These gains mainly came from the company’s ground and less-than-truckload delivery operations. Increased earnings at this division offset lower profits from the air delivery division, due to slowing Asian demand. Revenue rose 11.3%, to $10.5 billion from $9.5 billion.

The company’s fuel costs jumped 40% in the latest quarter. To offset this increase, FedEx will raise its shipping rates by an average of 3.9%, starting January 2, 2012.

FedEx now expects to earn $6.25 to $6.75 a share in fiscal 2012, down from its previous forecast of $6.35 to $6.85 a share. The stock trades at just 12.5 times the midpoint of the new range.

The company holds cash of $2.0 billion, or $6.18 a share. Its long-term debt of $1.4 billion is a low 5% of its market cap.

FedEx is a buy.

To cut its reliance on ATMs, the company now offers more services, such as software, ATM maintenance and processing customer transactions. The company now gets over 50% of its revenue from services. That gives it recurring revenue and helps cut its risk.

International expansion continues

Diebold is also doing a good job of selling ATMs to overseas banks. In Asia and Latin America, rising prosperity is giving banks more cash to invest in ATMs. As well, ATM demand continues to rise because installing these machines is cheaper than hiring tellers. Diebold now gets 55% of its revenue from overseas markets.

The company’s revenue rose 9.1%, from $2.9 billion in 2006 to $3.1 billion in 2008. However, revenue fell 14.3%, to $2.7 billion, in 2009, because banks bought fewer ATMs in the wake of the credit crisis. Revenue rose 3.9%, to $2.8 billion, in 2010.

Earnings fell from $1.82 a share (or a total of $121.7 million) in 2006 to $1.62 a share (or $108.0 million) in 2007. Earnings improved to $2.61 a share (or $173.5 million) in 2008. That’s largely because Diebold cut its costs, including shifting 85% of its ATM production to low-cost countries, such as China and Hungary.

Even with these savings, earnings fell to $1.65 a share (or $110.3 million) in 2009. However, earnings rebounded to $2.09 a share (or $137.8 million) in 2010.

Big savings on the way

Diebold feels its cost-cutting efforts, which began in 2006, will lower its yearly costs by $300 million by the end of 2013.

These savings should let Diebold buy back more shares. That raises earnings per share and other per-share calculations, and gives the remaining shareholders a larger stake in the company. In 2010, Diebold spent $25.8 million on share buybacks.

The company continues to spend around 3% of its revenue on research. This will let it keep developing innovative new products.

For example, Diebold recently developed a new system that helps cut down on fraud by letting bank customers lock and unlock their ATM cards using their mobile phones. In the event of suspicious activity, customers will be able to stop unauthorized withdrawals by sending a text message that will lock their card. More people are using smartphones to do their banking, so demand for this service should be strong.

Steady income and low p/e ratio

The company will probably earn $2.09 a share in 2011. The stock trades at 15.3 times that estimate. As well, Diebold has raised its dividend each year for the past 58 years. The current annual rate of $1.12 a share yields 3.5%.

Diebold is a buy.

LIMITED BRANDS INC. $43 (www.limitedbrands.com) will spend $590 million to upgrade its stores and open new outlets in fiscal 2013, which ends January 31, 2013. That’s up 38.8% from the $425 million it spent on capital improvements in fiscal 2012. Most of these funds will go toward opening new Victoria’s Secret lingerie stores outside the U.S. Limited held cash of $1.0 billion, or $3.44 a share, on July 31, 2011, so it can easily afford to expand. Buy.

MTS SYSTEMS INC. $36 (www.mts.com) has raised its quarterly dividend by 25.0%, to $0.25 a share from $0.20. The new annual rate of $1.00 yields 2.8%. Buy.

Intact has two product lines: its personal products, which contribute 70% of its premiums, include automobile and property insurance that Intact sells to individuals. Commercial products provide 30%, and include auto, property, liability, surety and specialty coverage that Intact mainly sells to small- and medium-sized businesses.

In the three months ended June 30, 2011, Intact’s sales rose 2.7%, to $1.35 billion from $1.32 billion. Earnings per share fell 8.2%, to $1.12 from $1.22 a year earlier. However, the decline was mainly the result of catastrophic claims related to the Slave Lake, Alberta, wildfires and worse-than-usual spring storms. Those losses were partly offset by strong results from the company’s auto insurance business.

In September 2011, Intact completed the purchase of AXA Canada from Paris-based ASX Group for $2.6 billion. The new operations will increase Intact’s premium revenue by about 40%, to $6.5 billion a year. It will also cut Intact’s reliance on personal auto insurance, which now accounts for about 49% of its revenue.

As well, the purchase lets Intact access the commercial insurance market. (AXA Canada now gets 36% of its business from selling commercial insurance.) Adding AXA Canada also gives Intact a presence in Quebec, B.C. and Atlantic Canada.

Intact trades at 11.9 times forecast 2011 earnings of $4.80 a share.

Intact Financial is a buy.

In the three months ended June 30, 2011, Leon’s sales fell 3.0%, to $163.9 million from $169.0 million a year earlier. Weaker consumer spending and a drop in new-housing starts held back sales.

Earnings fell 9.4%, to $9.8 million, or $0.14 a share, from $11.4 million, or $0.16 a share. The slower sales were the main reason for the earnings decline. The company also spent more on advertising.

Leon’s plans to speed up its expansion by opening roughly five new stores a year over the next five years. The company recently opened stores in Rosemere, Quebec; Bathurst, New Brunswick; and Guelph, Ontario. By the end of 2011, Leon’s plans to open stores in Regina, Saskatchewan and Mississauga, Ontario.

The company is also renovating its existing stores. It is now making major upgrades to its outlets in Sault Ste. Marie and Sudbury.

Leon’s has no debt, and holds cash of $200.0 million, or $2.86 a share. The company pays a quarterly dividend of $0.09 a share. The annual rate of $0.36 yields 3.0%.

Leon’s is still a hold.

BMTC GROUP $21.25 (Toronto symbol GBT.A; TSINetwork Rating: Extra Risk) (514-648-5757; No web site; Shares outstanding: 49.2 million; Market cap: $1.0 billion; Dividend yield: 1.1%) is one of Quebec’s largest retailers of furniture, electronics and household appliances. It sells these products through its two affiliates: Brault & Martineau Inc. and Ameublements Tanguay.

The company has 20 large stores in the Montreal, Quebec City, Repentigny, Laval, Saint-Georges, Chicoutimi, Sainte-Therese, Trois-Rivieres, Sherbrooke, Rimouski, Riviere-du-Loup and Gatineau areas. It also has six liquidation centres, six Sleep Gallery stores and two distribution and administration centres in Montreal and Quebec City. It’s now building a new store in Levis that will open in December 2011.

In the three months ended June 30, 2011, BMTC’s sales fell 6.6%, to $194.1 million from $207.8 million. Lower consumer spending and an increase in the Quebec sales tax hurt BMTC’s sales. However, it cut its costs and earned higher investment returns. That pushed up its earnings per share by 5.1%, to $0.41 from $0.39.

In the first half of this year, BMTC bought back 2.9% of its shares for $33.7 million. It plans to buy back more shares. Share buybacks reduce the number of shares outstanding, which means that per-share earnings rise, because net income is divided by fewer shares. That helps boost share prices.

BMTC holds cash of $43.8 million, plus $71.7 million of investments. Together, these total $2.35 a share. It has no long-term debt. The shares yield 1.1%.

The company’s near-term outlook is uncertain, but the shares trade at just 14.0 times BMTC’s latest 12 months of earnings.

BMTC Group is a buy.

Under these agreements, two airlines cooperate on flights and baggage handling. WestJet has similar arrangements with Air France, China Airways of Taiwan, China Eastern, Alitalia, Korean Air, Australia’s Qantas Airlines, Japan Airlines, Hong Kong-based Dragonair and El Al Israel.

Interline deals can become code-sharing agreements. These are similar to interline pacts, but they also let airlines sell seats and move luggage under their own names onto another carrier’s flights. WestJet has codesharing deals with Cathay Pacific, KLM and American Airlines.

WestJet, our Stock Pickers Digest “Stock of the Year for 2011,” is still a buy.

Tim Hortons earned $95.5 million in the three months ended July 3, 2011. That’s up 1.5% from $94.1 million a year earlier. The company spent roughly $206 million on share buybacks in the quarter. Due to fewer shares outstanding, earnings per share rose 7.4%, to $0.58 from $0.54.

If you exclude a severance payment to its former chief executive officer, the company would have earned $0.61 a share in the latest quarter.

Sales rose 9.8%, to $702.8 million from $639.9 million a year earlier. Canadian same-store sales rose 3.8%, because Tim Hortons launched successful new products, like fruit smoothies. U.S. same-store sales rose 6.6%, as customers spent more per visit. The company also raised its prices to cover higher costs for coffee and other foods.

Tim Hortons needs a sustained recovery in consumer spending to show continued same-store sales growth in the U.S., but its strategy of expanding in towns and cities near the Canadian border should pay off. This lets it profit from Canadian tourists and Americans who are already familiar with its brand. Meanwhile, there’s still room to expand in Canada, including in gas stations, convenience stores, universities, hospitals and airports.

The stock trades at 21.2 times the company’s forecast 2011 earnings of $2.34 a share. That’s reasonable in light of its strong growth prospects.

Tim Hortons is a buy.

CHIPOTLE MEXICAN GRILL $310.27 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 31.8 million; Market cap: $9.9 billion; No dividends paid) is a Denver-based Mexican-restaurant chain. The company, which was founded in 1993, charges slightly higher prices than fast-food chains, but it offers higher-quality food, including naturally raised meat, and better decor and service.

In the three months ended June 30, 2011, Chipotle’s sales rose 22.4%, to $571.6 million from $466.8 million a year earlier. The company’s restaurants attracted more customers during the quarter. That pushed up its same-restaurant sales by 10.0%. As well, Chipotle opened 39 new outlets. It now has a total of 1,131 locations.

Earnings per share rose 10.1%, to $1.63 from $1.48. Even so, the latest earnings missed the consensus forecast of $1.68 a share. That’s mainly because Chipotle’s food costs rose and it paid higher labour costs after it replaced illegal workers in the wake of a U.S. government probe of illegal immigrant hiring.

The shares have risen 72.4% in the past year. They now trade at 45.9 times the $6.76 a share that the company is expected to earn in 2011.

Chipotle is a hold.

Mosaid Technologies mainly licenses computer chip and telecommunications technology, including patents for technology used in smartphones and laptops.

Wi-LAN has now raised its offer to $42 a share. This new bid will expire on November 1, 2011.

Mosaid still hopes to find a friendly bidder. In fact, the company says it has received a “formal, nonbinding indication of interest for a potential transaction. The potential bidder is a substantial private equity firm with an international presence and over $5 billion in capital under management.”

Mosaid is now trading at $42.27 a share, or slightly above Wi-LAN’s latest bid. This indicates that investors anticipate an even higher offer from Wi-LAN or another bidder.

We’ll say more in the Hotline, but for now Mosaid is still a hold.

CHESAPEAKE ENERGY $27.10 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 751.0 million; Market cap: $20.4 billion; Dividend yield: 1.3%) reports positive drilling results from 12 test wells in the Utica shale formation, which lies several thousand feet below the huge Marcellus shale-gas field in Pennsylvania and New York State.

Shale gas is natural gas that is trapped in rock formations. To extract it, companies must pump water and chemicals into the rock. This fractures the rock and releases the natural gas.

Chesapeake holds 1.25 million acres in the Uticashale region. These drilling results should make it easier for the company to attract a joint-venture partner to help it develop these properties.

Chesapeake is a buy.

HECLA MINING COMPANY $5.31 (New York symbol HL; TSINetwork Rating: Extra Risk) (208-769-4100; www.hecla-mining.com; Shares outstanding: 295.8 million; Market cap: $1.6 billion) plans to start paying dividends linked to the price of silver; it will raise or cut its quarterly payout by $0.01 a share for each $5.00 per ounce increase (or decrease) in its average selling price for silver in the preceding quarter.

Hecla expects to pay an initial dividend of $0.03 a share in the fourth quarter of 2011. The implied annual rate of $0.12 yields 2.3%.

Hecla Mining is still a hold.

In the three months ended July 31, 2011, Bombardier’s earnings rose 56.7%, to $210 million, or $0.12 a share (all amounts except share prices and market cap in U.S. dollars). A year earlier, it earned $134 million, or $0.07 a share. Sales rose 17.4% to $4.7 billion from $4.0 billion.

Sales at the railcar division (which supplies 56% of Bombardier’s total sales) rose 26.0%, mainly due to strong demand from European public-transit systems. In the latest quarter, this business received $3.9 billion of new orders, down from $4.3 billion a year earlier. Its order backlog is $33.9 billion, up from $33.5 billion on January 31, 2011.

Sales at the aerospace division (44% of total sales) rose 7.9%. It delivered 56 planes in the quarter, up from 49 a year earlier. Its order backlog of $23 billion is up 19.8% from January 31, 2011.

Bombardier trades at just 8.8 times the $0.46 U.S. a share that it should earn in 2011.

Bombardier is a buy. The subordinate-voting class B shares are the better choice, due to their greater liquidity and slightly higher dividend yield.

The remaining third comes from publishing over 170 newspapers and magazines. The publishing division also has over 1,000 web sites, which will become more important to Transcontinental’s growth in the next few years as advertisers spend more on the Internet than print products.

In the quarter ended July 31, 2011, the company’s revenue rose 2.3%, to $492.6 million from $481.3 million a year earlier. It has won a number of new printing contracts, including an expanded deal to print The Globe and Mail.

Transcontinental recently swapped its printing operations in Mexico for six printing plants in Canada. Excluding the Mexican plants’ contribution and other unusual items, the company would have earned $32.8 million, or $0.40 a share, down 1.8% from $33.4 million, or $0.41 a share, a year earlier. The decline was due to the strong Canadian dollar, which hurt the contribution from the company’s international operations.

Transcontinental’s long-term debt of $642.2 million is a high 66% of its market cap. However, its debt is down 9.9% from $712.9 million on October 31, 2010. The company also holds cash of $60.8 million, or $0.75 a share.

The stock trades at just 6.4 times the $1.88 a share that Transcontinental should earn in fiscal 2011. That low p/e ratio mainly reflects investor concern that the slowing economy will hurt the company’s advertising revenue.

However, Transcontinental gets 40% of its revenue from less-cyclical clients, such as supermarket chains. As well, it gets more than half of its printing revenue from customers whose contracts range from one to 18 years.

Transcontinental is a buy.