Canada’s economy grew by a stronger-than-expected 2.9 percent during the fourth quarter, as consumer spending led the way. For full-year 2013, gross domestic product (GDP) grew 2 percent year over year, an improvement of three-tenths of a percentage point from the prior year. As such, it looks like 2012 should mark the trough of the current cycle, as the economy is projected to make incremental gains during each of the next three years.

In the near term, however, private-sector economists forecast that gross domestic product (GDP) will temporarily slacken during the first quarter, to 2.1 percent, before reaccelerating in the subsequent quarters. The economy is projected to expand by 2.3 percent in 2014, with modest momentum in each of the two following years.

Although the anticipated transition to an economy driven by rising exports and business investment, as opposed to consumer spending, has yet to materialize, the Bank of Canada (BoC) appears to have softened to a more neutral stance in its latest monetary policy statement versus the more dovish cast of its January statement.

A Tough Target

BoC Governor Stephen Poloz had previously expressed concern about the country’s persistent disinflation, observing in the bank’s last statement that “downside risks to inflation have grown in importance.” That suggested the BoC was at least considering the possibility of another rate cut.

At the time, Mr. Poloz was looking at data for two consecutive months, October and November, in which Canada’s consumer price index (CPI) had fallen below the lower threshold of the bank’s 1 percent to 3 percent inflation-targeting range. The CPI for those two months grew 0.7 percent and 0.9 percent year over year, respectively.

But the two subsequent CPI readings reversed that potentially alarming trend. The CPI for December and January grew 1.2 percent and 1.5 percent year over year, respectively. As a result, the BoC’s latest statement, in which it announced it was holding short-term rates at 1 percent, a level at which they’ve been since late 2010, also noted that the “downside risks to inflation remain important.”

To be sure, the bank still expects inflation this year to remain below its 2 percent target, but the recent numbers seem to have provided policymakers with some relief. In fact, the Canadian dollar has also rallied in relief recently, even though policymakers would prefer that it continue its decline.

The loonie rose as high as USD0.913 this week, appearing to temporarily shake off the four-year low it hit in late January. Unfortunately, weak employment data, at least in the headline numbers, along with much stronger US jobs numbers prompted another drop. The Canadian dollar currently trades near USD0.902, down about 14.9 percent from this cycle’s high in mid-2011.

Full-Time vs. Part-Time

Canada’s February employment report fell well short of economists’ expectations, with jobs declining by 7,000 versus the consensus forecast of a gain of 15,000. The unemployment rate held steady, at 7 percent, near the five-year low, while the labor force participation rate fell by a tenth of a percentage point, to 66.2 percent, the lowest level in 12 years.

But the headline numbers masked stronger underlying data. For instance, the decline was driven largely by the loss of 25,900 part-time jobs, continuing the trend from last month in which the economy shed 21,100 part-time positions.

At the same time, full-time positions increased by 18,900, a deceleration from last month’s gain of 50,500 in this area, but a worthy improvement nonetheless. The one caveat here is that self-employed positions, which tend to pay less than traditional positions, helped drive gains in full-time employment during each of the past two months.

Since monthly employment data tend to be volatile, it’s useful to examine longer-term trends to get a better sense of where things stand. Over the past three years, the economy has added an average of 15,400 jobs per month, while over the trailing year it’s added 7,900 jobs per month. Meanwhile, over the last six months, employment growth has averaged just 3,400 jobs per month. So even though the latest jobs numbers weren’t actually all that bad, the labor market is clearly in a downtrend.

Beneath the Headline

The latest trade data provide an interesting contrast, where the headline numbers seemed promising, while the underlying data were less reassuring. Canada’s trade deficit narrowed in January to CAD177 million from a revised CAD922 million in December, well below the consensus forecast of CAD1.2 billion.

However, this result was driven by a 1.6 percent decline in imports, while exports rose by just 0.2 percent. Energy exports, particularly crude oil and natural gas, jumped 9.2 percent in January and were up 19.6 percent year over year, due to a rise in prices.

Exports to the US, which absorbs roughly three-quarters of Canada’s foreign trade, fell by 0.1 percent, though they’re still up 7.5 percent year over year.

Fortunately, the rebound underway in the US appears to be gaining momentum, at least based on the latest employment data. The economy added 175,000 jobs last month, well ahead of the consensus forecast of 149,000. Although the unemployment rate ticked up by a tenth of a point, to 6.7 percent, that should give the US Federal Reserve some additional breathing room with regard to continuing to support the nascent recovery.

Given the importance of the US as an export market, Canada’s prospects for growth remain dependent on its neighbor to the south. So hopefully a resurgent US economy will eventually flow through to Canada.

Bay Street Beat

The vast majority of our Portfolio companies have reported their calendar fourth-quarter earnings since last issue. So there are quite a few ratings changes to review.

AltaGas Ltd (TSX: ALA, OTC: ATGFF) reported fourth-quarter earnings per share that beat the consensus forecast by 12.6 percent, but its results disappointed by 15.2 percent on the top line.

In response, TD Securities lowered its rating to “buy,” from “action list buy,” both of which are treated as equivalent for sentiment purposes. The mix of analyst sentiment now stands at four “buys,” three “holds” and one “sell.”

The consensus 12-month target price is CAD45.00, up from CAD43.33 last month, and suggests potential appreciation of 2.2 percent above the current share price.

Artis REIT (TSX: AX-U, OTC: ARESF) reported fourth-quarter funds from operations (FFO) per unit, the relevant measure of a real estate investment trust’s (REIT) profits, that equaled the consensus forecast.

The mix of analyst sentiment remains unchanged, at six “buys” and three “holds.” The consensus 12-month target price is CAD17.04, up from CAD16.75 last month, and suggests potential appreciation of 8.6 percent above the current unit price.

Bank of Nova Scotia (TSX: BNS, NYSE: BNS) reported fiscal first-quarter (ended Jan. 31) financials that beat analyst expectations by 0.3 percent on earnings per share and by 3.1 percent on revenue.

In response, EVA Dimensions boosted its rating to “overweight,” equivalent to a “buy,” from “hold.” The mix of analyst sentiment now stands at 10 “buys,” eight “holds” and one “sell.”

The consensus 12-month target price is CAD67.96, up from CAD67.91 last month, and suggests potential appreciation of 6.8 percent above the current share price.

Bird Construction Inc (TSX: BDT, OTC: BIRDF) reported fourth-quarter earnings per share that fell short of analyst expectations by 14.6 percent, but the firm exceeded forecasts for revenue by 1.5 percent.

In response, Raymond James upped its rating to “outperform,” equivalent to a “buy,” from “market perform,” or “hold.” The mix of analyst sentiment now stands at four “buys” and three “holds.”

The consensus 12-month target price is CAD14.25, up from CAD13.17 last month, and suggests potential appreciation of 5.9 percent above the current share price.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF) reported fourth-quarter funds from operations (FFO) per unit, the relevant measure of a real estate investment trust’s (REIT) profits, that fell short of the consensus forecast by 9.6 percent.

In response, BMO Capital Markets lowered its rating to “market perform,” equivalent to a “hold,” from “outperform,” or “buy.” The mix of analyst sentiment now stands at seven “buys” and four “holds.”

The consensus 12-month target price is CAD23.82, down from CAD24.66 last month, and suggests potential appreciation of 14.4 percent above the current unit price.

Cineplex Inc (TSX: CGX, OTC: CPXGF) reported fourth-quarter financials that fell short of analyst expectations by 33.2 percent on earnings per share and by 0.7 percent on revenue.

In response, EVA Dimensions lowered its rating to “sell,” from “hold.” The mix of analyst sentiment now stands at five “buys,” six “holds” and two “sells.”

The consensus 12-month target price is CAD42.68, down from CAD43.90 last month, and suggests potential appreciation of 2.9 percent above the current share price.

Davis + Henderson Corp (TSX: DH, OTC: DHIFF) reported fourth-quarter earnings per share that beat analyst expectations by 0.4 percent, but the firm fell short on revenue by 1.8 percent.

The mix of analyst sentiment remains unchanged, at three “buys,” five “holds” and one “sell.” The consensus 12-month target price is CAD31.75, up from CAD30.43 last month, and suggests potential appreciation of 4.1 percent above the current share price.

Dundee REIT (TSX: D-U, OTC: DRETF) reported fourth-quarter funds from operations (FFO) per unit, the relevant measure of a real estate investment trust’s (REIT) profits, that equaled the consensus forecast.

Nevertheless, Canaccord Genuity Corp lowered its rating to “hold,” from “buy.” The mix of analyst sentiment now stands at four “buys” and three “holds.”

The consensus 12-month target price is CAD33.17, down from CAD34.10 last month, and suggests potential appreciation of 15.2 percent above the current unit price.

Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF) reported fourth-quarter earnings per share of CAD0.05, which beat the consensus forecast of CAD0.001. However, the firm fell short on revenue by 17.3 percent.

The mix of analyst sentiment remains unchanged, at three “buys,” five “holds” and one “sell.” The consensus 12-month target price is CAD10.69, down from CAD10.82 last month, and suggests potential appreciation of 7.2 percent above the current share price.

Keyera Corp (TSX: KEY, OTC: KEYUF) reported fourth-quarter financials that fell short of analyst expectations by 23.3 percent on earnings per share.

In response, FirstEnergy Capital Corp lowered its rating to “market perform,” equivalent to a “hold,” from “outperform,” or “buy.” The mix of analyst sentiment now stands at four “buys” and six “holds.”

The consensus 12-month target price is CAD69.33, up from CAD67.78 last month, and suggests potential appreciation of 4.5 percent above the current share price.

Northern Property REIT (TSX: NPR-U, OTC: NPRUF) reported fourth-quarter funds from operations (FFO) per unit, the relevant measure of a real estate investment trust’s (REIT) profits, that fell short of the consensus forecast by 4.2 percent.

Nevertheless, the mix of analyst sentiment remains the same, at five “buys” and four “holds.” The consensus 12-month target price is CAD30.92, up from CAD30.79 last month, and suggests potential appreciation of 7.0 percent above the current unit price.

Pembina Pipeline Corp (TSX: PPL, NYSE: PBA) reported fourth-quarter financials that beat the consensus forecast by 71.1 percent on earnings per share and by 15.2 percent on revenue.

The mix of analyst sentiment now stands at eight “buys,” two “holds” and one “sell.” The consensus 12-month target price is CAD42.60, up from CAD40.00 last month, and suggests potential appreciation of 8.1 percent above the current share price.

Student Transportation Inc (TSX: STB, NSDQ: STB) reported fourth-quarter earnings per share that fell short of the consensus forecast by 9.1 percent, but the firm exceeded expectations for revenue by 2.2 percent.

The mix of analyst sentiment remains unchanged, at two “buys,” three “holds” and one “sell.” The consensus 12-month target price is CAD7.48, up from CAD7.35 last month, and suggests potential appreciation of 5.6 percent above the current share price.

TransForce Inc (TSX: TFI, OTC: TFIFF) reported fourth-quarter financials that fell short of the consensus forecast by 40.3 percent on earnings per share and by 1.6 percent on revenue.

In response, National Bank Financial lowered its rating to “sector perform,” equivalent to a “hold,” from “outperform,” or “buy.” The mix of analyst sentiment now stands at six “buys” and five “holds.”

The consensus 12-month target price is CAD25.60, down from CAD27.05 last month, and suggests potential appreciation of 10.7 percent above the current share price.

Acadian Timber Corp (TSX: ADN, OTC: ACAZF) reported fourth-quarter financials that fell short of the consensus forecast by 20 percent on earnings per share and by 16.3 percent on revenue.

The mix of analyst sentiment remains at one “hold” and one “sell.” The consensus 12-month target price remains at CAD12.50, which is 7.7 percent below the current share price.

Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF) suffered a serious erosion in sentiment following the release of its fourth-quarter financials.

EVA Dimensions lowered its rating to “sell,” from “hold.” National Bank Financial dropped its rating to “sector perform,” equivalent to a “hold,” from “outperform,” or “buy.” And Scotia Capital cuts its rating to “sector perform,” from “sector outperform,” or “buy.”

The mix of analyst sentiment now stands at one “buy,” four “holds” and one “sell.” The consensus 12-month target price is CAD22.20, up from CAD22.00 last month, and suggests potential appreciation of 2.8 percent above the current share price.

Enerplus Corp (TSX: ERF, NYSE: ERF) reported fourth-quarter financials that beat the consensus forecast by 45.6 percent on earnings per share and by 3.4 percent on revenue.

In response, EVA Dimensions boosted its rating to “hold,” from “underweight,” or “sell.” The mix of analyst sentiment now stands at 14 “buys” and four “holds.”

The consensus 12-month target price is CAD23.91, up from CAD22.82 last month, and suggests potential appreciation of 12.4 percent above the current share price.

Extendicare Inc (TSX: EXE, OTC: EXETF) reported a fourth-quarter loss of CAD0.02 per share, which fell short of the consensus forecast for profits of CAD0.07 per share. However, the firm exceeded expectations for revenue by 1.8 percent.

In response, EVA Dimensions lowered its rating to “sell,” from “underweight,” both of which are treated as “sells” for sentiment purposes. The mix of analyst sentiment now stands at three “holds” and two “sells.”

The consensus 12-month target price is CAD7.44, up from CAD6.94 last month, and suggests potential appreciation of 6.7 percent above the current share price.

Lightstream Resources Ltd (TSX: LTS, OTC: LSTMF) isn’t scheduled to report earnings until March 11, but it released a new estimate of its reserves that disappointed analysts, prompting two to cut their ratings.

FirstEnergy Capital Corp lowered its rating to “underperform,” equivalent “sell,” from “market perform,” or “hold.” TD Securities dropped its rating to “hold,” from “buy.”

The mix of analyst sentiment now stands at 16 “holds” and three “sells.” The consensus 12-month target price is CAD6.54, up from CAD6.68 last month, and suggests potential appreciation of 18.1 percent above the current share price.

Magna International Inc (TSX: MG, NYSE: MGA) reported fourth-quarter financials that beat the consensus forecast by 50.5 percent on earnings per share and by 3.6 percent on revenue.

In response, Goldman Sachs boosted its rating to “neutral/neutral,” from “sell/neutral,” and JPMorgan upped its rating to “neutral,” from “underweight,” or “sell.” Meanwhile, TD Securities initiated coverage with a “buy” rating. The mix of analyst sentiment now stands at 12 “buys,” eight “holds” and one “sell.”

The consensus 12-month target price is CAD110.09, up from CAD102.00 last month, and suggests potential appreciation of 3.1 percent above the current share price.

Newalta Corp (TSX: NAL, OTC: NWLTF) reported fourth-quarter financials that fell short of analyst expectations by 66.9 percent on earnings per share and by 0.2 percent on revenue.

Nevertheless, Scotia Capital upped its rating to “sector outperform,” equivalent to a “buy,” from “sector perform,” or “hold.” The mix of analyst sentiment now stands at nine “buys” and one “sell.”

The consensus 12-month target price is CAD20.44, up from CAD19.19 last month, and suggests potential appreciation of 6.2 percent above the current share price.

Parkland Fuel Corp (TSX: PKI, OTC: PKIUF) reported fourth-quarter financials that beat the consensus forecast by 77.8 percent on earnings per share and by 16.6 percent on revenue.

Nevertheless, the mix of analyst sentiment remains unchanged, at six “buys” and three “holds.”

The consensus 12-month target price is CAD21.59, up from CAD20.06 last month. But the new target price is actually below the current share price.

Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF) reported fourth-quarter financials that fell short of analyst expectations by 9.7 percent on earnings per share and by 8.8 percent on revenue.

The mix of analyst sentiment now stands at 14 “buys,” four “holds” and two “sells.” The consensus 12-month target price is CAD39.18, up from CAD36.33 last month, and suggests potential appreciation of 10.4 percent above the current share price.

ShawCor Ltd (TSX: SCL, OTC: SAWLF) reported fourth-quarter earnings per share that fell short of analyst expectations by 1.8 percent, but the firm exceeded forecasts for revenue by 5.5 percent.

In response, Cormark Securities Inc upped its rating to “buy,” from “market perform,” or “hold.” The mix of analyst sentiment now stands at four “buys” and two “holds.”

The consensus 12-month target price is CAD53.40, which suggests potential appreciation of 18.1 percent above the current share price.

Vermilion Energy Inc (TSX: VET, OTC: VEMTF) reported fourth-quarter earnings per share of CAD1.00, which soundly beat analyst estimates of CAD0.79.

In response, EVA Dimensions upped its rating to “buy,” from “overweight,” both of which are treated as “buys” for sentiment purposes. The mix of analyst sentiment, therefore, remains unchanged, at 13 “buys,” six “holds” and one “sell.”

The consensus 12-month target price is CAD67.44, up from CAD64.50 last month, which suggests potential appreciation of 5.9 percent above the current share price.

Wajax Corp (TSX: WJX, OTC: WJXFF) reported fourth-quarter earnings per share that fell short of analyst expectations by 1.5 percent, but the firm exceeded forecasts for revenue by 7.9 percent.

In response, M Partners Inc boosted its rating to “buy,” from “hold.” The mix of analyst sentiment now stands at four “buys” and seven “holds.”

The consensus 12-month target price is CAD38.97, up from CAD37.38 last month. However, the new target price is 0.8 percent below the current share price.

In the listing below, the number of analyst “buy,” “hold” and “sell” ratings for each company are shown, followed by the average 12-month target price among the analysts for which we have access to such data.

Month-over-month variances in the number of analysts listed below for each stock are often due to those securities being on a brokerage’s restricted list for a brief period. A restricted list is a compliance measure that’s typically used during the period when the investment banking side of an analyst’s firm is involved in advising the company.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–4–3–1 (CAD45.00)
• Artis REIT (TSX: AX-U, OTC: ARESF)–6–3–0 (CAD17.04)
• Bank of Nova Scotia (TSX: BNS, NYSE: BNS)–10–8–1 (CAD67.96)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–3–4–0 (CAD13.17)
• Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF)–0–1–0 (CAD15.00)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, NYSE: BEP)–9–2–1 (CAD32.50)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–7–4–0 (CAD23.82)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–5–6–2 (CAD42.68)
• Davis + Henderson Corp (TSX: DH, OTC: DHIFF)–3–5–1 (CAD31.75)
• Dundee REIT (TSX: D-U, OTC: DRETF)–4–3–0 (CAD33.17)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–5–2–0 (CAD11.72)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–3–5–1 (CAD10.69)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–4–6–0 (CAD69.33)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–5–4–0 (CAD30.92)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–8–2–1 (CAD42.60)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–4–5–0 (CAD28.61)
• Shaw Communications Inc (TSX: SJR/B, NYSE: SJR)–4–12–3 (CAD25.20)
• Student Transportation Inc (TSX: STB, NSDQ: STB)–2–3–1 (CAD7.48)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–6–5–0 (CAD25.60)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–0–1–1 (CAD12.50)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–7–3–1 (CAD48.19)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–11–8–1 (CAD32.04)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–1–4–1 (CAD22.20)
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–22–1–1 (CAD46.87)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–14–4–0 (CAD23.91)
• Extendicare Inc (TSX: EXE, OTC: EXETF)–0–3–2 (CAD7.44)
• Lightstream Resources Ltd (TSX: LTS, OTC: LSTMF)–0–16–3 (CAD6.54)
• Magna International Inc (TSX: MG, NYSE: MGA)–12–8–1 (CAD110.09)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–9–0–1 (CAD20.44)
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–1–0–0 (CAD7.00)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–6–3–0 (CAD21.59)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–14–4–2 (CAD39.18)
• ShawCor Ltd (TSX: SCL, OTC: SAWLF)–4–2–0 (CAD53.40)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–13–6–1 (CAD67.44)
• Wajax Corp (TSX: WJX, OTC: WJXFF)–4–7–0 (CAD38.97)