Inside the Market’s roundup of some of today’s key analyst actions
Citing valuation concerns and “the view that investors will rotate into the underperformers (or discount banks),” TD Cowen analyst Mario Mendonca downgraded Royal Bank of Canada (RY-T) to a “hold” recommendation from “buy” ahead of fourth-quarter earnings season for the domestic bank sector.
“In our bank industry Q4/24E preview, we review our three go-to valuation approaches in assessing bank industry valuation,” he said. “The message is the same from all three: bank stock valuations are somewhat vulnerable. The equity risk premium (ERP) on the group provides the clearest picture. The ERP (earnings yield less 5-year GOC) has fallen to 5.6 per cent, a near 14- year low. We believe that absent meaningful positive earnings estimate revisions and/or lower rates, we view that sector as fairly valued.
“On the back of RY’s strong performance, and the well documented challenges at several of its peers, the bank trades at a 15-per-cent forward P/E premium to the group market cap. weighted-average. While this premium is not unprecedented, a review .... demonstrates that a 15-per-cent-18-per-cent premium has, in the past (2022-2024), acted as a point of resistance on relative valuation. .... From this figure, we see that RY’s recent relative performance has normalized as investors have begun to allocate capital to the other banks. We expect this trend to accelerate in 2025.”
In a report released Friday, Mr. Mendonca said his downgrade reflects the view that RBC’s premium return on equity will ”remain strong, but not expand in the manner and magnitude we see for the under performers.”
“Our upgrade of BNS on November 4 was based on valuation and the view that BNS will deliver a healthy increase in ROE ... We use our ROE decomposition analysis to demonstrate that although RY stands to benefit from moderating PCLs (2026), margin expansion (2025), and better efficiency (2025 and 2026), we expect RY’s ROE to remain relatively stable over the next two years,” he said. “In our view, the only obvious way RY can drive its premium ROE still higher is through more aggressive buybacks. On this point, we note that RY has not been active in its NCIB, and given its share price performance and valuation, we do not expect RY to be active. In fact, we believe the motivation to buy back stock will be far greater at the underperformers than the outperformers in 2025, particularly as these banks comfortably sustain 13.0-per-cent-plus CET 1 ratios.”
His target for RBC shares rose to $180 from $178. The average target on the Street is $165.51, according to LSEG data.
Mr. Mendonca also made these other target adjustments:
- Bank of Montreal (BMO-T, “hold”) to $131 from $114. The average is $122.66.
- Bank of Nova Scotia (BNS-T, “buy”) to $82 from $80. Average: $71.60.
- Canadian Imperial Bank of Commerce (CM-T, “buy”) to $98 from $91. Average: $82.36.
- National Bank of Canada (NA-T, “hold”) to $140 from $129. Average: $129.23.
“Valuation is approaching fair value territory. Absent lower rates (we are thinking the 5- year, not the overnight rate) or a more than modest increase in 2025E/2026E consensus estimates, it is difficult to argue for strong upside to valuations,” he said.
“We view Canadian bank stock valuations as somewhat vulnerable currently. We believe investors would be better served allocating investing dollars to the bank stocks at the lower end of valuation. We upgraded BNS on November 4 to capture the upside to ROE.”
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After Thursday’s release of “solid” third-quarter results, National Bank Financial analyst Maxim Sytchev sees AtkinsRéalis Group Inc. (ATRL-T) “staying on the right track” and believes “compounding can continue.”
“Numbers are getting cleaner as time is progressing and critically FCF improvements are taking hold even though it’s very hard to model the fluctuations in non-cash working capital,” he said. “Comments around Q4/24 organic growth facing a headwind due to tough comps and project sequencing should not be concerning given backlog growth. With investors using Atkins shares now as a proxy for nuclear sentiment, we have been getting some whippy momentum depending on what the market is seeing in the US from the likes of Nuscale/BWX.
“Resumption of FCF generation on an annualized basis is critical; we saw how powerful that dynamic was with GE ... We can however say that operational improvements are moving in the right direction and 20.4 times P/E (ex-concessions) on 2025E is lower vs. 23 times+ P/Es for the direct CAD peers; risk of M&A is contained for the time being with tuck-in type sizing.”
Shares of the Montreal-based engineering and consulting company, formerly SNC-Lavalin, soared 15.7 per cent on Thursday following the premarket report, which included quarterly revenue of $2.452-billlion that fell in line with Mr. Sytchev’s $2.473-billion estimate and topped the consensus forecast of $2.412-billion by 2 per cent. Consolidated EBITDA of $251-milllion and adjusted earnings per share of 72 cents both exceeded expectations ($246-billion and 68 cents and $239-billion and 66 cents, respectively).
“Tough comps on Q4/23 and the wrap up of major projects last year suggest that ESR [Engineering Services Regions] organic revenue growth will be roughly flat year-over-year in Q4/24E,” the analyst said. “Nevertheless, management is confident in achieving its 8-10-per-cent target for the full year and being able to sustain more than 8-per-cent growth through 2027E. Operations are progressing towards the stated 17 per cent to 18 per cent 2027E EBITDA margin target for the segment. Like most major engineering consultants around the globe, ATRL continues to benefit from increased infrastructure spending across the globe (management does not see a major pullback in government stimulus following the U.S. presidential election).
“Nuclear growth has shifted into a higher gear. The Nuclear business continues to grow at an impressive pace, and the $3-billion-plus backlog provides a significant degree of revenue visibility combined with a relatively attractive margin profile. Management continues to actively promote its new Monark technology and is hopeful that the company can secure an additional new build contract in the foreseeable future (this would be the first new CANDU build in about 20 years).”
While he also believes cash flow generation should “continue gathering momentum, further improving optionality,” Mr. Sytchev trimmed his forecast for the upcoming quarter to “account for muted organic growth in Engineering (closing out unprofitable projects in the UK and Canada as well as tougher comps from last year) as well as potential SBC costs exceeding expectations.”
However, he raised his target for AtkinsRéalis by $2 to $76, maintaining an “outperform” rating. The average is $74.50.
Other analysts making target adjustments include:
* TD Cowen’s Michael Tupholme to $98 from $87 with a “buy” rating.
“Q3/24 PS&PM adjusted EBITDA was 7 per cent above consensus,” he said. “Further, ATRL’s AtkinsRéalis Services backlog reached another record-high. Meanwhile, ATRL remains on-track to deliver on its 2024 consolidated cash flow from operations (CFO) guidance (in excess of $400-million), with the company generating $215-million of CFO year-to-date. On the whole, we see the Q3/24 release as aligned with our constructive stance on the name.”
* BMO’s Devin Dodge to $78 from $62 with an “outperform” rating.
“In our view, there were several encouraging takeaways from Q3/24 results, including continued margin expansion in Engineering Services, strong demand for nuclear services, and improved cash flow performance (i.e., strongest Q3 in more than a decade). Optimism in the nuclear sector has increased significantly in recent weeks and multiples have shifted materially higher. While the sustainability of the recent re-rating is uncertain, a catalyst for resetting multiples isn’t clear to us,” said Mr. Dodge.
* Raymond James’ Frederic Bastien to $84 from $70 with an “outperform” rating.
“AtkinsRéalis finally backed up its strong organic growth momentum with healthy margin expansion in 3Q24, bringing the promise of its 2025-2027 strategic ambitions closer into view,” he said. “From a growth perspective, we are confident the firm will tackle more than a dozen CANDU refurbishments over the next decade, capitalize on Downing Street’s intention to double water infrastructure investment, and win big pieces of the IIJA opportunity pie. Profitability wise, our expectations have a selective approach to work in Canada, better use of performance analytics and project delivery training, and the Global Technology Centers’ (GTC) continued expansion driving margins steadily higher. We argue ATRL’s multiples will rise in lockstep and ultimately, approach those of its Canadian engineering peers through our forecast horizon.”
* Desjardins Securities’ Benoit Poirier to $87 from $71 with a “buy” rating.
“Given the new year is less than two months away, the longer-term nature of ATRL’s nuclear business and for a better comparison with WSP/STN, we have rolled our valuation forward to our 2026 numbers. Moreover, we have increased our EV/EBITDA valuation multiple to account for the company’s recent execution and the improved balance sheet. ATRL’s nuclear business has high barriers to entry, potentially justifying a higher valuation than its engineering segment if execution persists,” he said.
* RBC’s Sabahat Khan to $84 from $70 with an “outperform” rating.
“Q3 results reflected another quarter of solid execution in AtkinsRéalis’s Engineering segment and significant growth in the Nuclear business. Backlog in AtkinsRéalis Services (core business lines) also reached another record high,” said Mr. Khan. “Overall, the setup for AtkinsRéalis remains supportive and the company is well positioned to deliver on its full-year guidance, in our view.”
* ATB Capital Markets’ Chris Murray to $80 from $73 with an “outperform” rating.
“The outlook was better than expected, particularly in Nuclear, and we see the valuation gap to peers continuing to close on M&A and margin expansion. We would continue to add shares at current levels,” said Mr. Murray.
* CIBC’s Jacob Bout to $80 from $70 with an “outperformer” rating.
* Canaccord Genuity’s Yuri Lynk to $80 from $70 with a “buy” rating.
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Seeing an “improved acquisition outlook,” Desjardins Securities analyst Lorne Kalmar raised his recommendation for Automotive Properties REIT (APR.UN-T) to “buy” from “hold” following the release of third-quarter financial results that largely fell in line with his expectations.
On Oct. 31, the Toronto-based REIT announced the acquisition of a Rivian-tenanted automotive property in Tampa, Florida for approximately US$13.5-million as welll as two heavy construction equipment dealership properties in the Greater Montreal Area for $25.4-million. Both additions are expected to be accretive to adjusted funds from operations per unit.
“APR revved up its deal activity post 3Q, announcing its entry into the U.S. and its first heavy equipment dealership acquisitions,” he said. “In consideration of the more positive tone from management around the transaction environment and a materially larger opportunity set, we expect acquisition activity to pick up in the near term, which should be a positive catalyst for earnings and the unit price.”
“The key reason for our upgrade is the improved acquisition outlook, due both to management’s commentary around deal momentum on the Canadian auto dealership side (expect an uptick in acquisitions over the next 6–24 months) and to a material increase in the REIT’s acquisition pipeline given diversification beyond Canadian auto dealerships. In Canada, there are approximately 3,500 auto dealerships; in the U.S., the number is 5 times greater, with an estimated 18,100 auto dealerships. APR’s expansion into non-auto dealerships further increases the pool of potential acquisitions. In our view, this should enable the REIT to ramp up acquisition activity (and portfolio diversification), which should be accretive to earnings.”
After the bell on Wednesday, Automotive Properties reported funds from operations per unit of 23.7 cents, down 1 per cent year-over-year but in line with Mr. Kalmar’s estimate of 24.4 cents and the consensus expectation of 24.2 cents.
“While the REIT could undertake some capital recycling to fund acquisitions (similar to the sale of Kennedy Lands completed on October 1), as it begins to trade closer to — and ultimately above — NAV (current consensus $13.00), it can issue equity to fund accretive external growth,” said the analyst. “In the interim, with leverage pro forma the recently announced acquisitions at 42 per cent, we calculate that APR could undertake $200-million of acquisitions on its own balance sheet before reaching 50-per-cent D/GBV. We estimate that $50-milion of acquisitions at cap rates in line vs the historical (6.5–7.5%) would add 2 per cent to our FFOPU estimates. Our current forecast calls for $50-million of unannounced acquisitions in both 2025 and 2026 (average FFOPU growth of 6 per cent).”
While his full-year 2024 FFOPU estimates declined slightly to reflect moderately higher-than-expected interest costs in the quarter, Mr. Kalmar raised his target for the REIT’s units to $14 from $13. The average is $13.19.
Elsewhere, others making changes include:
* RBC’s Jimmy Shan to $13 from $12.50 with a “sector perform” rating.
“The highlight was the previously announced acquisitions as APR expands into the U.S. and other ‘dealership-adjacent verticals’ (i.e., construction equipment),” said Mr. Shan. “While we do not expect a significant push in the near-term, its leverage capacity and a wider range of acquisition targets set up well for accelerating FFO growth.”
* TD Cowen’s Jonathan Kelcher to $13 from $12 with a “hold” rating.
“Q3 results were largely in line with our estimates/consensus and highlighted by post q acquisition announcements with APR entering two new verticals (heavy equipment and the U.S.). We view this positively as it opens up the acquisition universe for APR, although we do expect a slow ramp up in each vertical. Our estimates decrease slightly on a lower acquisition pace,” said Mr. Kelcher.
* CIBC’s Sumayya Syed to $13 from $12.75 with an “outperformer” rating.
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National Bank Financial analyst Travis Wood thinks Ovintiv Inc. (OVV-N, OVV-T) has reshaped its portfolio with two “significant” transactions on Thursday.
The Denver-based energy giant announced it was paying about US$3.3-billion in cash for 44,110 hectares in Alberta’s Montney region from Paramount Resources Ltd. (POU-T). It is selling about 51,000 hectares of largely undeveloped land in Utah’s Uinta Basin for US$2.8-billion
“Overall, we view the transactions as a positive for Ovintiv, as it should allow for the capture of synergies gained by the increased consolidation of the Alberta Montney (acquired asset is in proximity to existing Pipestone position) and more exposure to premium condensate volumes in Canada (currently trading at or near par with WTI),” said Mr. Wood.
“All together, the two transactions should be accretive for Ovintiv, allowing them to now focus on one less basin while unlocking capital savings. Pro-forma, the deal enhances Ovintiv’s position in the liquids-rich Montney window (now 55 mbbl/d of oil and condensate), while bolstering inventory depth in the region for the next decade plus (15 years of premium Montney inventory pro-forma) and monetizing a non-core asset. The company expects the combined transactions should increase 2025 FCF by $300-million, partially driven by the annual cost synergies realized from the combined transactions of $125-million (some of this will be on capital side due to D&C savings of $1.5-million per well they expect to realize, with other savings on overhead and cash taxes).”
After updating his forecast to reflect the deals, Mr. Wood increased his target for shares of Ovintiv, formerly known as Encana Corp., to US$59 from US$57, keeping an “outperform” rating. The average is US$58.23.
Elsewhere, TD Cowen’s Gabe Daoud hiked his target to US$70 from US$55 with a “buy” rating.
Meanwhile, CIBC’s Jamie Kubik raised his Paramount target to $39.50 from $38 with an “outperformer” rating. The average is $37.13.
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In other analyst actions:
* TD Cowen’s Derek Lessard downgraded Dorel Industries Inc. (DII.B-T) to “hold” from “buy” and dropped his target to $4.50 from $12, while BMO’s Stephen MacLeod lowered his target to $5 from $7 with a “market perform” rating. The average is $8.50.
“The Home segment Q3/24 performance was disappointing. More importantly, given the industry pressure, we believe it has become increasingly challenging for us to pinpoint when a turnaround is likely to occur. The segment requires an aggressive restructuring at a minimum to stem the cash burn. Consequently, we are downgrading the shares to HOLD (from Buy),” said Mr. Lessard.
* Jefferies’ John Aiken lowered Element Fleet Management Corp. (EFN-T) to “hold” from “buy” and reduced his target to $30 from $32. The average target on the Street is $32.34.
* National Bank’s John Shao lowered his Alithya Group Inc. (ALYA-T) target to $2 from $2.50 with a “sector perform” rating. Other changes include: Ventum Capital Markets’ Rob Goff to $2.50 from $2.75 with a “buy” rating and Desjardins Securities’ Jerome Dubreuil to $3.25 from $3.50 with a “buy” ratin. The average is $3.04.
“Alithya reported its FQ2 results with revenue below our estimate due to a tough spending environment, but the Company was able to offset that top-line miss with a favorable revenue mix and cost optimization, delivering margin expansion and adjusted EBITDA growth. While it’s still unclear when the macro will improve as this quarter’s bookings continue to be soft, we think the Company has been doing the right thing by focusing on matters it could control. Today’s CFO appointment to fill the vacancy also reduces the execution risk. As Alithya continues to build its scale, we expect M&A to kick in. In the meantime, debt reduction and share buybacks remain the top priorities,” said Mr. Shao.
* RBC’s Maurice Choy raised his Atco Ltd. (ACO.X-T) target to $51 from $50 with a “sector perform” rating,. Other changes include: Scotia’s Robert Hope to $49 from $45 with a “sector perform” rating and CIBC’s Mark Jarvi to $58 from $59 with an “outperformer” rating. The average is $50.75.
“While Q3/24 did not deliver as many new contract wins at S&L as we had seen in recent quarters, the better-than-expected quarterly financial results signaled ATCO’s continued ability to fund not only its growth aspirations (including in S&L) but also its ongoing annual dividend growth commitment.,” said Mr. Choy. “Amid the positives at Canadian Utilities (notably the AA6 regulatory decision in Australia) and the stability at Neltume Ports, we like management’s confidence in its outlook for S&L, with tailwinds that delivered the strong base business growth thus far in 2024 seemingly continuing into the new year.”
* CIBC’s Krista Friesen lowered her target for AutoCanada Inc. (ACQ-T) to $15 from $15.50 with an “underperformer” rating, while Acumen Capital’s Trevor Reynolds increased his target to $20 from $19.75 with a “hold” rating. The average is $18.90.
* Canaccord Genuity’s Mike Mueller cut his Birchcliff Energy Ltd. (BIR-T) target to $5.75 from $6, keeping a “hold” rating. The average is $6.42.
* CIBC’s Mark Jarvi cut his Boralex Inc. (BLX-T) target to $42, matching the average, from $43 with an “outperformer” rating, while BMO’s Ben Pham lowered his target to $45 from $46 with an “outperform” rating.
“Q3/24 results fell short of expectations on below-average wind resource, but the growth backlog is advancing well notably $769-million of Ontario battery storage projects advancing to construction stage,” said Mr. Pham. “This should drive solid growth for BLX in 2025 and even more in 2026, while maintaining its strong balance sheet and high-quality asset base (91-per-cent contracted with average contract length of 11 years). Combined with the attractive valuation (9.5x 2026E EBITDA vs. 12 times average renewable power peers), we’re maintaining our Outperform rating and lower target.”
* CIBC’s Dean Wilkinson raised his Brookfield Corp. (BN-N, BN-T) target to US$68 from US$57 with an “outperformer” rating. Other changes include: BMO’s Sohrab Movahedi to US$62 from US$50 with a “market perform” rating and Scotia’s Mario Saric to US$69 from US$65 with a “sector perform” recommendation. The average is US$61.46.
“We are encouraged by BN’s 2025 prospects underpinned by a more constructive environment for monetizations, carry realizations and the benefit of lower yields primarily via improved valuation of its privately held real estate portfolio. This, combined with a valuation discount to comparable balance sheet managers continues to point to a favorable risk-reward on BN stock, as we see it,” said Mr. Movahedi.
* RBC’s Maurice Choy bumped his target for Canadian Utilities Ltd. (CU-T) to $39 from $38 with a “sector perform” rating, while Scotia’s Robert Hope moved his target to $37 from $36 with a “sector perform” rating. The average is $37.60.
“We believe the market will favourably view CU’s solid Q3/24 results, the clarity on its capital allocation and funding strategies, and the positive regulatory outcome in Australia, all of which should support the company’s ability to continue delivering annual dividend growth while progressively lowering its payout ratio. Beyond repeatedly delivering supportive financial results in the periods ahead, we look forward to seeing CU materially de-risk the AH3 project in the quarters ahead, especially with Linde Canada now identified as a partner,” said Mr. Choy.
* RBC’s Arthur Nagorny cut his CCL Industries Inc. (CCL.B-T) to $90 from $92 with an “outperform” rating. Other changes include: TD Cowen’s Sean Steuart to $94 from $98 with a “buy” rating and BMO’s Stephen MacLeod to $93 from $90 with an “outperform” rating. The average is $88.90.
“CCL reported in line Q3 results, with strong organic growth across the business (up 6.9 per cent year-over-year, CCL core was up 4.9 per cent),” Mr. Nagorny said. “RFID [radio frequency identification] growth was once again the standout this quarter, and we believe the set up remains favorable heading into 2025. Further, CCL continued to repurchase shares in Q3 ($100-million; no M&A in the quarter), and we believe the company is well positioned to accelerate the pace of capital deployment/M&A going forward (leverage was 1.1 times exiting Q3, negative 0.1 times quarter-over-quarter).”
* Scotia’s Phil Hardie increased his CI Financial Corp. (CIX-T) target by $1 to $26 with a “sector perform” rating. Other changes include: BMO’s Tom MacKinnon to $25 from $22 with a “market perform” rating, Raymond James’ Stephen Boland to $27 from $22 with an “outperform” rating and TD Cowen’s Graham Ryding to $28 from $26 with a “buy” rating. The average is $25.43.
“Despite a bit of a tepid stock price reaction we viewed CI’s third quarter as positive,” said Mr. Hardie. “Adj. EBITDA came in well ahead of Street expectations, and, although it benefited from inherently volatile performance fees, after stripping this out we estimate results would still have been a 3-per-cent beat. Flows and AUM were announced ahead of the quarter with the key takeaway likely being that CI’s Canadian retail flows moved back into positive territory. We think this was driven by a combination of a broader improvement in the industry-wide sales environment and relatively solid mid-term investment performance across its funds.
“CI remains a divisive name among equity investors; however, its particularly strong stock performance through the back half of 2024 supports our view that it is a solid beta play. We think investors with a bullish outlook for equities in 2025 should look at names such as CI to add beta to their portfolios. We are a little more cautious following an unexpectedly strong market rally and also believe that CI’s elevated leverage could expose shareholders to outsized downside risk through a market sell-off or period of elevated volatility.”
* TD Cowen’s Aaron MacNeil hiked his target for Enerflex Ltd. (EFX-T) to $15 from $12, reiterating a “buy” rating. Other changes include: BMO’s John Gibson to $15 from $11 with a “market perform” rating, Raymond James’ Michael Barth to $13.75 from $12 with an “outperform” rating, RBC’s Keith Mackey to $12 from $9 with an “outperform” rating and National Bank’s Dan Payne to $11 from $9 with a “sector perform” rating. The average is $11.91.
“We think Enerflex could continue to outperform given its proximity to index inclusion, resiliency of cash flows, strong financial performance and path to further increases in shareholder returns,” Mr. MacNeil said. “Enerflex remains at the top of our pecking order.”
* National Bank’s Matt Kornack raised his Flagship Communities REIT (MHC.U-T) target to US$20.50 from US$20 with an “outperform” rating. Other changes include: BMO’s Michael Markidis to US$20 from US$19 with an “outperform” rating and RBC’s Jimmy Shan to US$20 from US$19 with an “outperform” rating. The average is US$20.11.
* National Bank’s Patrick Kenny bumped his Keyera Corp. (KEY-T) target to $39 from $38 with a “sector perform” rating. Other changes include: BMO’s Ben Pham to $44 from $41 with a “market perform” rating, Citi’s Spiro Dounis to $50 from $46 with a “buy” rating. and ATB Capital Markets’ Nate Heywood to $44 from $43 with a “sector perform” rating. The average is $43.92.
“We expect KEY to grow its fee-based EBITDA by over 6 per cent per year through 2029; that said, we see upside to a nearly 10-per-cent CAGR if excess cash flows are reinvested in the business,” said Mr. Dounis. “More specifically, we expect projects like KAPS Zone 4, KFS II de-bottleneck, and KFS III to cumulatively cost less than $0.8-billion and drive base-line growth of 6 per cent per annum. Through 2029 we expect KEY to generate excess cash flow of $1.7-billion, which if re-invested (or used for M&A) could upgrade the CAGR to nearly 10 per cent. Alternatively, this cash flow could be utilized for share buybacks which could drive double digit EPS growth. KEY currently trades at 10.6 times ‘26 EBITDA which is a modest discount to integrated peers trading closer to 11.0 times. We see room for KEY to upgrade its growth CAGR with the December update.”
* TD Cowen’s Derek Lessard raised his K-Bro Linen Inc. (KBL-T) target by $2 to $48 with a “buy” rating, while Stifel’s Justin Keywood increased his target to $46 from $45 with a “buy” rating. The average is $47.67.
“Q3 adds to KBL’s growing record of consistent execution since emerging from the pandemic, and reflects the favourable industry fundamentals (high surgical backlog and healthy leisure and business travel demand),” he said. “The shares are trading only at 7.6 times forward consensus EBITDA (versus five-year average of 9.1 times), which we do not think fairly represents the stock’s attractive risk/reward trade-off.”
* RBC’s Arthur Nagorny cut his Mattr Corp. (MATR-T) target to $18 from $20 with an “outperform” rating. Other changes include: Stifel’s Ian Gillies to $18.75 from $21.50 with a “buy” rating, Canaccord Genuity’s Yuri Lynk to $22 from $24 with a “buy” rating and National Bank’s Zachary Evershed to $21 from $22 with an “outperform” rating. The average is $20.59.
“Despite recent macro setbacks, the long-term thesis remains intact, as the new facilities ramp up to serve niche and critical infrastructure end markets,” said Mr. Evershed. “Specifically for Flexpipe, the spin up of the new Texas facility remains a foundational driver of underlying organic growth and margin expansion as MATR’s large diameter products continue to take share (outpacing industry-wide activity levels) with the benefit of lowered cost/meter produced and lower freight costs given proximity to customers. Nonetheless, international orders have been pushed to the right, and with incrementally negative views on North American O&G activity, the company has taken decisive action to rightsize the cost base by $20-million (75 per cent in Composite Technologies) to acknowledge a slower than anticipated ramp up of the new facility.”
* RBC’s Doug Miehm raised his Medical Facilities Corp. (DR-T) target to $17 from $16 with a “sector perform” rating. The average is $16.25.
* Ahead of its Nov. 20 earnings release, BMO’s Tamy Chen raised her Metro Inc. (MRU-T) target to $92 from $85 with a “market perform” rating. The average is $88.89.
“We believe most of Loblaw’s Q3/24 dynamics were company-specific. It appears key industry trends such as promotional penetration and tradedown remained largely consistent, which would be in line with our MRU forecasts. We expect MRU to provide F2025E outlook. We forecast 11-per-cent year-over-year EPS growth in F2025E; Street is 10.8 per cent, just above MRU’s medium-term target for 8–10-per-cent EPS CAGR. While we remain neutral on the grocers, between Loblaw vs. MRU, we slightly lean to MRU for the next 12 months as the company is moving past its DC ramp,” she said.
* Desjardins Securities’ Chris MacCulloch bumped his Peyto Exploration & Development Corp. (PEY-T) target to $16.50 from $16.25 with a “hold” rating. The average is $17.93.
“We have increased our target on Peyto ... reflecting positive revisions to estimates following the release of 2025 guidance,” he said. “We were particularly impressed by recent improvements in cost structures and robust production growth in the face of depressed natural gas prices. However, we remain cautious on the company’s ability to fully participate in an eventual natural gas price recovery while noting that the elevated dividend payout handcuffs its ability to reduce debt levels.”
* CIBC’s Sumayya Syed raised her Pro REIT (PRV.UN-T) target to $6.50 from $6.25 with an “outperformer” rating, while Raymond James’ Brad Sturges cut his target to $6.50 rom $6.75 with an “outperform” rating. The average is $6.29.
“We believe PROREIT provides attractive exposure to higher growth Canadian secondary industrial hubs. Along with its JV partner, Crestpoint, PROREIT benefits from unique, market dominant positioning as Halifax’s largest small-bay industrial facility landlord. We also suggest that PROREIT offers an attractive blend of an above-average distribution yield, a discount valuation, a wide industrial rent MTM growth opportunity that could support an SP-NOI growth profile in the mid-single-digit range YoY over the next few years, and improving balance sheet strength,” said Mr. Sturges.
* Scotia’s Meny Grauman moved his Sagicor Financial Co. Ltd. (SFC-T) target to $10 from $9 with a “sector outperform” rating. The average is $9.
“Although core EPS was in line with both our expectations and Management guidance, we believe that this understates the quality of Sagicor’s Q3 results given the strength we saw in its US business. Not only did annuity sales ramp up to US$292-million from Q2′s US$211-million, but core earnings was up 89-per-cent sequentially as insurance experience in the unit swung from loss in both Q1 and Q2 to a US$4.4-million gain. The momentum we saw in Sagicor’s U.S. business this quarter gives us increased confidence that the lifeco will be able to deliver on its medium-term ROE target of 13 per cent, and that highlights just how much upside there is in the shares given that they currently trade at just under 0.7 times book,” said Mr. Grauman.
* Canaccord Genuity’s Katie Lachapelle trimmed her Street-high target for Sigma Lithium Corp. (SGML-X) to $32.50 from $33, keeping a “buy” rating. The average is $28.76.
* CIBC’s Dean Wilkinson raised his SmartCentres REIT (SRU.UN-T) target by $1 to $29 with an “outperformer” rating. The average is $26.
* RBC’s Greg Pardy increased his Strathcona Resources Ltd. (SCR-T) target to $36 from $34 with a “sector perform” rating, while TD Cowen’s Menno Hulshof raised his target to $31 from $30 with a “hold” rating. The average is $34.25.
“Strathcona delivered an in depth look at its people, operations and differentiated business approach at its inaugural investor open house and will look to boost its public float in the first-quarter of 2025. Our constructive stance towards the company reflects its solid operating performance, robust shareholder alignment and extensive RLI,” said Mr. Pardy.
* Scotia’s Robert Hope cut his Tidewater Midstream and Infrastructure Ltd. (TWM-T) target to 30 cents from 45 cents with a “sector perform” rating, while CIBC’s Robert Catellier lowered his target to 30 cents from 40 cents with a “neutral” rating. The average is 43 cents.
“Tidewater Midstream (TWM-T) shares were under significant pressure following its Q3 update, which we attribute to continued challenges at Tidewater Renewables (LCFS-T) and compressing conventional refining margins. Management reiterated its 2024 guidance range, but is pointing to the lower end of the range given compression of refining margins as well as continued pressure on gas volumes. LCFS-T continues to be a challenged entity with commentary that if LCFS credit pricing does not improve, its ability to continue as a going concern may be in jeopardy. Our 2024 estimates move down to reflect lower conventional refining margins, while our 2025 estimates move down largely to reflect lower EBITDA at LCFS-T. Looking forward, we expect the key driver of the share price will be BC LCFS credit pricing, which we expect will be depressed through the balance of 2024,” said Mr. Hope.