snc lavalin

EMERA INC. $32 (Toronto symbol EMA; Income Portfolio, Utilities sector; Shares outstanding: 121.9 million; Market cap: $3.9 billion; Price-to-sales ratio: 1.3; Dividend yield: 4.2%; TSINetwork Rating: Average; www.emera.com) gets 60% of its revenue and 50% of its earnings from Nova Scotia Power Inc., which is Nova Scotia’s main electricity supplier. It gets the rest of its revenue and earnings from its investments in pipelines and power companies in the U.S. and Caribbean. In the three months ended June 30, 2011, Emera’s revenue rose 37.3%, to $500.8 million from $364.7 million a year earlier. The company bought a controlling interest in the main power provider in Barbados in December 2010; the contribution from these operations was the main reason for the higher revenue. Earnings rose 15.0%, to $29.9 million from $26.0 million. Earnings per share rose just 4.3%, to $0.24 from $0.23, on more shares outstanding. The year-earlier earnings figures exclude a one-time gain related to an acquisition. Emera is a buy....

SNC-LAVALIN GROUP INC. $57 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 150.8 million; Market cap: $8.6 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.snclavalin.com) is buying the money-losing Candu nuclearreactor business of Atomic Energy of Canada Ltd. from the federal government. Reactor demand has suffered in the wake of the Japanese earthquake and tsunami, which damaged the Fukushima nuclear plant and allowed radiation to escape. Moreover, Germany recently announced plans to shut down all of its nuclear reactors by 2022. However, the $15-million price is just 20.3% of the $73.9 million, or $0.49 a share, that SNC earned in the three months ended March 31, 2011. As well, Candu is nearly finished refurbishing three reactors. Once they’re completed, SNC will cut Candu’s workforce of 2,000 by 40%. The resulting lower costs should make Candu more profitable....

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....

BREAKWATER RESOURCES, $7.41, symbol BWR on Toronto, is now the subject of a $663-million friendly takeover bid from Belgium-based Nyrstar, a major global producer of zinc and lead, as well as silver, gold and copper. The offer is for $7.00 a share in cash for all of Breakwater’s shares. In addition, Breakwater shareholders will get a special dividend of $0.50 a share in cash. At $7.50, that’s up 155% from the $2.94 we recommended the stock at a year ago in our July 2010 issue of Stock Pickers Digest....

These three leading industrial companies all face rising costs for labour and raw materials. However, all three continue to win new contracts that will help them offset these expenses. Moreover, all three continue to trade at attractive multiples to earnings. SNC-LAVALIN GROUP INC. $55 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 150.8 million; Market cap: $8.3 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.snclavalin.com) continues to win new contracts, thanks in part to its strong reputation. SNC is a leading Canadian engineering and construction company. It designs and builds large-scale public-works projects, such as roads, bridges, transit systems and water-treatment plants. It also builds mines, chemical plants and electrical-power systems....

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....

RESEARCH IN MOTION INC. $53 (www.rim.com) has agreed to license over 30,000 patents from Intellectual Ventures, a privately held U.S. company. RIM did not say how much it is paying, but the deal will help protect it from patent-infringement lawsuits. These patents should also help RIM add new features to its BlackBerry smartphones, or develop new products, such as its upcoming PlayBook tablet computer. Buy. SNC-LAVALIN GROUP INC. $54 (www.snclavalin.com) has won a contract to build a new airport terminal on Mayotte, a French-controlled island northwest of Madagascar. SNC will also operate the terminal under a 15-year concession agreement. The $62-million deal is small next to SNC’s annual revenue of $6.3 billion, but it enhances the company’s reputation and could lead to more contracts in this region. Best Buy. POTASH CORP. OF SASKATCHEWAN $54 (www.potashcorp.com) will probably ship 9.5 million to 10 million tonnes of potash in 2011. That would beat its 2007 record of 9.4 million tonnes. Rising prices for corn and other crops are prompting farmers to apply more fertilizers. However, potash prices remain volatile, and the stock could suffer a setback if prices move down. Hold.

RESEARCH IN MOTION INC., $55.78, Toronto symbol RIM, reported better-than-expected earnings this week. However, the stock fell 11%. That’s because the company’s sales forecast for the current quarter fell short of the consensus estimate. In its 2011 fiscal year, which ended February 26, 2011, RIM’s earnings rose 38.8% to $3.4 billion from $2.5 billion in fiscal 2010 (all amounts except share price in U.S. dollars). Earnings per share rose 47.1%, to $6.34 from $4.31, on fewer shares outstanding. That beat the consensus estimate of $6.29 a share. The company shipped a record 52.3 million BlackBerry smartphones in fiscal 2011, up 43% from the prior year. That’s why revenue rose 33.1%, to $19.9 billion from $15.0 billion....

These three companies all have large overseas operations. That exposes them to a wide variety of risks, including volatile currency-exchange rates and political unrest. However, all three are focusing on fast-growing markets. That enhances their long-term prospects. THOMSON REUTERS CORP. $38 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 833.7 million; Market cap: $31.7 billion; Price-to-sales ratio: 2.4; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.thomsonreuters.com) has two main divisions: Markets (which supplied 58% of its 2010 revenue and 49% of its earnings) sells financial-information products to banks and other financial institutions. Professional (42%, 51%) sells specialized information to professionals in the legal, accounting, scientific and health-care fields. Thomson Reuters took its present form when the Ontario-based Thomson Corp. bought the U.K.-based Reuters news agency for $17 billion U.S. in cash and shares (all amounts except share price and market cap in U.S. dollars) in April 2008....

CANADIAN IMPERIAL BANK OF COMMERCE, $82.25, Toronto symbol CM, reported sharply higher earnings this week. In its 2011 first quarter, which ended January 31, 2011, the bank’s earnings rose 22.5%, to $799 million, or $1.92 a share. A year earlier, it earned $652 million, or $1.58 a share. If you exclude unusual items, such as writedowns of securities the bank holds and a gain on the sale of a business, earnings per share would have risen 19.6%, to $1.95 from $1.63. On this basis, the latest earnings beat the consensus estimate of $1.77 a share. Revenue rose 1.3%, to $3.10 billion from $3.06 billion....