bombardier

BANK OF NOVA SCOTIA, $53.11, Toronto symbol BNS, continues to benefit from its growing banking operations in the Caribbean, Latin America, South America and Asia. In the three months ended July 31, 2011, the bank’s earnings rose 19.1%, to $1.2 billion from $1.0 billion a year earlier. Earnings per share rose 13.3%, to $1.11 from $0.98, on more shares outstanding. If you exclude certain one-time items, the bank would have earned $1.14 a share in the latest quarter. That beat the consensus estimate of $1.12 a share. Revenue rose 13.6%, to $4.3 billion from $3.8 billion. Bank of Nova Scotia continues to set aside less money to cover bad loans: loan-loss provisions fell 12.0%, to $243 million from $276 million a year earlier....

TORONTO-DOMINION BANK, $71.10, Toronto symbol TD, has agreed to buy MBNA’s Canadian credit card operations from Bank of America (New York symbol BAC). This purchase will add 1.8 million customers to TD’s roughly 4.0 million credit-card accounts. MBNA is also the largest issuer of MasterCard cards in Canada, which will diversify TD’s Visa cards. TD will pay $8.5 billion for MBNA’s Canadian credit-card operations when the deal closes, probably early next year. To put that in context, TD earned $5.2 billion, or $5.77 a share, in its 2010 fiscal year, which ended October 31, 2010....

ENCANA CORP., $28.92, Toronto symbol ECA, reported sharply higher earnings this week. In the three months ended June 30, 2011, Encana earned $166 million, or $0.22 a share (all amounts except share price in U.S. dollars). That’s up 151.5% from $66 million, or $0.09 a share a year earlier. These figures exclude several unusual items, particularly losses related to hedging and foreign exchange. On this basis, the latest earnings easily beat the consensus estimate of $0.14 a share. Even so, cash flow per share fell 10.9%, to $1.47 from $1.65. That’s mainly because the company’s average selling price for gas fell 7.5% to $5.09 per thousand cubic feet from $5.50 a year earlier (gas accounts for 96% of Encana’s overall production). Average daily gas production rose 3.3%. Encana sold its oil for at an average price per barrel of $92.66, up 38.2% from $67.05....

BOMBARDIER INC. $6.51 (www.bombardier.com) may close its train plant in the U.K. That’s because the company lost a $2.2-billion contract to supply 1,200 passenger cars to a rail system near London (all amounts except share price in U.S. dollars). Even so, Bombardier’s rail division has an order backlog of $33.5 billion. That’s twice the company’s overall revenue of $17.7 billion in the fiscal year ended January 31, 2011. Best Buy. TRANSCONTINENTAL INC. $16 (www.transcontinental.com) will become the exclusive Canadian seller of advertising on About.com and its related web sites, Netplaces.com (general information) and CalorieCount.com (dieting information). These web sites receive 5.8 million unique Canadian visitors a month, so this new deal should help Transcontinental profit as advertisers spend more on Internet advertising. Buy. PRECISION DRILLING CORP. $14 (www.precisiondrilling.com) plans to build 28 new drilling rigs in 2011, including 16 of its Super Series models, which use horizontal drilling techniques to extract oil from hard-to-reach deposits. The company already has longterm contracts for 17 of these rigs, and expects to sign contracts for the remaining 11 in the next few weeks. Buy.

PLEASE NOTE: Our next Hotline will go out on Friday, July 8, 2011. SNC-LAVALIN GROUP INC., $58.88, Toronto symbol SNC, rose 9% this week in response to its purchase of certain assets of Atomic Energy of Canada Ltd. from the federal government. The purchase mainly consists of Atomic Energy’s Candu nuclear-reactor division. All of Canada’s reactors use the Candu design and technology. The division has also sold reactors to Argentina, Romania, India, South Korea and China....

BOMBARDIER INC. (Toronto symbols BBD.A $6.88 and BBD.B $6.89; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.8 billion; Market cap: $12.4 billion; Price-to-sales ratio: 0.7; Dividend yield: 1.4%; TSINetwork Rating: Average; www.bombardier.com) will use robots to assemble the cockpit and fuselage of its new CSeries jets....

BANK OF NOVA SCOTIA, $58.48, Toronto symbol BNS, reported better-than-expected earnings this week. That’s mainly because it is putting less money aside to cover bad loans because of the improving economy. The bank also saw strong gains at its international-banking and wealth-management operations. In the three months ended April 30, 2011, Bank of Nova Scotia earned $1.5 billion. That’s up 40.7% from $1.1 billion a year earlier. Earnings per share rose 33.3%, to $1.36 from $1.02, on more shares outstanding. The latest earnings included a one-time gain of $286 million, or $0.26 a share. That’s mostly because new accounting rules forced the bank to revalue its original 18% stake in DundeeWealth Inc. in connection with its recent purchase of the remaining 82% of this company. DundeeWealth manages investments and operates a brokerage business. It also owns the Dynamic family of mutual funds, and provides financial-planning and investment advice....

BOMBARDIER INC. (Toronto symbols BBD.A $6.70 and BBD.B $6.69; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $11.4 billion; Price-to-sales ratio: 0.6; Dividend yield: 1.5%; TSINetwork Rating: Average; www.bombardier.com) continues to win new railcar contracts. The company recently won a nine-year deal to build 200 diesel locomotives for DB Regio AG, which operates public-transit systems in Germany. This contract is worth $867 million, which is equal to 5% of Bombardier’s annual revenue of $17.7 billion (all amounts except share price and market cap in U.S. dollars). The company will start delivering these trains in 2013. Bombardier has also received a $186-million order for 50 electric locomotives from Italy’s state-owned railway company. The company will deliver these trains in 2012 and 2013....

Bombardier was a favourite of momentum traders in the 1990s, and the stock peaked at over $26 in 2000. However, 9/11 and two recessions cut the company’s share price to under $3 in 2009. In response, Bombardier aggressively cut its costs. It also expanded its railcar business. That lowered its exposure to the highly cyclical aircraft industry. These moves have significantly improved Bombardier’s earnings. That’s also helping the company develop new, more fuel-efficient airplanes and high-speed trains. These new products will help Bombardier increase its sales and market share, particularly in fast-growing countries like China and Brazil. BOMBARDIER INC. (Toronto symbols BBD.A $6.90 and...

CAE INC. $12 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 256.8 million; Market cap: $3.1 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.3%; TSINetwork Rating: Average; www.cae.com) was, like Bombardier (see left), a one-time favourite of momentum traders. But it fell out of the broker/media limelight after airlines cut their flight-simulator orders in the wake of 9/11. However, the company continues to benefit from its expansion into pilot training, which it began in 2000. This has cut CAE’s reliance on simulator sales, and given it more predictable revenue streams. CAE now trains over 50,000 pilots each year at its 24 training centres around the world....