Inside the Market’s roundup of some of today’s key analyst actions
A day after its shares plummeted 10.2 per cent following weaker-than-anticipated first-quarter financial results, a pair of equity analysts on the Street downgraded Manulife Financial Corp. (MFC-T).
“We worry about near-term headwinds in Asia and general confusion around the adoption of IFRS 17,” said Desjardins Securities’ Doug Young. “We believe the stock could remain range-bound over the near term.”
Before the bell on Thursday, Manulife reported core earnings per share of 77 cents, falling short of the consensus forecast by 5 cents despite a 19-per-cent increase year-over-year in Canadian core earnings. The miss came as sales slumped and new disruptions arose in Asia with COVID-19-related lockdowns.
Investor concern about the introduction of IFRS 17 accounting standards also weighed on Manulife shares.
“The adoption of IFRS 17 in 2023 is expected to reduce MFC’s book value by 20 per cent (not a big surprise) and core earnings by 10 per cent (more of a surprise), using 2022 as the base case,” said Mr. Young. “Management also updated or reaffirmed several medium-term targets— ROE [return on equity] of 15 per cent plus (from 13-per-cent-plus), core EPS growth of 10–12 per cent (unchanged) and dividend payout ratio of 35–45 per cent (from 30–40 per cent).”
After lowering his 2023 estimates to account for the change, Mr. Young moved Manulife to “hold” from “buy” with a $26 target, down from $30. The average on the Street is $28.64.
Elsewhere, Canaccord Genuity’s Scott Chan lowered the stock to “hold” from “buy” with a $23 target, down from $29.50.
“Select material areas of the company worry us near term particularly related to Asia (select lockdowns), Global WAM (asset performance year-to-date), and updated IFRS 17 disclosures (larger impact than market was expecting),” said Mr. Chan. “In Q1, Asia and Global WAM accounted for 63 per cent of core earnings with the company targeting 2/3 of core earnings. We are downgrading MFC to Hold (from Buy) ... With the above near-term headwinds, we are more comfortable on the sidelines until we get better visibility on profitability and growth.”
Others making target changes include:
* RBC’s Darko Mihelic to $26 from $29 with a “sector perform” rating.
“MFC’s Q1/22 results were below our forecast largely due to lower than expected results in Asia and Wealth,” he said. “While wealth may remain pressured in the near-term from continued market volatility, we believe Asia earnings can improve from here as COVID cases are dropping and stronger sales resume. MFC provided initial views on IFRS 17 impacts and appears to view many elements of IFRS 17 positively. Although we maintain our Sector Perform, we view the significant negative stock price reaction to earnings as excessive.”
* Scotia’s Meny Grauman to $27 from $28 with a “sector perform” rating.
“Although we did not expect as big a negative reaction as what we got, the reality is that we have been bracing for a sell off in Manulife shares for some time now given their relative outperformance heading into what was clearly going to be a challenging quarter. Falling equities, strict COVID lockdowns in Asia, and ongoing uncertainty about the impact of IFRS 17 are all issues that have been looming over this stock for some time now and on earnings day they all came together in a potent mix,” said Mr. Grauman.
* CIBC’s Paul Holden to $23 from $25 with an “underperformer” rating.
* Barclays’ John Aiken to $34 from $35 with an “overweight” rating.
Several analysts also their targets for peer Sun Life Financial Inc. (SLF-T) on Friday.
* Mr. Chan target to $67 from $75.50 with a “buy” rating. The average is $72.50.
* Mr. Young to $73 from $77 with a “buy” rating.
“Core EPS beat our estimate, and underlying EPS was above consensus expectations, so it was a beat either way. The outlook for the U.S. group insurance business has improved and the quarterly dividend was increased. We are reducing our estimates to factor in tougher equity market conditions,” he said.
* Scotia’s Meny Grauman to $67 from $71 with a “sector outperform” rating.
“In what proved to be a challenging quarter for all the Canadian lifecos, perhaps the biggest compliment we can give Sun Life is that it didn’t disappoint – at least relative to diminished expectations,” said Mr. Grauman. “The COVID challenges that hit the shares at year-end were better understood this time around, and when it came to the US group business, the end result actually proved to be somewhat better than we had forecast. More importantly though, the message from the company was that pandemic-related impacts are easing, especially in the US but also to some extent in Asia. The bottom line is that SLF is a name that we continue to like for its diversified business mix, strong risk profile, and consistent execution – all positives that become more valuable in this uncertain macro environment. That said, based on the market’s reaction to its peers’ IFRS 17 disclosure, we do see some downside risk surrounding the lifeco’s planned IFRS 17 information session on May 31.”
* BMO’s Tom MacKinnon to $75 from $80 with an “outperform” rating.
* CIBC’s Paul Holden to $68 from $71 with an “outperformer” rating.
Consumer demand at Canadian Tire Corp. (CTC.A-T) is “proving durable,” according to Canaccord Genuity analyst Luke Hannan, who thinks the “recessionary environment [is] nearly priced in at these levels.”
That led him to raise his rating for the retailer to “buy” from “hold” on Friday.
Shares of Canadian Tire jumped 6.2 per cent on Thursday following the premarket release of its first-quarter report, which Mr. Hannan called “the latest in a long line of impressive earnings results.”
Revenue came in at $3.84-billion, exceeding the analyst’s $3.46-billion estimate as same-store sales grew across all its banners. Adjusted earnings per share of $3.06 “blew away” his $1.73 estimate and as well as the Street’s $1.76 expectation.
“We have long expected that the company would find it difficult to generate growth against remarkably strong comps, without the benefit of pandemic-related stimulus moving forward,” the analyst said. “In this regard, we have been proven wrong: the breadth of Canadian Tire’s assortment and the value proposition of its Triangle Rewards program has created durable demand across its retail banners, leading us to take a more positive view on the shares
After raising his revenue and earnings estimates through 2023, Mr. Hannan increased his target for Canadian Tire shares to $208 from $203. The average on the Street is $227.40.
“It can be argued our upgrade is somewhat early, in the context of the current macroeconomic backdrop that could lead to a more cautious consumer spending environment in the near term,” he said. “Our counter is that (1) CTC has levers to pull to mitigate the impact to its earnings power stemming from softer demand, namely price/promo mix and targeted offers through Triangle; (2) the Automotive business, CTR’s highest-margin retail category, is witnessing growth and has ample headroom to grow before it surpasses pre-pandemic levels; and (3) the current share price mostly reflects this cautious consumer spending environment, with its current FY +1 P/E trading multiple sitting at one turn above the trough (excluding March 2020) witnessed in February 2009.”
Elsewhere, others making target changes include:
* BMO’s Peter Sklar to $184 from $187 with a “market perform” rating.
“What we find particularly noteworthy about the Canadian Tire stock is that while the company continues to report extraordinarily strong quarters, the stock continues to underperform other Canadian consumer stocks,” said Mr. Sklar. “Notwithstanding an attractive valuation, the stock underperformance can be accounted for by two issues. First, many consider Canadian Tire to have been a ‘COVID stock’ that benefitted during lockdowns and now from significant pent-up reopening demand, but eventually consumption patterns will normalize and comps will soften. Also, Canadian Tire’s relatively large discretionary basket could suffer as inflation pressures consumer wallets.”
* National Bank Financial’s Vishal Shreedhar to $222 from $212 with an “outperform” rating.
“We highlight that CTC’s shares remain discounted. Specifically, if we apply a conservative 10 times P/E multiple to CTC’s 2025 EPS target of $26 and discount back by 10 per cent to 2022, it still suggests a share price of $195 today,” he said.
* Desjardins Securities’ Chris Li to $225 from $234 with a “buy” rating.
“The exceptionally strong 1Q and surprising 25-per-cent dividend increase (attractive 4-per-cent yield) show that CTC is in a position of strength coming out of the pandemic,” said Mr. Li. “While concerns around macro challenges and normalization of sales post-pandemic will likely keep the stock range-bound in the near term, we believe these risks are largely reflected in the current valuation (only 9 times forward P/E vs 12 times average), with re-rating potential once visibility improves. We believe patient investors will be rewarded.”
* CIBC’s Mark Petrie to $222 from $220 with an “outperformer” rating.
Touting a “favourable” entry point on a “sizable” relative discount,” Stifel analyst Mike Rizvanovic upgraded Canadian Western Bank (CWB-T) to “buy” from “hold” on Friday.
“With the recent sell-off in the markets, CWB now trades at a very suppressed forward P/E multiple of 7. times (on F2023 EPS consensus), which is materially below the bank’s historical 10-year average multiple of 10.8 times, and represents close to a two standard deviation relative discount to the level at which CWB has traded historically against its larger peers,” he said.
Mr. Rizvanovic did reduce his 2022 and 2023 earnings forecast for the bank to “reflect tougher operating environment:,” leading him to cut his target to $37 from $41. The average is $42.29.
“CWB is expected to have the following headwinds: 1) elevated growth in operating expenses that is not going to subside until the latter part of F2022 at the earliest, with management guiding to negative operating leverage in the current fiscal year; 2) constraints on capital with CWB needing to tap into its at-the-market program to issue incremental amounts of common equity in order to fund loan growth; and, 3) less margin upside for CWB on a relative basis in a rising rate environment that should benefit the sector in the coming quarters” he said.
“We are however upgrading the stock to a BUY rating given the following: 1) An abnormally low valuation multiple vs both historical levels for the bank and on a relative basis. 2) Very limited exposure to the consumer lending, where we see more downside to loan growth through F2023; and 3) A more favorable outlook for commercial lending to oil & gas producing provinces in Canada, which account for 35 per cent of CWB’s total loan portfolio.”
The rating changes came alongside the analyst’s second-quarter preview for the Canadian banking sector, which he expects to be “more challenging.”
“Following an impressive run with EPS consistently beating expectations over the past several quarters, we expect the Canadian banks to see a more challenging environment in Q2, but to still report decent results,” he said. “And while we forecast EPS falling by an average of 13 per cent sequentially due to both the absence of sizable PCL recoveries and weaker Capital Markets, we expect year-over-year growth in pre-tax, pre-provision earnings to come in at a still-respectable 3 per cent. Beyond Q2, however, the group’s EPS trajectory has become far less certain given the implications of numerous additional rate hikes, which leads us to reduce our F2023 EPS estimates by 2 per cent, while our target prices fall by 10 per cent on a lower PE multiple to reflect rising macroeconomic risks. BMO remains our top pick among the Big Six banks heading into Q2, while we also favor BNS, NA, and CWB, which we have upgraded.”
Mr. Rizvanovic’s other target changes were:
- Bank of Montreal (BMO-T, “buy”) to $157 from $171. Average: $163.12.
- Bank of Nova Scotia (BNS-T, “buy”) to $95 from $106. Average: $94.26.
- Canadian Imperial Bank of Commerce (CM-T, “hold”) to $152 from $172. Average: $169.69.
- Laurentian Bank of Canada (LB-T, “hold”) to $40 from $47. Average: $46.64.
- National Bank of Canada (NA-T, “buy”) to $104 from $117. Average: $105.
- Royal Bank of Canada (RY-T, “hold”) to $132 from $150. Average: $149.55.
- Toronto Dominion Bank (TD-T, “hold”) to $95 from $104. Average: $105.83.
Expecting ongoing labour and inflationary pressures to persist through 2022 and into 2023, National Bank Financial analyst Endri Leno downgraded Medical Facilities Corp. (DR-T) to “sector perform” from an “outperform” recommendation.
On Thursday before the bell, the Toronto-based company, which owns a portfolio of surgical facilities in the United States, reported revenue of US$100.8-million, excluding government support, which was an increase of 7 per cent year-over-year and exceeding both Mr. Leno’s US$100.5-million estimate and the US$100-million consensus. However, adjusted earnings before interest, taxes, depreciation and amortization of US$18-million, missing forecasts (US$21.5-million and US$23.7-million respectively) as operating expenses jumped 13 per cent.
“While we were expecting inflationary pressures in Q1, they were ahead of our forecasts and, per management, are to continue in the near term,” said Mr. Leno. “We also note a potential cash drag of US$4.1-million as DR’s application for loan forgiveness (re: gov’t support) was denied. The company intends to appeal (7-8+ months process) and a further US$8-million is pending forgiveness review.”
After cutting his EBITDA estimates for 2022 and 2023 by 8 per cent and 7 per cent, respectively, Mr. Leno lowered his target for Medical Facilities shares to $10.50 from $12.75. The average is $11.
“Following a period of management turnover, rationalization of underperforming assets and other pressures, DR’s outlook has generally stabilized as 1) its volumes continue to normalize following the pandemic impact; 2) there is potential for incremental volumes from any deferred care; and 3) the company will likely continue opening new ambulatory surgical centres to increase its footprint,” he added. “Financial metrics are also generally favourable as DR has 1) reasonable leverage of 1.7 times Net Debt to 2023e EBITDA (peers at 3.7 times); 2) a dividend yield of 3 per cent (peers at 0.6 per cent) that is sustainable at a 28-per-cent 2023 estimated payout; and 3) a valuation discount to peers that trade at a 56-per-cent premium.”
Citing “continued uncertainty,” CIBC World Markets analyst Kevin Chiang dropped NFI Group Inc. (NFI-T) to “underperformer” from “neutral.”
“Coming out of Q1 earnings, inflation and supply chain issues were the dominant themes, along with recessionary concerns,” he said. “On this last point, we recognize that NFI sells a non-cyclical product tied to government funding, which we continue to regard as being very healthy. In turn, NFI’s backlog has grown and its bidding universe continues to expand. That being said, ongoing supply chain issues, which have impacted delivery/production rates, have weighed on NFI’s shares. Most recently, NFI noted that its module supplier was experiencing a chip shortage and would, therefore, not be delivering to NFI its regular scheduled and confirmed orders of those modules starting in May. While NFI expects this situation to ease in August and is implementing an internal risk mitigation strategy to help manage its battery module situation, the overall situation remains fluid.”
While he expects supply chain disruptions to ease in the second half of the year, the analyst said there is “some permanence to the headwinds that NFI has faced,” adding: “In turn, that poses a risk to NFI’s earnings recovery given our view that a return to pre-pandemic margins will be more challenging, especially with growing concerns around EV supply chain resiliency longer term.
Seeing risk to its dividend, limited upside its share price and calling it a “show me story,” Mr. Chiang maintained a $12 target, below the $16.75 average.
“We believe investors will want to see an inflection in earnings and the company is not poised to deliver on that until it reports Q4 results (i.e., in Q1/23),” he added.
Separately, coming off research restriction, Mr. Chiang upgraded Exchange Income Corp. (EIF-T) to “outperformer” from “neutral” to “reflect the step up in earnings from its recently announced acquisitions.”
His target rose to $56.50 from $47. The average is $57.59.
Elsewhere, Raymond James’ Steve Hansen raised his target to $62 from $55 with an “outperform” rating.
While it suffered through a “weak” start to 2022, Echelon Partners analyst Ryan Walker raised his recommendation for Wesdome Gold Mines Ltd. (WDO-T) based on its current valuation, expecting its shares to continue to trade in tandem with gold “amid ongoing market volatility.”
On Wednesday, the Toronto-based company reported earnings per share for its first quarter of 5 cents, below the forecasts of both Mr. Walker (10 cents) and the Street (12 cents). The miss was due largely to soaring all-in sustaining costs, which jumped 19.4 per cent quarter-over-quarter to US$1,339 per ounce as production slid and expenses rose.
“WDO notes that Q122 was negatively impacted by supply chain unpredictability, sector-wide inflationary pressures and the Omicron variant surge which reduced workforce availability (150 personnel/contractors impacted during the quarter),” the analyst said. “Kiena also saw unscheduled downtime of the underground crusher (since remedied) and delayed delivery of underground mobile equipment (received at quarter’s end). WDO also notes the ground conditions in the schists and komatiites in the footwall of the Kiena Deep A are challenging (as expected) with completion of the paste fill plant (August) expected to help speed up the production cycle, mitigate delays and significantly improve production going forward. Importantly, most critical components for commercial restart are now on site.
“At Eagle, new stopes in the high-grade Falcon Zone are expected to deliver higher production in H222. Recent initial underground development has confirmed high gold grades and good continuity of the zone which expected to play an integral role in production in H222 and beyond. Ongoing drilling has also identified several thicker sections of the zone, mostly related to dilation jogs, splays and fold noses that have the potential to add significantly to the existing resource base. Importantly, the high-grade zone is also situated away from other mining areas near the bottom of the ramping system, helping to avoid in-mine congestion.”
Seeing Wesdome as “well-financed,” Mr. Walker said it deserves to trade at a premium to its peers, citing its “organic production growth solely in a Tier 1 Jurisdiction and the potential for positive exploration results from aggressive drilling at both Kiena and Eagle River.”
Accordingly, he raised his rating to “buy” from “hold” with an unchanged $13.50 target. The average is $16.53.
Following its “disappointing” first-quarter results that led to a 74.3-per-cent drop in its share price, Canaccord Genuity analyst Doug Taylor downgraded LifeSpeak Inc. (LSPK-T) to “speculative buy” from “buy” after lowering his financial projections to below the bottom-end of its guidance “while we await an update on the large customer renewal.”
“We believe the fundamental drivers leading to higher investment by employers and insurers on mental health and wellness are intact,” he said. “With that said, pending an update on this key renewal and recognizing a lower profit profile with a higher debt load, we see the risks related to Lifespeak’s execution as heightened and believe a depressed valuation against the company’s guidance is likely to persist until such time as these issues are addressed. As a result, we have moved our rating.”
Mr. Taylor dropped his target for Lifespeak shares to $3 from $12. The average is now $6.11.
Elsewhere, Stifel’s Justin Keywood cut his target to $2.75 from $13 with a “buy” rating.
“The developments raise several questions, but the business is not broken, in our view,” he said. “The current ARR is $51.1-million and the business is still profitable, including full contribution of the Wellbeats acquisition in Q2.”
Seeing its cost inflation as “difficult to ignore,” BMO Nesbitt Burns analyst John Gibson downgraded Xebec Adsorption Inc. (XBC-T) to “market perform” from “outperform.”
“While XBC has done a solid job at winning work in both the RNG and Carbon Capture spaces and should continue to play a long-term role in the development of these industries, cost inflation continues to hamper financial performance. XBC’s margin profile already sits in a very tight band, and we expect that the next few quarters will remain difficult to return to profitability,” he said.
n Thursday before the bell, the Montreal-based company reported an adjusted EBITDA loss of $9-billion, below the forecasts of Mr. Gibson and the Street (losses of $1.1-million and $2.6-million, respectively).
He said cost inflation continues to present “challenges,” particularly on legacy orders and overshadows recent wins.
“The company’s margin profile also sits in a very tight band, and we expect the next few quarters to remain difficult for the company, despite some nice wins in both the RNG and Carbon Capture spaces,” said Mr. Gibson. “Note that XBC’s backlog doubled quarter-over-quarter to $261-million, mostly as a result of its recent Summit Carbon Solutions contract for 51 C02 reciprocating packages. That said, we don’t expect this win to materially impact results until late-2022/2023. Further, we believe the company may need to look at additional financing options in order to fund its large book of work.”
After lowering his 2022 and 2023 earnings forecast largely to account for lingering margin pressure, he cut his target to $1.75 from $3.25. The average is $2.36.
“Longer term, we like what XBC is doing, although we now view the company in a more cautious light until it can show better financial performance,” said Mr. Gibson.
Elsewhere, Raymond James’ David Quezada lowered the stock to “market perform” from “outperform” with a target of $2, down from $3.50.
“While we remain optimistic on XBC’s opportunities in the RNG, hydrogen and carbon capture end markets, margin compression evidentin 1Q22 results suggests to us that material costs and supply chain issues are greater than we anticipated while the company’s legacy RNG contracts are also having a longer lasting impact than previously thought. Accordingly, we are adjusting our rating,” he said.
National Bank Financial’s Rupert Merer reduced his target to $2 from $3.75 with a “sector perform” rating, while Desjardins Securities’ Frederic Tremblay cut his target to $3 from $4.50 with a “buy” rating.
“Strong growth in 1Q was eclipsed by macro pressures (inflation, supply chain) and costs related to the last few legacy custom RNG projects,” said Mr. Tremblay. “We view XBC’s top-line growth outlook as superb based on a record backlog and incremental opportunities across the portfolio. The new management has a multi-pronged plan to address operational and cost challenges, and we look forward to monitoring the progress.”
Raising his financial expectations following better-than-expected first-quarter results, Raymond James analyst Andrew Bradford upgraded CES Energy Solutions Corp. (CEU-T) to “strong buy” from “outperform” with a $4.75 target, rising from $3.35 and above the $3.60 average.
“Headline EBITDA came just above the consensus: $42-million vs $39-million,” he said. “But we suspect the quarter will be viewed more positively than the magnitude of the beat might suggest, if only because investors were conditioned to expect material margin compression. Not that the 240bpsequential drop from 13.0 per cent to 10.6 per cent isn’t material; it’s just that when input costs are rising as quickly as widely discussed through 1Q, the interim compression could have been worse. Put differently, expectations were managed well.”
“Equally important in our view was the revenue figure during the quarter. $401-million set a new record for CEU, besting the previous record by 9 per cent, itself set just one quarter ago. In our view, these revenue figures portend a step-change in EBITDA and earnings potential. We’re anticipating close to $1.7-billion revenue in 2022 and just over $1.8-billion in 2023. At normalized margins, EBITDA will be annualizing well-over $200-million.”
In other analyst actions:
* Canaccord Genuity’s Yuri Lynk cut his Airboss of America Corp. (BOS-T) target to $35.51 from $51 with a “buy” rating, while CIBC’s Kevin Chiang reduced his target to $37 from $55 with an “outperformer” rating. The average is $44.75.
“BOS delivered an in-line EBITDA quarter but wasn’t able to provide clarity on the timing of new awards in AirBoss Defense Group (ADG). The reduced visibility, in our view, explains a large portion of [Thursday’s]12-per-cent share price decline, which appears to be an overreaction given (1) ADG’s bid pipeline remains at a record $1.5 billion and (2) the potential awards have been delayed, not lost (to a competitor or otherwise). With that said, ADG, and by extension BOS, has proven very difficult to forecast over the last two years. The earnings visibility is just not there,” said Mr. Lynk.
* Raymond James’ David Quezada cut his Algonquin Power & Utilities Corp. (AQN-N, AQN-T) target to US$18 from US$20 with an “outperform” rating. The average is US$17.43.
“We maintain our constructive stance on AQN, which is a function of the company’s well-rounded opportunity set and strong expected EPS growth. We note AQN has guided to 7-9-per-cent EPS growth over 2022-2026 fueled by organic growth opportunities in the company’s regulated business and a strong slate of renewable/storage development projects—a level we believe places the company among the higher growth utility peers. We further note that shares of AQN have underperformed in recent months and now trade at 17.6 times 2022 P/E vs. the 20.0 times peer group average — representing attractive value, in our view,” he said.
* MKM Partners’ William Kirk cut its fair value for Aurora Cannabis Inc. (ACB-T) shares to $3, below the $5.07 average, from $6.50 with a “neutral” rating.
* Canaccord Genuity’s Aravinda Galappatthige cut his Boat Rocker Media Inc. (BRMI-T) target to $9.50 from $11 with a “buy” rating, while RBC’s Drew McReynolds cut his target by $1 to $9 with an “outperform” rating. The average is $8.88.
“Q1/22 results were below our forecast, which we attribute entirely to timing given the inherent quarterly volatility of the business. 2022 guidance was reiterated as expected. Following a trimming of our target multiple to reflect a higher interest rate environment and a rising equity risk premium, our price target decreases,” said Mr. McReynolds.
* RBC’s Geoffrey Kwan cut his Brookfield Asset Management Inc. (BAM-N, BAM.A-T) target to US$68 from US$72, reiterating an “outperform” rating, while BMO’s Sohrab Movahedi lowered his target to US$69 from US$71 with an “outperform” rating. The average is US$70.82.
“We have a positive view on Q1/22 results,” said Mr. Kwan. “While financial results (FRE, OFFO) were in line with our forecast, BAM confirmed plans to spin off its asset management business and indicated its fundraising outlook is very strong, which bodes well for future FRE growth. Our Outperform rating reflects our view that BAM offers an attractive mix of positive fundamentals; potential catalysts (e.g., asset manager spinoff, potential large monetizations, successful fundraising); and an attractive valuation (22-per-cent discount to NAV) ... We show buying BAM when it trades at a discount to NAV has been historically a good time to buy.”
* JP Morgan’s Brian Ossenbeck raised his Canadian National Railway Co. (CNR-T) target to $162 from $159 with a “neutral” rating. The average is $162.83.
* Canaccord Genuity’s Tania Armstrong-Whitworth cut her CareRX Corp. (CRRX-T) target to $8 from $8.50 with a “buy” rating, while Desjardins Securities’ Gary Ho reduced his target to $8.50 from $10 also with a “buy” rating and Stifel’s Justin Keywood trimmed his target to $7.50 from $8 with a “buy” rating. The average is $8.74.
* National Bank Financial’s Zachary Evershed cut his Cascades Inc. (CAS-T) target to $14 from $18, maintaining an “outperform” rating, while RBC’s Paul Quinn reduced his target to $15 from $17 with an “outperform” rating and BMO’s Mark Wilde trimmed his target to $17 from $20 with an “outperform” rating. The average on the Street is $14.93.
“Following Q1 results, our hopes for a quick resolution to profitability headwinds dim as the expected impact of margin improvement efforts is weighted to H2,” Mr. Evershed said.
* Desjardins Securities’ Frederic Tremblay reduced his CT Real Estate Investment Trust (CRT.UN-T) target to $18 from $18.50 with a “hold” rating. The average is $18.82.
* Mr. Evershed also lowered his target for KP Tissue Inc. (KPT-T) to $10.50, below the $10.92 average, from $11 with a “sector perform” rating, while RBC’s Paul Quinn moved his target to $10 from $11 with a “sector perform” rating.
* Barclays’ John Aiken cut his CI Financial Corp. (CIX-T) target to $25, above the $24.19 average, from $28 with an “overweight” rating. Others making changes include: Scotia’s Phil Hardie to $21 from $25 with a “sector perform” rating, TD’s Graham Ryding to $16 from $19 with a “hold” rating and BMO’s Tom MacKinnon to $25 from $26 with an “outperform” rating.
“While market conditions and flows are casting a shadow on CI’s outlook, our positive view on CI is predicated on the substantial growth and profitability of its U.S. business and the continued valuation discount despite CI’s proven success south of the border,” said Mr. Aiken.
“Despite our more conservative estimates, we continue to forecast solid earnings growth and this does not reflect the potential impact of expected share repurchases or acquisitions announced but not yet closed. Heading out of reporting we have decreased our price target.”
* RBC’s Walter Spracklin cut his CCL Industries Inc. (CCL.B-T) target to $74 from $80, below the $76.89 average, with an “outperform” rating. Other changes include: BMO’s Stephen MacLeod to $879 from $80 with an “outperform” rating and Scotia’s Mark Neville to $79 from $80 with a “sector outperform” rating.
“Q1/22 results came in above expectations and (contrast with last quarter) there was no cautionary language around near-term trends. Conversely, the company indicated that further cost passthrough initiatives would complement those that were already successfully implemented to date; which we believe should be well-received by the market. Key in our view isthe share price today, which exhibits a meaningful disconnect between the company’s strong fundamentals, its clean balance sheet and the valuation at which the shares trade,” he said.
* National Bank Financial’s Jaeme Gloyn bumped up his Definity Financial Corp. (DFY-T) to $38 from $37, reiterating an “outperform” rating. The average is $36.82.
* CIBC’s Stephanie Price cut her Docebo Inc. (DCBO-T) target to $63.50 from $70.50 with an “outperformer” rating, while Canaccord Genuity’s Robert Young lowered his target to US$55 from US$65 with a “buy” rating and Stifel’s Suthan Sukumar reduced his target to US$65 from US$85 with a “buy” rating. The average is $88.48.
“Docebo reported a strong Q1 with ARR growth of 55 per cent and a lower-than-expected EBITDA loss,” said Mr. Young. “The beat was lighter than those in previous quarters although execution remained strong. We are surprised by an overly negative market reaction pushing shares down ~15%. Momentum across enterprise continued, with 50 per cent of new ARR in deals above $100k and no deals above $1M in the quarter underscoring broad-based demand. Management indicated that its pipeline remains strong, with Docebo Learning Suite products including Shape, Connect and Flow seeing higher-than-expected attach rates. Management also reiterated its goal of exiting Q4 with positive EBITDA and FCF, a welcome comment particularly given current investor sentiment. In our view, Docebo continues to do what it said it would do, and we see no near-term risk of deceleration. We remain confident in Docebo’s ability to gain market share, although the recent selloff in software names leads us to reduce our target multiple.”
* BMO’s Thanos Moschopoulos dropped his Dye & Durham Ltd. (DND-T) target to $30 from $53 with an “outperform” rating, while Raymond James’ Stephen Boland cut his target to $60 from $77 with an “outperform” rating. The average is $51.75.
“We think the stock’s sharp selloff has been driven by a confluence of factors — but perhaps most notably, the uncertainty with respect to the regulatory reviews in the UK and Australia, and investor apprehension regarding weakness in transaction volumes,” he said. “We’ve reduced our target price as we expect these issues to continue weighing on the stock, but we believe the risk/reward remains compelling.”
* Canaccord Genuity’s Josphi Vafi cut his Hut 8 Mining Corp. (HUT-T) to $6 from $12 with a “buy” rating. The average is $10.60.
* CIBC World Markets’ Paul Holden lowered his target for iA Financial Corporation Inc. (IAG-T) to $75 from $78 with a “neutral” rating. Other changes include: RBC’s Darko Mihelic to $86 from $96 with an “outperform” rating, Desjardins Securities’ Doug Young to $80 from $88 with a “buy” rating and National Bank Financial’s Gabriel Dechaine to $80 from $88 with an “outperform” rating. The average is $85.78.
“We significantly reduced our 2022 core EPS estimate following the quarter but our 2023 core EPS estimate only moves slightly lower. Yes, we think IAG will miss 2022 guidance, but we view the negative stock price reaction as overdone and already discounting this probability,” said Mr. Mihelic.
* Raymond James’ Steven Li cut his Lightspeed Commerce Inc. (LSPD-T) target to $40 from $68 with an “outperform” rating. The average is $71.03.
* CIBC’s Todd Coupland raised his Quarterhill Inc. (QTRH-T) target to $4, exceeding the $3.57 average, from $3.50 with an “outperformer” rating.
* Canccord Genuity’s Aravinda Galappatthige lowered his target for Quebecor Inc. (QBR.B-T) to $30 from $32 with a “buy” rating. Other changes include: BMO’s Tim Casey to $35 from $37 with an “outperform” rating, National Bank Financial’s Gabriel Dechaine to $32 from $27 with a “sector perform” rating and CIBC’s Stephanie Price to $37 from $39 with an “outperformer” rating. The average is $34.42.
* RBC’s Sabahat Khan reduced his target for Recipe Unlimited Corp. (RECP-T) to $18 from $21, keeping an “outperform” rating. The average is $20.13.
“Recipe Unlimited Corporation reported Q1 results that were in line to ahead of RBC forecasts. The operating backdrop is steadily improving and the company is taking steps to address the labor/ inflation-related challenges. We believe the spring/summer months should exhibit much stronger top-line growth as restrictions impacting restaurant operations are largely “removed”. The company is also making steady progress with e-commerce (up 13 per cent year-over-year in Q1),” said Mr. Khan.
* Desjardins Securities’ Frederic Tremblay reduced his Savaria Corp. (SIS-T) target to $25 from $25.50 with a “buy” rating, while Scotia’s Michael Doumet cut his target by $1 to $20 with a “sector outpeform” rating. The average is $23.
“SIS shares were down 8 per cent after 1Q adjusted EBITDA missed consensus (but was in line with our forecast),” Mr. Tremblay said. “Year-to-date, the stock is down 32 per cent (vs down 7 per cent for the S&P/TSX), which we view as deeply exaggerated. 1Q22 is seasonally soft and faced various headwinds without the full benefits of Savaria’s key initiatives. We expect performance to improve meaningfully in 2Q and beyond (volume, pricing,synergies, etc). 2Q is off to a solid start based on management’s comments and unchanged guidance.”
* Canaccord Genuity’s Christopher Koutsikaloudis cut his Slate Office REIT (SOT.UN-T) target to $5.25 from $6 with a “buy” rating. The average is $5.30.
* RBC’s Paul Treiber lowered his Softchoice Corp. (SFTC-T) target to $23 from $27 with a “sector perform” rating, while CIBC’s Stephanie Price cut her target to $26 from $31 with an “outperformer” rating. The average is $30.19.
“Softchoice reported Q1 below consensus/RBC, as certain onetime headwinds weighed on profitability and growth. Positively, Software& Cloud revenue was in line with our estimates and Q1 billings were healthy (up 11 per cent year-over-year), which provide visibility to the achievability of FY22 guidance (more than 11.5 per cent year-over-year),” said Mr. Treiber.
* CIBC’s Dean Wilkinson raised his Smartcentres Real Estate Investment Trust (SRU.UN-T) target to $34.50 from $34 with an “outperformer” rating. The average is $33.38.
* RBC’s Sabahat Khan cut his Stantec Inc. (STN-T) target to $65 from $69, below the $75.50 average, with a “sector perform” rating, while Desjardins Securities’ Benoit Poirier lowered his target to $75 from $81 with a “buy” rating. Other changes include: Stifel’s Ian Gillies to $70 from $74 with a “buy” rating, BMO’s Devin Dodge to $72 from $78 with an “outperform” rating and Raymond James’ Frederic Bastien to $77 from $85 with a “strong buy” rating.
“Stantec Inc reported Q1 results that were in line to modestly above RBC/consensus, while full year 2022 guidance was reiterated. The 2022 guidance reflects improved top-line and margin trends over the coming quarters, with improved contribution from the U.S. market expected to be the primary growth driver through H2,” said Mr. Khan.
* Mr. Khan also cut his WSP Global Inc. (WSP-T) target to $197 from $201 with an “outperform rating, while Mr. Poirier lowered his target to $177 from $192 with a “buy” rating. Other changes include: Stifel’s Ian Gillies to $152 from $180 with a “buy” rating, Raymond James’ Frederic Bastien to $185 from $200 with an “outperform” rating and BMO’s Devin Dodge to $170 from $186 with an “outperform” rating. The average is $185.57.
“We believe there is improving visibility into the ramp-up of organic net revenue growth across WSP’s markets. As activity levels shift higher, we believe there is upside to margins from improving utilization levels and efficiency gains. While management hasn’t seen evidence to suggest that a recession is forthcoming, we believe WSP is well-equipped to navigate choppier economic conditions should they develop (vs. many other industrial companies) owing to its significant exposure to public sector clients and management’s ability to quickly realign capacity to demand,” said Mr. Dodge.
* CIBC’s Hamir Patel reduced his target for Stella-Jones Inc. (SJ-T) to $45 from $47, below the $49.75 average, with an “outperformer” rating.
* IA Capital Markets’ Neil Linsdell raised his Supremex Inc. (SXP-T) target by $1 to $7 with a “buy” rating.