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Why RIM's earnings aren't likely to disappoint

Given the intense competitive pressures faced by Research in Motion Ltd. , the Street is taking a pretty cautious stance on the BlackBerry maker ahead of fourth-quarter results on Thursday.

RIM's own guidance suggests earnings per share of $1.74 (U.S.) to $1.80, and revenue of $5.5-billion to $5.7-billion.

But what's the company's track record for meeting its own forecasts?

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Very good, points out National Bank Financial analyst Kris Thompson. He notes that over the past four years, RIM has beaten the midpoint of revenue guidance nine out of 15 times and has beaten the midpoint earnings-per-share guidance 10 out of 15 times.

Mr. Thompson, in fact, believes investors are underestimating what RIM will deliver on Thursday. While data have revealed RIM is losing market share in North America, this should come as no surprise. It's international growth driving RIM's success, he notes. "Investors should not expect RIM to gain market share in North America until fiscal 2013, after the launch of desperately needed new BlackBerry hardware/software," he said.

National Bank is forecasting adjusted fourth-quarter EPS of $1.77, 2 cents better than consensus and up 40 per cent year-over-year, on revenue of $5.615-billion.

"Our thesis on investing in RIM is that consensus estimates for fiscal 2012 and 2013 are too conservative and will rise over the next several quarters," said Mr. Thompson. "International growth should drive shipments ahead of expectations and drive EPS growth."

Meanwhile, "a product refresh in mid-2012 offers additional upside to estimates and investor sentiment," he said.

Upside: Mr. Thompson rates RIM as an "outperform" with a $80 price target.

Homburg Canada REIT has closed its second equity offering since its IPO last May, a sign that the REIT is preparing to make a further acquisition of an income-producing property, according to TD Newcrest analyst Sam Damiani. Homburg has already completed three acquisitions in Quebec totalling $96-million and the REIT's asset quality continues to be under-appreciated, he said.

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Upside: Mr. Damiani upgraded the REIT to TD's "action list buy" from a "buy" and raised his price target by 50 cents to $13.50.

Consumer products firm Dorel Industries Inc. is well positioned for a period of more stable growth, said CIBC World Markets Inc. analyst Mark Petrie. "On any measure, Dorel is a cheap stock, trading below historical multiples that already reflect a discount to peers. Though catalysts are in short supply, we believe that steadily improving results highlighted by strong growth in the bikes business will lead to an improving share price," he said.

Upside: Mr. Petrie initiated coverage with a $36 price target and a "sector outperformer" rating.

Alliance Grain Traders will likely post weak fourth-quarter results and faces a slow pace in earnings recovery in the first half of 2011, warned Canaccord Genuity analyst Keith Carpenter. The processor of crops also will see "a higher than normal risk" of seeding delays this spring planting season due to high moisture levels in the ground, he said.

Downside: Mr. Carpenter lowered his target price by $3 to $32 and downgraded the stock to a "hold."

Recent share price weakness and promising growth opportunities suggest a buying opportunity in shares of Fortress Paper Ltd. , said RBC Dominion Securities Inc. analyst Paul Quinn. He believes that the specialty paper maker, currently trading at a discount to its peer group, will ultimately be successful in increasing its exposure to "red hot" dissolving-pulp markets.

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Upside: Mr. Quinn upgraded the stock to "outperform" and raised his price target by $8 to $58.

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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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