The Globe and Mail reports in its Tuesday, Sept. 30, edition that a prolonged harvest season due to cold weather, rain and snow in Western Canada should translate into good news for shareholders of Cervus Equipment ($19.05), says CIBC's Jacob Bout. The Globe's Darcy Keith and Jody White write in the Eye On Equities column that Mr. Bout hiked Cervus to "sector outperform" from "sector perform."
He raised his price target to $23 from $22. Mr. Bout notes that a prolonged and wet harvest is usually positive for ag-equipment dealerships, as farms must first swath the crop to let it dry and then combine the swathed crop, thereby using the equipment longer. This increases the chance of equipment breakdown and drives higher-margin parts and services revenues.
Mr. Bout also believes Cervus's exposure to the Canadian construction market, which should get a boost from an improving Canadian economic outlook, will also benefit the company.
The Street on average, according to Thomson Reuters, targets the shares over the next year at $23.26. Raymond James upgraded Cervus to "outperform" from "market perform" and hiked its price target to $22.50 from $22 in the Eye column on Sept. 22. The shares were then worth $19.31.
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