Bloomberg News

Canada Stocks Fall After BMO Earnings Trail Analyst Estimates

December 07, 2011

Dec. 6 (Bloomberg) -- Canadian stocks fell for the third time in four days, led by financial companies, after Bank of Montreal reported fourth-quarter earnings that missed the average analyst estimate in a Bloomberg survey.

BMO, Canada’s fourth-biggest lender by assets, lost 3.5 percent after its profit excluding certain items missed the average estimate by 3.4 percent. Copper producer Quadra FNX Mining Ltd. soared 40 percent after agreeing to be bought by KGHM Polska Miedz SA. Petrominerales Ltd., which produces oil and gas in Colombia, plunged 16 percent after halting some production.

The Standard & Poor’s/TSX Composite Index slipped 38.08 points, or 0.3 percent, to 12,081.25.

“People are saying, ‘Where’s the significant growth going to come from for the Canadian banks?’” Anil Tahiliani, a money manager at McLean & Partners in Calgary, said in a telephone interview. The firm oversees about C$1 billion ($989 million). “It’s hard to say what’s going to drive the banks forward other than the global economic picture getting better.”

The S&P/TSX climbed 5.7 percent in the previous six days as central banks in Europe, Asia and North America cut lenders’ borrowing costs and Italy’s cabinet passed a package of spending cuts and tax increases. Canada’s benchmark stock gauge has fluctuated with developments in the European debt crisis this quarter, which has overshadowed growth in Canadian companies’ earnings.

Financials Decline

The S&P/TSX Financials Index fell after Toronto-based BMO missed the analyst estimate for the first time in five quarters. Bank of Montreal slumped 3.5 percent to C$57.74. Royal Bank of Canada, the country’s biggest lender, slipped 1.5 percent to C$48.50.

Regional lender Canadian Western Bank dropped 4.7 percent, the most since July 2009, to C$27.13 after Sumit Malhotra, an analyst at Macquarie Group Ltd., reduced his rating on the shares to “neutral” from “outperform.”

The U.S. Dollar Index declined and raw-materials companies rose after the Financial Times said the European Union was in talks to almost double its bailout fund. The newspaper cited unnamed European officials.

Potash Corp. of Saskatchewan Inc., the world’s biggest fertilizer producer by market value, increased 2.9 percent to C$43.90 as corn advanced for the first time in four days. Goldcorp Inc., the world’s second-largest gold producer by market value, climbed 1.4 percent to C$52.54 as the metal erased its losses in electronic trading.

Mongolian Mine

Ivanhoe Mines Ltd., Rio Tinto Group’s partner in the Oyu Tolgoi copper mine in Mongolia, rose 5.1 percent to C$22.71 after Australia’s Business Spectator said Rio Tinto is “widely expected” to buy the shares of Ivanhoe it doesn’t already own. The website didn’t cite any sources. Luke Distelhorst, a spokesman for Ivanhoe, said the company has no comment on the report.

Quadra FNX, which operates in the U.S., Canada and Chile, jumped a record 40 percent to C$15.88 after saying Lubin, Poland-based KGHM, the biggest copper producer by European output, will buy it for C$15 a share in cash. The purchase would be the biggest acquisition of a Canadian base-metals company by price since Rio Tinto bought Alcan Inc. for $43 billion in 2007.

European Goldfields Ltd., which is developing mines in Greece and Romania, surged 22 percent, the most since December 2008, to C$12.12 after Sky News said Eldorado Gold Corp. has approached it about a potential takeover. The network didn’t say where it got its information. European Goldfields said in a statement it received “preliminary and indicative approaches from third parties” regarding potential deals.

Production Suspension

Petrominerales plunged 16 percent, the most since September 2008, to C$17.10 after saying it has suspended some production until it improves water-disposal capacity. Pacific Rubiales Energy Corp., which also operates in the country, retreated 4.2 percent to C$20.27.

Athabasca Oil Sands Corp., PetroChina Co.’s partner in oil- sands development, rallied 6.1 percent to C$13.35. The companies may be close to receiving regulatory approval for the MacKay project, Jeff Martin, an analyst at Peters & Co. in Calgary, said in an e-mail message.

Yoga-wear retailer Lululemon Athletica Inc. slumped 6.5 percent to C$45.98 after Taposh Bari, an analyst at Jefferies & Co., reduced his 12-month share-price estimate to $54 from $59. Bari cut his 2012 profit forecasts after the Vancouver-based company reported sales that missed the average analyst estimate in a Bloomberg survey last week.

Canadian National Railway Co., the country’s largest railroad, slipped 1.8 percent to C$78.39 after Gary Chase, an analyst at Barclays Plc, cut his rating on the shares to “underweight” from “equal weight.” CN is more-expensive relative to forecast earnings for 2012 than other North American railroads, Chase wrote in a note to clients.

Capstone Infrastructure Corp., which owns stakes in alternative-energy power plants, sank 37 percent to a record-low C$3.54 after cutting its earnings forecast and saying it may reduce its dividend.

Sandvine Corp. tumbled 35 percent, the most since March 2008, to C$1.20. The maker of hardware and software for Internet service providers said fourth-quarter revenue was C$19.5 million ($19.3 million) to C$20 million, compared with an average analyst estimate in a Bloomberg survey of C$29 million.

--With assistance from Heather Walsh in Bogota and Liezel Hill in Toronto. Editor: Stephen Kleege

To contact the reporter on this story: Matt Walcoff in Toronto at mwalcoff1@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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