The Bank of Canada (BoC) may have just lowered its forecasts for Canada’s economic growth, but the country’s economy has shown some surprising short-term strength.

In late October, the central bank updated its forecasts for the first time since July. The BoC now expects full-year 2013 growth of 1.6 percent (down from its prior forecast of 1.8 percent), 2.3 percent growth in 2014, and 2.6 percent growth in 2015. The BoC had previously forecast that the economy would grow by 2.7 percent in both 2014 and 2015.

Those numbers are now essentially in line with private-sector economists. Of course, the key takeaway is that neither the economists at the BoC nor their institutional peers expect the economy to grow at a full-year pace that equals or exceeds 2.5 percent until 2015. That’s the minimum growth threshold that BoC Deputy Governor Tiff Macklem recently identified as necessary to absorb the economy’s excess capacity.

Of equal note, the bank finally abandoned its hawkish stance on rate hikes. That means the BoC not only intends to maintain short-term rates near historic lows for the foreseeable future, but also sees at least some possibility that the economy could end up underperforming even these diminished expectations. And the latter scenario could, therefore, require further easing.

The good news is that institutional economists expect the economy to start growing at a 2.5 percent annualized rate by the second-quarter of 2014. That may not be quite enough to boost the full-year performance to that level, but it shows that Canada’s rebound could commence sooner than the headline data suggest.

By contrast, the BoC’s projections show that the fourth quarter will be the first period in which economic growth meets or exceeds this threshold. But either way, the Canadian economy’s excess capacity should finally be absorbed sometime next year.

Fortunately, more recent data suggest a positive trend could be developing even sooner than that. According to Statistics Canada (StatsCan), the country’s gross domestic product (GDP) grew 0.3 percent in August, soundly beating the consensus forecast of 0.1 percent, based on a Bloomberg survey of 19 economists.

This result followed an increase of 0.6 percent in July, as the economy rebounded from a 0.5 percent decline in June, due to historic flooding in Alberta and a province-wide strike in Quebec. And on a year-over-year basis, the economy grew at a rate of 2 percent, the fastest growth in more than a year.

Economists with CIBC say this pace of growth could put the economy on track to grow 2.8 percent during the third quarter, a full point higher than the BoC’s recent projection. But for now, Bloomberg’s survey of institutional economists shows that the consensus for third-quarter growth still stands at 2 percent.

Meanwhile, StatsCan reports that the economy added 13,200 jobs in October, moderately exceeding the consensus forecast of 11,000. The unemployment rate held steady at 6.9 percent, as did the labor force participation rate, at 66.4 percent. Full-time employment grew by 16,000 jobs, though many positions were in lower-paying industries, while part-time employment fell by 2,700 jobs.

Job growth was slightly below the trailing-year average of 17,800 jobs per month, though May’s stunning gain of 95,000 jobs may have somewhat distorted this context. However, over the trailing three-year period, job growth was even stronger, averaging 19,300 jobs created per month. Still, there have been several months over the past year in which the economy actually lost jobs, so even modest job growth is welcome.

And CIBC notes that one statistic could augur well for October GDP: the 0.4 percent rise in hours worked that followed the 0.2 percent decline in September. As they explain it, this figure correlates more closely with GDP than changes in employment.

As we’ve repeatedly stated in the past, the nascent US recovery will be a big part of Canada’s imminent rebound. To that end, there were similarly promising figures on both the GDP and employment front.

US third-quarter GDP rose at an annualized rate of 2.8 percent, an improvement of three-tenths of a percentage point versus the prior quarter, while far surpassing the consensus forecast of 2 percent.

Of course, a deeper dive into the data revealed that this result was partly driven by a build-up of inventories. Final sales, which exclude inventories, grew by 2 percent.

Over the preceding four quarters, by contrast, the difference between final sales and GDP averaged one-tenth of a percentage point. The question is whether the sudden jump in inventories will be met with equal demand during the fourth quarter, which includes the holiday season.

At present, the consensus forecast shows US GDP growth will slacken to 2.1 percent in the fourth quarter, though the economy is expected to grow by 2.6 percent next year.

The latest US employment data also surprised many observers by showing the economy added 204,000 jobs last month. That’s despite the impact of the government shutdown, though it should be noted that the establishment survey from which those data are drawn counted furloughed government workers as employed. Economists had forecast job gains of just 125,000, while revisions to prior months’ numbers added another 60,000 jobs.

The effect of the shutdown may be better reflected by data drawn from the household survey, which showed the unemployment rate rising a tenth of a percentage point, to 7.3 percent, while the labor force participation rate dropped four-tenths of a point to 62.8 percent. So it will be interesting to see to what extent these trends were caused by the shutdown and are, therefore, reversed in November.

Overall, both countries can point to some positive near-term economic trends while they await stronger growth during the second half of 2014.

Bay Street Beat

Earnings season is finally underway in earnest, and a majority of our Portfolio Holdings have reported their results for the calendar third quarter.

AltaGas Ltd’s (TSX: ALA, OTC: ATGFF) third-quarter numbers beat analyst estimates for earnings per share by 85.2 percent, but disappointed on sales by 36.1 percent, the third consecutive quarter in which revenue has fallen short of expectations.

Nevertheless, the mix of analyst sentiment remained the same, at five “buys,” three “holds,” and one “sell.” However, the 12-month target price improved to CAD42.25 from CAD40.56. That suggests a potential gain of 8.4 percent above the current share price.

Artis REIT’s (TSX: AX-U, OTC: ARESF) third-quarter results beat analyst estimates by 8.9 percent on funds from operations (FFO), the fourth consecutive quarter in which it’s surpassed expectations for this metric. FFO is the relevant measure of a real estate investment trust’s (REIT) profits. It also bested forecasts for revenue by 3.5 percent.

The mix of analyst sentiment held steady at seven “buys” and three “holds,” while the 12-month target price declined slightly to CAD16.81 from CAD16.91. But that would still represent a 19.1 percent rise from the current unit price.

Bird Construction Inc (TSX: BDT, OTC: BIRDF) fell short of analyst expectations for third-quarter earnings per share by 59.6 percent, the third consecutive quarter in which the firm missed forecasts by a significant amount. However, it did beat estimates for revenue by 7.9 percent.

Regardless, analyst sentiment remained static, as did the 12-month target price. But that could change in the days ahead, as the company only just reported its results today.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF) beat analyst forecasts for fund from operations (FFO) by 0.7 percent, the third consecutive quarter in which it surprised to the upside. FFO is the relevant measure of a real estate investment trust’s (REIT) profits. However, revenue fell short of estimates by 0.8 percent.

RBC Capital Markets downgraded the REIT to “outperform” from “top pick,” though for sentiment purposes both ratings are treated as equivalent to a “buy.” However, its 12-month target price remained at CAD25.

The current mix of analyst sentiment stands at 10 “buys” and two “holds.” The consensus 12-month target price declined to CAD24.76 from CAD25.11. The new target price represents a potential return of 18.3 percent above the current unit price.

Cineplex Inc (TSX: CGX, OTC: CPXGF) missed analyst estimates on earnings per share by 13.5 percent and also fell short on sales by 1.1 percent, the first time it’s disappointed on revenue in five quarters.

In response, Industrial Alliance Securities downgraded the stock to “hold,” from “buy,” though it maintained its 12-month target price at CAD42. And CIBC World Markets lowered its rating from “sector outperform,” or “buy,” to “sector perform,” which is equivalent to “hold.” But it maintained its 12-month target price at CAD42.

The overall mix of analyst sentiment now stands at six “buys,” six “holds,” and one “sell.” However, the consensus 12-month target price improved to CAD42.08 from CAD39.85, though that’s barely above the current share price.

Davis + Henderson Corp’s (TSX: DH, OTC: DHIFF) third-quarter numbers beat analyst estimates by 4 percent on earnings per share, but fell short on revenue by 7.2 percent.

In response, EVA Dimensions lowered its rating to “underweight,” which is equivalent to a “sell,” from “overweight,” or “buy.”

The overall mix of sentiment now stands at three “buys,” four “holds,” and one “sell.” The consensus 12-month target price is CAD28.50, up from CAD27.57, and represents a potential return of 1.8 percent above the current share price.

Dundee REIT (TSX: D-U, OTC: DRETF) beat analyst estimates for funds from operations (FFO) by 2.2 percent, the first time in six quarters it’s exceeded forecasts for this metric. FFO is the relevant measure of profits for a real estate investment trust (REIT).

However, the mix of analyst sentiment remained unchanged at four “buys” and two “holds.” The consensus 12-month target price declined slightly to CAD33.85 from CAD34.35, though the new number still suggests a potential return of 19.8 percent above the current unit price.

Innergex Renewable Energy Inc’s (TSX: INE, OTC: INGXF) third-quarter results beat analyst forecasts by 172.7 percent on earnings per share, while revenue bested estimates by 11.5 percent.

The mix of analyst sentiment now stands at six “buys,” four “holds,” and one “sell,” while the consensus 12-month target price barely budged.

Keyera Corp’s (TSX: KEY, OTC: KEYUF) third-quarter numbers missed analyst estimates for earnings per share by 4.9 percent and fell short on revenue by 22.1 percent.

In response, FirstEnergy Capital Corp lowered its rating to “market perform,” which is equivalent to a “hold,” from “outperform,” or “buy.” But it maintained its target price at CAD64.

The mix of analyst sentiment now stands at five “buys” and six “holds.” Meanwhile, the consensus 12-month target price increased to CAD64.20 from CAD63.30, which suggests a potential return of 7.7 percent above the current share price.

Northern Property REIT (TSX: NPR-U, OTC: NPRUF) beat analyst forecasts for third-quarter funds from operations, the relevant measure of a real estate investment trust’s profits, by 5.7 percent. It also surpassed expectations on revenue by 1.1 percent.

In response, EVA Dimensions boosted its rating to “overweight,” which is equivalent to a “buy,” from “underweight,” or “sell.”

The overall mix of analyst sentiment now stands at six “buys,” three “holds,” and one “sell.” The consensus 12-month target price improved slightly to CAD30.12 from CAD29.89, which suggests a potential return of 10.1 percent above the current unit price.

Pembina Pipeline Corp’s (TSX: PPL, NYSE: PBA) third-quarter results missed analyst estimates by 13.7 percent on earnings per share, but surprised to the upside on revenue by 60.8 percent, the fifth consecutive quarter in which sales exceeded expectations by a wide margin.

However, the mix of analyst sentiment remained at eight “buys,” three “holds,” and one “sell.” The consensus 12-month target price improved to CAD37.23 from CAD36.15, suggesting a potential return of 8.6 percent above the current share price.

RioCan REIT’s (TSX: REI-U, OTC: RIOCF) third-quarter numbers beat analyst estimates for funds from operations, the relevant measure of a real estate investment trust’s profits, by 2.8 percent. But it fell short on revenue by 1.7 percent.

The mix of analyst sentiment held steady at five “buys,” and five “holds.” The consensus 12-month target priced declined slightly to CAD27.83 from CAD28.06, suggesting a potential return of 13.4 percent above the current unit price.

Shaw Communications Inc’s (TSX: SJR/B, NYSE: SJR) results for its fiscal fourth quarter (ended Aug. 31), fell short of analyst expectations on earnings per share by 33.5 percent, but narrowly beat estimates for revenue by 0.8 percent.

The mix of analyst sentiment now stands at five “buys,” 11 “holds,” and three “sells.” Barclays initiated coverage with an “equal weight” rating, which is equivalent to a “hold,” and a 12-month target price of CAD26.

The consensus 12-month target price declined to CAD25.06 from CAD25.25, which suggests a potential return of 1.3 percent above the current share price.

Student Transportation Inc’s (TSX: STB, NSDQ: STB) numbers for its fiscal 2014 first quarter (ended Sept. 30) beat analyst forecasts for earnings per share by 6 percent and also surprised to the upside on sales by 9.8 percent.

The stock is on the “restricted list” at two of the six brokerages for which we have access to ratings data, so changes from the month-ago data in the listing below should be disregarded. 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.

TransForce Inc’s (TSX: TFI, OTC: TFIFF) third-quarter numbers fell short of analyst estimates for earnings per share by 3.1 percent and also disappointed on revenue by 1.3 percent.

The mix of analyst sentiment now stands at nine “buys” and two “holds.” The consensus 12-month target price improved to CAD25.28 from CAD22.77, though the new target suggests a potential return of just 4.7 percent above the current share price.

Acadian Timber Corp’s (TSX: ADN, OTC: ACAZF) third-quarter results fell short of analyst estimates by 28.6 percent on earnings per share and also disappointed on revenue by 22.2 percent.

But the mix of analyst sentiment remains unchanged at one “hold” and one “sell,” while the consensus 12-month target price is still CAD12.50, which is just below the current share price.

ARC Resources Ltd’s (TSX: ARX, OTC: AETUF) third-quarter numbers beat analyst estimates by 15.4 percent on earnings per share, but fell short of expectations on revenue by 7.7 percent.

In response, TD Securities raised its rating to a “buy” from a “hold,” while also boosting its 12-month target price to CAD34 from CAD29. Alta Corp Capital Inc raised its rating to “outperform,” which is equivalent to a “buy,” from “sector perform,” or “hold.” It also boosted its 12-month target price to CAD35 from CAD30.

The current mix of analyst sentiment now stands at 11 “buys” and seven “holds.” The consensus 12-month target price improved to CAD31.22 from CAD29.45, suggesting a potential return of 5.2 percent above the current share price.

Atlantic Power Corp’s (TSX: ATP, NYSE: AT) third-quarter numbers missed analyst forecasts for earnings per share by 53.2 percent, while revenue beat estimates by 4.7 percent.

The current mix of analyst sentiment now stands at five “holds” and four “sells.” The consensus 12-month target price declined to CAD4.63 from CAD4.72, suggesting a potential return of 14.3 percent above the current share price.

Crescent Point Energy Corp’s (TSX: CPG, OTC: CSCTF) third-quarter results missed analyst estimates for earnings per share by 30.7 percent.

The mix of analyst sentiment now stands at 21 “buys,” one “hold,” and one “sell.” The consensus 12-month target price improved slightly to CAD46.84 from CAD46.47.

Enerplus Corp’s (TSX: ERF, NYSE: ERF) third-quarter results fell short of analyst expectations by 19.1 percent.

The mix of analyst sentiment now stands at 11 “buys,” five “holds,” and one “sell.” The consensus 12-month target price improved to CAD20.54 from CAD20.04, suggesting a potential return of 13.5 percent above the current share price.

Analyst sentiment for Lightstream Resources Ltd (TSX: LTS, OTC: PBKEF) has fallen in sympathy with its share price and now stands at 17 “holds” and one “sell.” The consensus 12-month target price is CAD7.69, down from CAD9.08.

Newalta Corp’s (TSX: NAL, OTC: NWLTF) third-quarter results beat analyst forecasts on earnings per share by 5.7 percent, but missed on estimates for revenue by 4.7 percent.

In response, Cormark Securities Inc lowered its rating to “market perform,” which is equivalent to a “hold,” from “buy.” But it maintained its 12-month target price at CAD17.25. And Scotia Capital lowered its rating to “sector perform,” which is equivalent to a “hold,” from “sector outperform,” or “buy.” It maintained its target price at CAD19.

The mix of analyst sentiment now stands at seven “buys,” two “holds,” and one “sell.” The consensus 12-month target price improved to CAD18.95 from CAD18.27, suggesting a potential return of 25.5 percent above the current share price.

Parkland Fuel Corp’s (TSX: PKI, OTC: PKIUF) third-quarter numbers fell short of analyst estimates for earnings per share by 14.4 percent, but beat forecasts for sales by 7.6 percent.

In response, Haywood Securities Inc raised its rating to “buy” from “hold,” but maintained its 12-month target price at CAD19. And PI Financial Corp lowered its rating to “neutral,” or “hold,” from “buy.” It maintained its target price at CAD19.

The mix of analyst sentiment now stands at four “buys” and six “holds.” The consensus 12-month target price improved slightly to CAD19.42 from CAD19.22, suggesting a potential return of 6.4 percent above the current share price.

Vermilion Energy Inc’s (TSX: VET, OTC: VEMTF) third-quarter results missed analyst estimates by 14.1 percent on earnings per share, but beat expectations by 0.6 percent on revenue.

In response, National Bank Financial raised its rating to “outperform,” or “buy,” from “sector perform,” which is equivalent to a “hold.” It also boosted its 12-month target price to CAD64 from CAD60.

The mix of analyst sentiment now stands at 13 “buys,” five “holds,” and one “sell.” The consensus 12-month target price is CAD63.21, up from CAD61.81, suggesting a potential return of 6.3 percent above the current share price.

Wajax Corp’s (TSX: WJX, OTC: WJXFF) third-quarter numbers fell short of analyst forecasts by 3.3 percent on earnings per share and by 0.8 percent on sales.

M Partners Inc raised its rating to “buy” from “hold,” but maintained its 12-month target price at CAD39.

The mix of analyst sentiment now stands at three “buys” and seven “holds.” The consensus 12-month target price is CAD36.72, up from CAD36.00, suggesting a potential return of 4.5 percent above 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)–5–3–1 (CAD42.25)
• Artis REIT (TSX: AX-U, OTC: ARESF)–7–3–0 (CAD16.81)
• Bank of Nova Scotia (TSX: BNS, NYSE: BNS)–11–7–2 (CAD65.24)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–4–4–0 (CAD12.79)
• Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF)–0–1–0 (CAD14.50)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, NYSE: BEP)–9–2–1 (CAD31.64)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–10–2–0 (CAD24.76)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–6–6–1 (CAD42.08)
• Davis + Henderson Corp (TSX: DH, OTC: DHIFF)–3–4–1 (CAD28.50)
• Dundee REIT (TSX: D-U, OTC: DRETF)–4–2–0 (CAD33.85)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–5–2–0 (CAD10.83)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–6–4–1 (CAD10.47)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–5–6–0 (CAD64.20)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–6–3–1 (CAD30.12)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–8–3–1 (CAD37.23)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–5–5–0 (CAD27.83)
• Shaw Communications Inc (TSX: SJR/B, NYSE: SJR)–5–11–3 (CAD25.06)
• Student Transportation Inc (TSX: STB, NSDQ: STB)–2–1–1 (CAD7.45)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–9–2–0 (CAD25.28)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–0–1–1 (CAD12.50)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–6–4–1 (CAD41.00)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–11–7–0 (CAD31.22)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–0–5–4 (CAD4.63)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–1–5–0 (CAD18.13)
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–21–1–1 (CAD46.84)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–11–5–1 (CAD20.54)
• Extendicare Inc (TSX: EXE, OTC: EXETF)–0–3–2 (CAD6.94)
• Lightstream Resources Ltd (TSX: LTS, OTC: PBKEF)–0–17–1 (CAD7.69)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–7–2–1 (CAD18.95)
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–1–0–0 (CAD8.00)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–4–6–0 (CAD19.42)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–12–4–2 (CAD34.09)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–13–5–1 (CAD63.21)
• Wajax Corp (TSX: WJX, OTC: WJXFF)–3–7–0 (CAD36.72)