stay in the doldrums for a while.
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Having raised production 235 per cent over the past three years, Paladin Energy Ltd. is now approaching "cruising altitude," shifting its focus from growth to cost control, said Raymond James Ltd. analyst Bart Jaworski. Even though the outlook on costs is higher than Mr. Jaworksi expected, he continues to see value in the uranium company, especially as it seeks to sell non-core assets.
Upside: Mr. Jaworksi cut his price target to $3.40 from $4.10 but maintained an "outperform" rating.
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Transcontinental Inc. reported a disappointing third quarter, partly because of lower demand for textbooks, noted CIBC World Markets Inc. analyst Robert Bek. But he still believes shares are inexpensive, especially given expectations of lower capital expenditures and new contracts to come.
Downside: Mr. Bek cut his price target by $2 to $17 and maintained a "sector outperformer" rating.
Darcy Keith