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Will Japan mean big troubles for Big Blue?

The impact of the Japanese crisis on technology giant IBM has been a particular concern for the Street, given that the tech giant generated nearly 11 per cent of its revenue from the country last year. Shares are down roughly 5 per cent since the close last Friday, shaving $11-billion from the company's market cap.

Canaccord Genuity analyst Eyal Ofir suggests the longer-term outlook remains intact, assuming that a full nuclear meltdown and material radiation leakage is avoided. Under this scenario, "IBM should have sufficient levers within its war chest to maintain its 2015 EPS target of $20 per share," he said in a note.

Short-term, it's likely a different situation. "While it is currently unclear how much economic fallout from recent natural disasters and nuclear crisis will occur, investors should assume that there could be some revenue pressures in both Q1 and early Q2 until business in the country normalizes," Mr. Ofir said.

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While IBM has not commented on its supply chain, Mr. Ofir believes it wouldn't be surprising if a number of its component venders for its Systems and Technology Group are affected. "This could cause revenue pressures in late Q2 or Q3, but margin pressure is more likely if there are raw material shortages," he said.

Mr. Ofir adds that his mapping of IBM's Japanese locations show potential for "minor impacts." IBM has publicly stated that there has not been any significant damage to its Japanese operations.

Upside: Canaccord Genuity maintained a "buy" recommendation and a $180 (U.S.) price target.

Eldorado Gold Corp. reported a 24 per cent jump in reserves, but the grade of those ounces dropped by 32 per cent because the company incorporated more lower grade material as it used a higher assumed gold price, noted CIBC World Markets Inc. analyst Barry Cooper.

Upside: Mr. Cooper lowered his price target by $2 to $27 (U.S.), but continues to recommend Eldorado as one of his top picks, partly because it is trading at lower cash flow multiples than many of its peers for estimated 2012 production.

Aurizon Mines Ltd. reported "solid" results for the fourth quarter, with cash flow per share coming in above estimates by Clarus Securities Inc. analyst Nana Sangmuah thanks to lower-than-expected operating costs. She notes that Aurizon has no remaining hedges, so the company will be fully leveraged to the gold price going forward.

Upside: Ms. Sangmuah upgraded Aurizon to a "buy" from "hold" with an increased target price of $8.50 from $7.00.

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Labopharm Inc. CFO Mark D'Souza is replacing James Howard-Tripp as president and CEO, as the board undertakes a full strategic review of the company's business. "Given our longstanding lack of confidence in Labopharm's reformulation strategy and current drug portfolio, we agree that a strategic review is appropriate," said TD Newcrest analyst Lennox Gibbs.

Downside: Mr. Gibbs maintained a "reduce" rating and suspended his 75-cents-per-share target price pending the outcome of the review.

Genivar Inc.'s fourth-quarter results were a disappointment, as the engineering firm coped with fewer operating days and the impact of future tax liabilities. Scotia Capital Inc. analyst Mark Neville noted the company expects organic growth to come in at the lower end of its 5 to 10 per cent targeted range this year as it faces weakness in international revenues.

Downside: Mr. Neville cut his one-year price target by $3 to $32, suggesting $28 would make for an attractive entry point.

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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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