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Warning of tough quarter, analyst cuts earnings estimates on RIM

The latest quarterly earnings from Research In Motion Ltd. is due June 28 and already the analyst community is warning investors to keep expectations low.

Raymond James analyst Steven Li today slashed his earnings estimates for RIM's first quarter, as well as for each succeeding quarter for this fiscal year.

"Overall, we believe RIM's May quarter was a challenging one on a number of fronts," Mr. Li said in a research note. "Our own channel checks placed to U.S. retail locations have indicated low consumer interest with RIM's BlackBerry 7 portfolio rapidly aging and most sales being replacements."

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While conceding demand in emerging markets for BlackBerrys is harder to gauge, he also has little doubt that fierce pricing competition at the lower end of the market is putting pressure on international shipments as well.

For instance, Nokia, itself aggressively trying to reclaim lost market share, recently announced two new phones that will sell below $50 and will feature a new cloud-based web browser that will lower data usage by up to 90 per cent. It's a selling point that RIM has also aggressively marketed in emerging markets.

Globally, Mr. Li believes consumers are also likely to defer replacements or purchases of RIM smartphones until the new BlackBerry 10 platform comes out in the second half of this year. And even with the new devices, RIM is facing an uphill battle in attracting developers for applications to run on the new phones.

Mr. Li cut his fiscal first-quarter 2013 earnings per share estimate to 30 cents from 39 cents, and for the year as a whole to $1.69 from $2.55. He now forecasts revenue this year of $16.016-billion, down from $17.012-billion.

RIM shares today are trading modestly lower at $10.96, just a tad above the 8-year low of $10.57 (U.S.) reached last Thursday.

Upside: Mr. Li maintained a $15 (U.S.) price target and "market perform" rating. The mean price target on the Street right now is $13.40, according to Bloomberg data.

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Raymond James analyst Steve Hansen is recommending investors buy shares in Methanex Corp. , as new sanctions against Iran appear to be restricting global supplies for methanol. European insurers have joined their North American peers in being barred from providing coverage for vessels carrying Iranian petroleum products, and that's been pushing up spot methanol prices in Europe and Asia. "We believe these sanctions will have a material impact on outgoing Iranian cargoes, at least temporarily," he said.

Upside: Mr. Hansen reiterated an "outperform" rating and $42 (U.S.) price target.

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Probe Mines Ltd.'s Borden Lake deposit in Ontario is an attractive exploration project that hosts a gold resource of 5.8 million ounces, said Stonecap Securities analyst Ali Khan. He sees several near-term potential catalysts that could potentially reward investors with a healthy return, including an early stage "scoping" study anticipated in the second half of 2012.

Upside: Mr. Khan initiated coverage with a $3 price target and "outperform" rating.

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Kinross Gold Corp. has bolstered its balance sheet by selling its stake in the Crixas gold mine in Brazil for $220-million (U.S.) to AngloGold Ashanti Ltd., which already owns the other half of the mine. National Bank Financial analyst Paolo Lostritto termed the sale as a "mild positive," as it should lower company-wide costs given inflation in the country had made operating the project more expensive.

Upside: Mr. Lostritto maintained an "outperform" rating and $15 price target.

Read more: Kinross sells stake in Brazilian gold mine

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Leisureworld Senior Care Corp.'s recent acquisition of three luxury seniors' retirement homes in British Columbia "is a positive step" to further diversify the company's geographic footprint and revenue base, said Canaccord Genuity analyst Neil Maruoka. The $119.8-million transaction will see the long-term care provider expand outside of Ontario and into new markets in the greater Vancouver area.

Upside: Mr. Maruoka raised his price target by 25 cents to $13.50 and maintained a "buy" rating.

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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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