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5 Stocks to Watch This Week

The Toronto Stock Exchange 300 Composite Index (^GSPTSE) turned in another excellent performance last week gaining 1.6% and moving closer to the all-time high reached in June 2008. Gains were broad based with nine out of the 10 major sectors moving higher.

The gain so far this year is now 8.4% with 75% of the stocks in the index posting a positive return. Some big names have pushed the oil and gas companies from the weekly leader board with Westport Innovations and BlackBerry among the top performers.

The market momentum continues to be positive but some valuations are starting to look stretched. Good results from a whole raft of companies reporting this week will be required to support the ongoing bull market. We have selected some of the highlights below.

Watch these 5 companies in the week ahead

Valeant Pharmaceuticals (TSX: VRX)(NYSE: VRX) is expected to report quarterly results on Monday. The market consensus expectation is a profit of $1.72 per share compared to $1.30 a year ago. Most of this growth will be the result of organic revenue improvement and additional revenues and cost synergies from the $8.6 billion, May 2013 Bausch and Lomb acquisition.

Apart from the operational performance, the focus for the immediate future will be on the progress with the proposed $46 billion Allergan acquisition. The Valeant share price has performed spectacularly well over the over the past few years and almost doubled just over the past 12 months. With elevated investor expectations and very high debt levels the company has little room for error.

Agrium (TSE: AGU)(NYSE: AGU) announced recently that they expect to do only slightly better than break even in the first quarter, considerably lower than the previous consensus analyst expectations. The company indicated that the late arrival of spring is impacting the timing of product sales and that the wholesale results were also impacted by reduced rail availability.

With the bad news already known, investors will not be surprised to see a profit of $0.04 per share for the first quarter compared to $1.03 a year ago. However, the focus will be on the management comments regarding current market conditions and the outlook for the rest of 2014. The Agrium share price has recovered well from the weakness that followed the revised profit outlook announcement and is now close to an all-time high. Investors are clearly looking for a much improved remainder of 2014.

On Wednesday, local favourite Tim Hortons (TSX: THI)(NYSE: THI) is expected to report a profit per share of $0.68 compared to $0.61 for the same quarter last year. The estimated 11% growth per share will be derived from modest same-store sales growth, new store openings and boosted by a 9% reduction in the number of shares outstanding.

The share price of the company has more than doubled over the past five years and investors are now ascribing a rich valuation to the stock. Management will be expected to deliver good results and indicate solid growth prospects.

Two of the telecommunications majors, BCE Inc. (TSX: BCE)(NYSE: BCE) and Telus (TSX: T)(NYSE: TU) are expected to announce results on Wednesday and Thursday respectively. In the case of BCE, profits are expected to be unchanged while the earnings per share of Telus should improve by 8%.

After the recent below-par results from Rogers, market expectations for BCE and Telus may have become more muted. Positive profit and new subscriber surprises will be well received by investors and would be good news for the share prices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Deon Vernooy holds shares in BCE and Telus. Tom Gardner owns shares of Valeant Pharmaceuticals. The Motley Fool owns shares of Valeant Pharmaceuticals. Agrium is a recommendation of Share Advisor Canada.

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