Inside the Market’s roundup of some of today’s key analyst actions
National Bank Financial analyst Adam Shine sees Thomson Reuters Corp. (TRI-T, TRI-N) “gearing up” for better growth and return to margin expansion following 2024, which he calls an “investment year.”
Accordingly, believing its “already rich valuation could still have some room to grow further,” he upgraded his rating for its shares to “outperform” from “sector perform” on Monday.
“With its Q3 last year, TRI highlighted that 2024 was going to be a year of investment with margin contracting also due to M&A dilution,” said Mr. Shine. “Although the stock sits at levels seen in early May, this followed a step-up on the back of H2/23 and Q1 reporting related to an emerging GenAI theme at the company poised to start contributing to results in H2, ongoing outperformance, buyback activity ($1-billion NCIB completed in June), and evolving LSEG divestitures which concluded mid-May. TRI beat consensus EBITDA expectations Q3/22-Q1/24. This came to an end in Q2 where EBITDA was in line despite margin once again exceeding its telegraphed assumption albeit by a lesser degree than prior quarters. The timing of growth investments will impact H2 EBITDA which we see at down 2 per cent.
“With that already well understood by investors, the question becomes when will the stock see its next leg up. In the absence of quarterly beats, it may not come this fall, but TRI continues to see margin expansion of 75 basis points in 2025 and 50 basis points in 2026, with organic growth moving up to 8-9 per cent (8 per cent 2024) for Big 3 and 6.5-8.0 per cent (6.5 per cent 2024E) for total.”
In a research note released before the bell, the analyst also argued Thomson Reuters “tends to trade almost a year ahead of itself, as we try to find right multiples to reflect its growing moat in Legal, traction in Corporates and Tax & Accounting, progress of its build/buy/partner GenAI strategy, M&A opportunities to strengthen core franchises and grow internationally, and prospect of more material cash returns to shareholders given an under-levered balance sheet (0.6 times Q2, target 2.5 times, TRI says $8-billion capital capacity by 2026). EV/EBITDA now sits at 24.7 times 2025 estimates with multiple pointing to $258 in 2026E using FX at 1.40 or $248 at 1.35 (old 2026E NAV implied 23.3 times, FX 1.40).”
Citing a “better post-2024 outlook,” Mr. Shine raised his target for Thomson Reuters shares to $260 from $231. The average target on the Street is currently $227.60.
“We could be early, but renewed momentum appears ahead post-2024, TRI’s proven fairly recession resilient, much firepower exists for M&A and cash returns to shareholders, and management continues to execute extremely well,” said Mr. Shine.
Woodbridge Co. Ltd., the Thomson family holding company and controlling shareholder of Thomson Reuters, also owns The Globe and Mail.
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Despite seeing its “strong medium-term production upside intact” following last week’s release of the results of its internal economic study for its Puerto Del Aire project in Mexico, National Bank Financial analyst Mike Parkin downgraded shares of Alamos Gold Inc. (AGI-T, AGI-N) to “sector perform” from “outperform” based on valuation concerns.
“On Wednesday evening, Alamos released the development plan for their PDA deposit after releasing an exploration update which continued to highlight the strong potential for R&R growth across the Mulatos complex,” he said. “The results of the PDA development plan was largely mixed to our initial estimates, with higher development capex and opex as well as a 1-year difference in first production timing partially offset by lower LOM sustaining capex, higher production in the early years and higher daily tpd. We updated our model to better align with the results of the development plan, while remaining slightly conservative to cost assumptions, which weighed on our NAV estimate modestly.
“We continue to view Alamos Gold as a high-quality and safe name to own into year-end, but due to an elevated valuation following a period of strong share price outperformance, we are downgrading Alamos Gold to Sector Perform from Outperform. We could see ourselves becoming more positive on Alamos in 2025 as we get closer to an expected robust 2026 operational year, which should benefit from the high-margin Island Gold expansion.”
While Mr. Parkin emphasized the “future remains bright” for the Toronto-based company, he warned its valuation currently “screens at a strong premium to [its] peer group.”
“Alamos remains one of the best medium-term growth stories in our coverage universe, with the company expected to grow production to 900koz by 2028 (FY23 = 529koz) at declining TCC/AISC [total cash costs/all-in sustaining costs] after a transition year in 2025, as the Island Gold Complex completes an expansion of the high-margin underground mine and Lynn Lake potential begins producing in 2028, as well as through the development of the PDA u/g [underground] mine at Mulatos (first production in 2027) and optimization of the newly acquired Magino mine and mill,” he said.
“As demonstrated by the PDA development study released last Wednesday, Alamos has several quality organic opportunities to grow its production base, and should be able to self-fund this multitude of opportunities through mine site cash flow and modest reliance on the existing RCF. Additionally, the company’s continued success through the drill bit allows it to continue to add low-cost ounces to its reserves year-over-year, with a sixth consecutive year of reserve growth expected in 2024. We continue to view Alamos as having one of the best (if not the best) potential NAV/sh growth profiles in the sector, and we continue to view it as a quality name to own going into year end.”
After updating his model to include the closing of its acquisition of Argonaut Gold Inc. in mid-July, Mr. Parkin increased his target for Alamos shares to $28 from $26. The average on the Street is $28.79.
“The company’s recent elevated valuation coupled with its strong outperformance over the LTM [last 12 months] and YTD [year-to-date], have seen its shares now trading more in line with the index over the L3M,” he said. “We believe this trend will continue over the near term as the positive catalyst event of the PDA study is now behind it, but we could potentially see this outperformance resume as we get closer to the expected robust 2026 operational year.”
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BRP Inc.’s (DOO-T) earnings volatility may keep investors “sidelined” in the near term, according to Stifel analyst Martin Landry.
On Friday, shares of the Valcourt, Que.-based recreational vehicle manufacturer slid 4.5 per cent after it cut its profit forecast for the year as it grapples with softer consumer demand and heightened competition. The reduction came alongside better-than-expected second-quarter 2025 results, including earnings per share of 61 cents that exceeded both Mr. Landry’s 29-cent estimate and the consensus projection on the Street of 35 cents despite falling 81 per cent year-over-year.
“BRP made significant cuts to its FY25 EPS guidance, decreasing it by 54 per cent at the midpoint on a challenging economic backdrop,” said Mr. Landry. “The magnitude of the decrease is surprising given that the company had already cut its FY25 EPS guidance in June. Management expects the challenging conditions to last for an additional 12-18 months suggesting that demand could remain weak and promotional activity elevated for FY26.”
“Management revised its consumer demand expectation and its assumption on promotional activity. The FY25 revenues guidance decreases by 10 per cent while the FY25 EBITDA guidance goes down by 28 per cent. The larger revision at the EBITDA line reflects the high fixed-cost business model combined with the increasing promotional intensity observed in the market, particularly on the lower-end products. Some OEMs acted later than BRP to reduce inventory at dealerships, which resulted in more aggressive promotions to clear units recently. BRP has had to adapt its promotional strategy, which changed the near-term profitability outlook.”
Mr. Landry emphasized management now sees the “correction period” lasting up to 18 months and now expects “material” reductions to its fiscal 2026 estimates. He cut his earnings per share forecast for that fiscal year by 40 per cent to $4.95 (from $8.27), while his EPS projection for its current fiscal year (2025) slid to $3 from $6.19.
“Previous cycles lasted 2-4 years, and we have not completed a full year in the current correction,” he said.
“Value products [are] not selling as fast as before given competitive pressures and difficulty to get credit. New customers to the industry have declined and represent 20 per cent of total customers, down from 30 per cent at the peak of COVID. In addition, these customers have more difficulty to get credit approval than before, creating a headwind on revenues. Demand remains strong for BRP’s high-end products (up mid-single digits for SSVs [side-by-side vehicles]) compared to its entry level products (down mid-teens for SSVs). Competing OEMs have increased promotional intensity on entry level products putting pressure on BRP’s volume. This has been felt on the 3-wheel Ryker, for instance.”
Maintaining his “hold” recommendation for BRP shares, Mr. Landry reduced his target to $82 from $97.
Elsewhere, a trio of analysts downgraded BRP shares:
* Desjardins Securities’ Benoit Poirier to “hold” from “buy” with a $94 target, down from $110.
“While we still like this quality name in the long term as we believe BRP will continue to gain share from under-investing peers and additional revenue from new products, we see a lack of near-term catalysts” said Mr. Poirier. “Given the non-constructive consumer, irrational competitor actions and obstacles to BRP protecting its share price with buybacks, we believe the stock could face more downward pressure. We suggest investors wait for a more attractive entry point or signs of an inflection in retail sales.”
* Scotia’s Jonathan Goldman to “sector perform” from “sector outperform” with a $91 target, down from $103.
“We think shares and earnings will be in a holding pattern through at least 1H25,” said Mr. Goldman. “We don’t think upcoming rate cuts will be sufficient to catalyze a snap-back in consumer demand, especially for high-ticket discretionary items. Concurrently, management expects the current level of promo to continue through at least the first part of 2025. Competitors were slower to react to softening market conditions and are acting aggressively to clear excess inventory, which may lead to additional share shift. Destocking will continue in 2H24 and a softer PWC season will weigh on shipments next year.
“Street estimates will likely get rebased to much more realistic levels – we lowered our F26E EPS to $4.75 from $8.50 – but we struggle to find a catalyst in the near-term. Simply put: we don’t expect things to get much worse [emphasis added] from here, but we’re not sure they get much better either as the powersports recovery stretches out longer than we originally anticipated. Maybe we miss out on some macro beta, but we’re not willing to underwrite that risk at the moment. We raised our valuation multiple to reflect below midcycle earnings in 2025. Our target price goes to $91/share.”
* CIBC’s Mark Petrie to “neutral” from “outperformer” with a $92 target, falling from $100.
“A second consecutive material reduction to guidance leads to a much more cautious view on recovery in F2026. Our F2025 estimates fall to the mid-point of guidance and F2026E EPS is reduced by 38 per cent as we push out our forecasts for the inevitable recovery in demand and profitability. We acknowledge BRP’s long-term track record and strong management, but we believe there is greater uncertainty in the pace of recovery. Even applying a premium to long-term average multiple on F2026E implies limited upside,” said Mr. Petrie.
Other analysts making target adjustments include:
* Citi’s James Hardiman to $101 from $110 with a “buy” rating.
“As we have seen across powersports throughout the last quarter, DOO slashed FY25 guidance in the face of ongoing retail weakness and heightened competitive headwinds, both of which management expects to continue through at least the first half of FY26 (next year),” said Mr. Hardiman. “Despite the cut to guidance and our estimates, we believe we are close to trough earnings at this point and believe DOO has been exceedingly prudent in its management of the business in the current environment, an approach we believe will set the company up well once retail demand improves, potentially aided by rate cuts in the coming months. As such, while our estimates and price target are down.”
* National Bank’s Cameron Doerksen to $89 from $100 with a “sector perform” rating.
“Our position has consistently been that while the powersports market was clearly softening, the market was already pricing in a significant downturn for BRP,” said Mr. Doerksen. “However, the trough earnings for BRP is clearly materially worse than what we were anticipating as a worst-case scenario, but we nevertheless believe F2025 will be the trough earnings year.”
* TD Securities’ Brian Morrison to $95 from $98 with a “hold” rating.
“We have been looking for a reset of retail expectations and material inventory reduction within the dealer channel as potential catalysts to review our thesis,” said Mr. Morrison. “Progress in Q2/F25 is encouraging, but retail visibility is limited, and promotional activity is accelerating, which may extend the duration of a return to our forecast of ‘base level’ earnings.”
* RBC’s Sabahat Khan to $99 from $108 with an “outperform” rating.
“While the reduced guidance drove the modestly negative share price reaction [Friday], investor focus appears to be on the outlook/cadence of F26 results (management commentary pointed to some softness through ‘first part’ of F26),” said Mr. Khan.
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Stifel’s Matthew Sheerin thinks the recent sell-off in shares of Celestica Inc. (CLS-N, CLS-T) have brought a “compelling entry point” for investors, leading him to raise his rating to “buy” from “hold” previously.
“The EMS company’s stock fell 10.6 per cent last Friday (vs. down 1.7 per cent for the S&P500), and is down 35.2 per cent since July 16 (vs. down 4.6 per cent for the S&P500),” he said. “We attribute the sell-off to concerns of slowing AI investments from hyperscale customers following key supplier earnings reports (including NVDA and AVGO).”
The equity analyst thinks earnings expectations for the Toronto-based company “remain reasonable despite negative market sentiment.”
“Despite negative market sentiment on the AI investment cycle, we see no material change to conditions since Celestica reported Q2 earnings on July 26, when management clearly articulated key drivers (and potential headwinds) for growth from hyperscale customers, which account for 70 per cent of Celestica’s Connectivity and Cloud Solutions segment, and 40 per cent of total sales” said Mr. Sheerin. T”he company said it expects a shift in product mix in 2H24 within CCS, as incremental growth in networking and storage products is expected to offset a reduction in AI/ML compute products, which is being driven by technology transitions to next-gen compute programs, including liquid cooling, as well as the second-sourcing of some programs to a competitor. Current-gen compute shipments are expected to plateau in late FY24, while new programs begin to ramp in mid-to-late FY25. Meanwhile, management expects strong 400G switch demand through FY24 and into FY25, while 800G demand is expected to accelerate exiting FY24 and ramp through FY25. We note that Celestica is one of the leading ODM providers of data-center network switches to hyperscale customers, with a roughly 25-per-cent market share, and has at least two major hyperscale customers.”
Also seeing an enticing valuation for Celestica shares, he maintained his US$58 target. The average on the Street is US$64.11.
“Shares now trade at 10.2 times forward EPS and 6.7 times EV/EBITDA and trades at or below all key EMS comps, which we believe is unjustified given its best-in-class margins, diversification within the broader industrial markets, and defensible position within CCS given Celestica’s ODM model in the networking space,” he said.
“We believe Celestica will continue to benefit from multiple expansion as its years-long investments into more design and engineering-driven relationships, and its shift in focus to higher-margin “emerging” end markets, where outsourcing represents no more than 10-20 per cent, bears fruit. We also credit Celestica’s partnerships, IP, and know-how for proprietary compute products for AI/ML applications, which has enabled Celestica to benefit from the growth in AI infrastructure in recent quarters. We expect the transition in AI/ML compute programs to be a headwind to CCS growth in 2H’FY24 and into FY25, though we believe continued strength in networking and storage demand will somewhat offset those declines. We are positive on the stock, with shares trading at just 10x our FY25 EPS estimate.”
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TD Securities analyst Craig Hutchison sees First Majestic Silver Corp. (AG-T) proposed US$970-million acquisition of Gatos Silver Inc. (GATO-T) falling “in line with management’s strategy to add a cash-flowing silver asset.”
“We believe the acquisition of Gatos Silver offers the potential to be accretive to NAV [net asset value], earnings and cash flows staring in 2025,” he said after resuming coverage of the Vancouver-based company.
“At this stage, we are not making any adjustments to our forward estimates pending a more thorough review of the management circular and the technical report on CLG. We also believe the current political situation in Mexico could pose some risk to the timeline to close in Q1/25. In the interim, we have trimmed our target price multiple to reflect multiple compression among the silver names and maintained our HOLD rating.”
Mr. Hutchison trimmed his target for First Majestic shares by $1 to $7.50. The average is $9.33.
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Desjardins Securities analyst Chris Li expects Empire Company Ltd.’s (EMP.A-T) first-quarter 2025 financial results to “reflect continuing macroeconomic pressures weighing on same-store sales.”
However, he also thinks the Wednesday release will prove to be “the inflection point for earnings growth, supported by a gradual improvement in market conditions and consumer behaviour, ongoing benefits from cost reductions and margin management, and improving profitability at Voilà following the pause in Vancouver.”
Mr. Li is currently projecting earnings per share for the quarter of 87 cents, up 9 cents from the same period a year ago and in line with the consensus estimate on the Street. However, he’s forecasting same-store sales growth, excluding fuel, of 0.4 per cent, down from 4.1 per cent in fiscal 2024.
“This is below [Loblaw’s] 1.1 per cent (ex general merchandise) and [Metro’s] 2.4 per cent as macro pressures (cumulative impact of high inflation and elevated interest rates) continue to drive value-sensitive consumers to discount banners, for which EMP is under-indexed,” he said. “Gross margin up 30 basis points year-over-year (down from 60 basis points in 4Q FY24 and directionally in line with EMP’s 10–20 basis points longer-term target), driven mainly by improvements in space productivity, non-theft shrink in fresh, supply chain efficiency initiatives and business mix; and retail SG&A expense rate (ex D&A and $12-million charge for the early termination of Ocado’s exclusivity contract) up 40 basis points year-over-year (sequential improvement from 70bps in 4Q FY24), driven by business expansion, higher labour costs and store network investments, partly offset by cost-reduction initiatives.
“Following two years of no EPS growth, management expects adjusted EPS growth to revert to its long-term 8–11 per cent target this year. While other income/real estate gains tend to be lumpy and make the quarterly trend volatile, we believe this is achievable on an annual basis. Our 9-per-cent adjusted EPS growth forecast (in line with consensus) assumes adjusted net earnings growth of 4 per cent, with share buybacks contributing the other 4–5 per cent.”
Maintaining his “positive long-term view,” Mr. Li reiterated his “buy” recommendation for Empire with a $42 target, rising from $40, after increases to his full-year 2025 and 2026 earnings expectations. The average on the Street is $39.57.
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In other analyst actions:
* Calling Aecon Group Inc. (ARE-T) the “top trade idea” in his coverage universe “given the potential upside the stock offers driven by significantly improved earnings certainty on meaningfully lower project risks,” Stifel’s Ian Gillies raised his target to $30 (a high on the Street) from $25 with a “buy” rating. The average is $20.27.
“We upgraded ARE to BUY from HOLD on July 25, 2024, following the company’s update on its legacy projects,” he said. “We believe equity risk has reduced significantly after the company ringfenced impairments from the legacy projects for the first time. The stock has increased 42.0 per cent year-to-date, but there remains significant upside. A higher degree of certainty regarding a return in earnings momentum and a valuation re-rate due to lower project risks make ARE a top tactical trade idea for investors looking for an undervalued stock tied to the Canada infrastructure spending play.”
* Jefferies’ Matthew Murphy raised his Lundin Gold Inc. (LUG-T) target to $29, exceeding the $27.73 average, from $26 with a “buy” rating.
* Following a site visit to its Marban gold project near Val-d’Or, Que., Eight Capital’s Felix Shafigullin trimmed his O3 Mining Inc. (OIII-X) target to $3.85 from $4.40 with a “buy” rating. The average is $3.12.
* In response to its Investor Day on Sept. 5, National Bank Financial analyst Don DeMarco raised his Torex Gold Resources Inc. (TXG-T) target to $31.25 from $28.50 with a “sector perform” rating, while TD’s Steven Green bumped his target to $34 from $33 with a “buy” recommendation. The average is $31.23.
“The addition of EPO to TXG’s mine plan highlights the ongoing upside and district scale potential at the Morelos Complex” said Mr. Green. “This is a valuable and scarce asset in our view since there are very few mines producing 400-500k ozs/yr held by a small/mid-cap producer. Given its improved position, TXG is also re-engaging in potential M&A, which could add value by removing any single asset discount.”