Inside the Market’s roundup of some of today’s key analyst actions
While admitting he was “surprised” that Bank of Montreal’s (BMO-T) second-quarter credit quality was “markedly worse than peers,” RBC Dominion Securities analyst Darko Mihelic thinks Wednesday’s sell-off in its shares was “overdone.”
“We can never be sure that BMO is an outlier on credit quality, but we have many reasons to suspect it is not, including history,” he said. “We expect elevated PCLs in the foreseeable future but also expect BMO will not be alone in this regard.”
BMO plummeted 8.9 per cent after it reported core earnings per share for the quarter of $2.59, falling well below both Mr. Mihelic’s $2.72 estimate and the consensus projection of $2.76 due to higher-than-anticipated provisions for credit losses. Total PCLs came in at $705-million, much higher than the analyst’s estimate of $512-million, as performing and impaired PCLs topped expectations.
“It certainly looks like the quarter-over-quarter change at BMO was more dramatic and with higher guidance for H2/24, the pertinent question arises, is BMO’s credit outlook worse than peers? If the answer to the above question is yes, we believe the stock will suffer, and if the answer is no, given yesterday’s sell-off, this is likely an attractive entry point into the stock,” said Mr. Mihelic.
“Impaired PCLs increased 39 per cent quarter-over-quarter to $658 million, higher than our estimate of $486 million, and performing PCLs were $47 million, also higher than our forecast of $26 million. BMO is now guiding to an impaired PCL ratio of 41 bass points in H2/24 versus low 30s bps previously. We assume an impaired PCL ratio of 39 bps in Q3/24 and 40 bps in Q4/24.”
The analyst cut his forecast for BMO, primarily in the U.S. and Canadian P&C segments, with his core EPS estimates decreasing “considerably” by 53 cents to $11.07 (was $11.59) in 2024 and by $1.38 to $11.73 (was $13.11) in 2025.
“We introduce 2026 estimates for the first time, and we forecast a $13.64 core EPS in 2026,” he said.
“The main changes to our model include: 1) U.S. P&C: We reflect lower net interest margins (NIMs), reduced loan growth, and higher impaired PCLs for our remaining forecast period versus our previous estimates. Our changes in the segment have a negative EPS impact of $0.57 in 2024 and $1.50 in 2025. 2) Canada P&C: We model slightly higher NIMs, lower loan growth, and higher impaired PCLs than we did previously for our remaining forecast period. Our assumption updates in the segment have a negative EPS impact of $0.07 in 2024 and $0.02 in 2025.”
Maintaining his “outperform” recommendation for BMO shares, Mr. Mihelic cut his target to $124 from $130. The average target on the Street is $132.21, according to LSEG data.
Elsewhere, believing credit pressures could persist through the second half of the year, weighing on cash earnings per share and investor sentiment, Desjardins Securities analyst Doug Young downgraded BMO to “hold” from “buy” with a $129 target, down from $133.
“Higher impaired PCLs drove the cash EPS miss and, more importantly, management suggested the impaired PCL rate could remain around this level in the next two quarters,” he said. “A higher-for-longer interest rate environment is having a negative impact on borrowers, specifically in BMO’s commercial loan book. Note: Several larger commercial loan impairments (eg commercial real estate, financial sector, transportation) added several basis points to the PCL rate this quarter. And a higher-for-longer interest rate outlook could result in further performing loan PCLs in 2H FY24; we might get more colour on this in the next few quarters.”
Other analysts making target adjustments include:
* Scotia’s Meny Grauman to $129 from $137 with a “sector outperform” rating.
“After delivering its second quarterly miss in a row investors are clearly wondering whether it is time to throw in the towel on BMO,” said Mr. Grauman. “Given the stock’s recent track record we believe that it is certainly a valid question. And yet, we say no, even as we acknowledge that rehabilitation here will take multiple quarters. As we already highlighted in our bank preview, BMO’s US revenue story has been negatively impacted by the ‘higher-for longer’ rate environment (and probably the presidential election as well), and those same forces are clearly driving credit issues as well. We incorporate Management’s increased impaired PCL guidance into our forward estimates, but are still not convinced that BMO’s credit experience this cycle will prove to be materially worse than peers. Broadly speaking, we acknowledge that BMO’s U.S. exposure is a headwind right now, but with the U.S. economy continuing to outperform both Canada and the world, we see that pressure as temporary and ultimately supportive of our thesis on this name.”
* Canaccord Genuity’s Matthew Lee to $136 from $140 with a “buy” rating.
“BMO reported Q2 results [Wednesday] morning with EPS below estimates on the back of higher PCLs and U.S. NIM tightening,” said Mr. Lee. “On credit, management highlighted that the elevated rate environment and increasing unemployment are expected to pressure PCLs, with the bank now expecting impaired in the low 40bps-range for the remainder of F24. In tandem with slightly lower NIM, this creates a meaningful $0.62 reduction in our EPS for F24 (down 5.5 per cent) with a similar reduction in the first half of F25. As of now, we expect BMO’s impaired PCLs to moderate in the second half of next year, but perhaps not to the low-30s that we had forecasted prior. On the plus side, management appeared confident in its current provisioning, suggesting that performing PCLs should remain modest. On the NIM front, deposit competition in both geographies should be offset by improvements in the corporate segment, driving flat top-of-the-house NIM. Despite our estimate reductions post Q2, we continue to see opportunities for BMO to drive outsized earnings growth over the medium term, particularly through Bank of the West. We maintain our BUY rating but reduce our target to $136 from $140 on lower estimates. We continue to value BMO at 10.9 times P/E, a 4-per-cent premium to the peer group.”
* National Bank’s Gabriel Dechaine to $136 from $143 with an “outperform” rating.
“A 41 basis points impaired loss rate was higher than expected, and well above BMO’s low-30s impaired loss rate target for the year,” he said. “That target was delivered when rate cut expectations were different. In the current context, BMO expects loss rates similar to this quarter’s over the next few, resulting in a high-30s full-year loss rate. This outlook is unsurprising, given the steep increase in impaired loan formations over the past few quarters (i.e., GILs up 85 per cent since Q3/23) and with acknowledgement that many borrowers in the performing portfolio are struggling with higher rates. We note that Stage 2 classifications (i.e., higher risk performing category) represent 16 per cent of BMO’s loans, up from 10 per cent in Q2/23. Although it was a disappointing outcome, we believe credit expectations have become more realistic for BMO than they may have for other banks. As such, the risk of negative surprises in coming quarters should be lower.”
* Barclays’ Brian Morton to $132 from $140 with an “overweight” rating.
“Even after adjusting for a number of items, EPS fell shy of consensus estimates driven by a higher-than-expected PCL and lower NII. Still, trading results were strong and costs were well managed. Near term, impaired PCLs are expected to remain near current levels,” he said.
* TD Cowen’s Mario Mendonca to $135 from $142 with a “buy” rating.
“While there were some positives emerging from the quarter, namely operating leverage and NIM outlook, results were overshadowed by the abrupt deterioration in credit conditions, particularly U.S. business. Management characterized the issues as idiosyncratic. Estimates and multiples are coming down across the group, but we note that credit is an end of cycle theme, not beginning,” said Mr. Mendonca.
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After delivering stronger-than-expected second-quarter earnings per share “on the back of impressive Financial Markets execution,” Canaccord Genuity analyst Matthew Lee said National Bank of Canada (NA-T) “once again demonstrates solid execution.”
However, he cautioned its current valuation continues to be a concern.
“In the quarter, DCM [Debt Capital Markets] was the highlight as a robust underlying credit market drove 20 per cent year-over-year Financial Markets earnings growth for the firm,” he said. “Post-quarter, we are incrementally more constructive on NA’s Capital Markets business and opine that the second half of the year will likely benefit from greater equity issuances, noting that the firm has already secured some larger mining deals to start Q3. On the ABA front, we were impressed by the solid credit metrics, although management warned of elevated formations expected over the next two-three quarters. Overall, our forecasts are increased to reflect more pronounced Financial Markets growth. We maintain our HOLD rating on NA largely on valuation as the shares now trade at 11.3 times NTM P/E [next 12-month price-to-earnings] against the peer group at 10.5 times.”
A breakdown of the big banks’ second-quarter earnings
Shares of the Montreal-based bank rose 2.6 per cent on Thursday after it reported its profit climbed 9 per cent to $906-million, or $2.54 a share, compared with the same period last year. On an adjusted basis, the bank said it earned $2.54 a share, topping the $2.42 a share analysts expected, according to S&P Capital IQ. Capital markets profit rose 20 per cent to $322-million on higher revenues from equities and from interest-rate and credit activities.
Mr. Lee emphasized its Financial Markets business “remains the star of the show” and he expects improving loan growth in its Personal and Commercial segment.
“Capital Markets beat our estimates on both the top line and EPS as stronger-than-expected deal flow was complemented by stable FICC and prudent cost management,” he said. “We were also impressed by the segment’s loan growth, which was up 11 per cent year-over-year. Looking forward, we expect National’s performance to persist as ECM and advisory provide additional tailwinds to the business. As a result, we have increased our Capital Markets PTPP by 5 per cent for F24 with a commensurate increase in both F25 and F26.
“National’s P&C segment was largely in line with our Q2 forecasts, delivering stable sequential NIM and 1-per-cent quarter-over-quarter loan growth. Management expects an acceleration in the mortgage business throughout the back half of the year, culminating in mid-single-digit year-over-year growth for Q4. On the NIM side, we expect to see further pressure from deposit repricing, partially offset by the benefit of mortgage renewals.”
After raising his 2024 and 2025 earnings per share projections to $10.04 and $10.76, respectively, from $9.87 and $10.49, Mr. Lee bumped his target for National Bank shares to $117 from $109, reiterating his “hold” recommendation. The average target is $117.92.
Others making target adjustments include:
* Scotia’s Meny Grauman to $123 from $113 with a “sector perform” rating.
“National Bank’s financial performance, including a peer-leading ROE, continues to defy Street expectations, and the stock continues to outperform the larger banks by a wide margin,” said Mr. Grauman. “Far from being a challenge, the bank’s unique business mix with a geographical concentration in Quebec continues to allow it to outperform. This quarter we continued to see better-than-expected capital markets results despite the headwind from recent tax changes in Canada (the Dividend Received Deduction, or DRD). And on the credit side, the less indebted Quebec consumer helps underpin moderate credit guidance which has the bank’s annual impaired PCL ratio coming in towards the midpoint of the bank’s pre-pandemic range of 15-20 bps. With the DRD, less of a headwind than we expected and the bank likely to outperform peers on credit, our only real reservation on this name remains valuation. The shares are currently trade at an 11-per-cent premium to the group based on consensus F2025 EPS, which stands only behind RY’s 14-per-cent premium. The bank has clearly demonstrated that it deserves its place in this premium category, but we believe that further relative multiple expansion is limited versus much larger peers.”
* Desjardins Securities’ Doug Young to $119 from $116 with a “hold” rating.
“The bank delivered another strong quarter, with the beat driven primarily by capital markets and U.S. Specialty Finance and International (USSF&I),” he said. “There were also no big credit surprises.”
“We like various parts of the NA story, we just believe it is fairly valued.”
* RBC’s Darko Mihelic to $113 from $109 with a “sector perform” rating
“The better than expected quarter was mainly due to strength in Financial Markets (we have seen strong results here for several quarters), while Personal and Commercial earnings were lower than we expected. There were increases in gross impaired loan formations and signs of credit deterioration but guidance for H2/24 was relatively benign. While we believe NA’s impaired PCL guidance is credible (though probably not too conservative), signs of credit deterioration appear at both NA and its peers, so for conservatism we modelled higher PCLs in 2025 as we have for other banks,” said Mr. Mihelic.
* CIBC’s Paul Holden to $124 from $109 with an “outperformer” rating.
“It was another strong quarter of results. NA is trading at 11.6 times P/E (NTM [next 12-month] consensus), an 11-per-cent premium to the group average. The premium is high in a historical context and might well limit relative upside. However, the valuation multiple argument is not enough to dissuade us from our Outperformer thesis,” said Mr. Holden.
* Jefferies’ John Aiken to $123 from $121 with a “hold” rating.
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Mining analysts at Scotia Capital “markedly improved” their near-term commodity price outlook to reflect “the impact of ongoing supply-side challenges in the face of remarkably resilient global demand.”
In a research report released Thursday, they raised their targets for stocks in their coverage universe by an average of 12 per cent in response to a “significant improved” near-term copper market outlook.
“After incorporating our updated supply expectations for our combined coverage universe, which notably includes a delayed Cobre Panama restart to 2026 (vs. 2025 previously), we now forecast a tighter near-term outlook for the Cu market,” they said. “Specifically, we now forecast 2024-2026 net deficits of 172kt, 322kt, and 69kt (three-year average deficit of 188ktpa), which compares positively with our January outlook of a 171kt deficit, balance, and a 97kt deficit (three-year average deficit of 89kt), respectively. We continue to forecast relatively large deficits in the 2027-2028 period, supporting an elevated price environment. Spot Cu TCRCs have plummeted to unprecedented negative levels, reflecting ongoing concentrate supply underperformance. Although total global visible Cu inventories have crept slightly higher to 7 days, we forecast a theoretical inventory exhaustion ahead. While demand has been remarkably resilient to date, especially given markedly higher prices, we estimate that average global consumption growth of only 1.8 per cent per annum would be sufficient to balance the Cu market in the 2024-2026 period (including only 1.3 per cent in 2024).”
They added: “All copper equities are likely to move higher if Cu prices further improve, or lower if Cu prices weaken. Valuation multiples remain somewhat elevated in the context of current spot prices; however, this is likely supported by the very constructive medium- to long-term fundamental picture, the energy transition theme, and by ongoing M&A speculation. We note that margins for most producers remain solid (spot Cu of $4.70/lb vs. 2024 average AISC of $2.59/lb) although FCF generation appears muted.”
Analyst Orest Wowkodaw made the firm’s lone rating change, upgrading Ero Copper Corp. (ERO-T) to “sector outperform” from “sector perform,” citing “the shares attractive relative valuation, impressive near-term growth outlook (the Tucumã project remains on schedule for a Q3/24 start-up; consolidated Cu output is forecast to increase by 37 per cent in 2024 and 65 per cent in 2025), along with easing balance sheet pressures.”
His target for Ero Copper shares jumped to $40 from $32. The average on the Street is $33.98.
“ERO ranks very well on Cu growth driven by the development of the Tucumã project and a new shaft at Pilar,” he added. “The company also ranks relatively well on valuation (2025E EV/EBITDA and implied Cu price) and Cu price leverage. Moreover, FCF is anticipated to markedly improve starting in 2025.”
For large-cap producers, the firm’s changes are:
* First Quantum Minerals Ltd. (FM-T, “sector perform”) to $19 from $18. Average: $18.62.
“FM shares remain heavily discounted due to the ongoing operating uncertainty at Cobre Panama and the potential knock on implications to the company’s levered balance sheet,” said Mr. Wowkodaw.
* Ivanhoe Mines Ltd. (IVN-T, “sector outperform”) to $23 from $19. Average: $22.45.
“IVN ranks extremely well on growth (world-class assets to boot) and has high Cu leverage,” said Mr. Wowkodaw. “The company’s execution to date at Kamoa-Kakula (Phase 3 just completed) has been nothing short of remarkable. However, valuation (along with geopolitical risk profile) appears relatively elevated.”
* Teck Resources Ltd. (TECK.B-T, “sector outperform”) to $83 from $75. Average: $72.82.
“TECK has peer-leading near-term Cu growth (which will further improve with future QB expansions) and trades at relatively attractive valuation multiples (lowest implied Cu price among large caps; relatively discounted P/NAVPS to peers) despite low geopolitical risk,” said Mr. Wowkodaw. “Given the impending sale of the HCC assets, the associated transformation of the balance sheet, and relatively limited internal cash needs post the ramp-up of QB2, we anticipate meaningful shareholder returns to resume in late 2024.”
The analysts concluded: “Overall, TECK, CS, and CCO remain our top picks; we also recommend ERO, FCX, HBM, IVN, and MTAL for producing Cu exposure. Among the developers, we recommend ASCU, FIL, IE, and NXE. Due to relatively poor risk–reward profiles, we rate GMEXICO, NEXA, and SCCO Sector Underperform. Our Sector Outperform–rated equities (producers only) currently have a relatively modest 12-month average implied return of 17 per cent.”
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Stifel analyst Cole McGill thinks the recent retreat in copper prices is “healthy for the mid/long term bull thesis, and would note when inventories unwind, the broader secular copper demand story that is increasingly ex China can return.”
“Copper has taken a breather post the euphoric rise to $5.20/lb on short squeeze concerns two weeks ago,” he said. “Bears to this rally would point to Chinese inventories up and tempered fabricator utilization rates in China. We think heightened inventory shipments from China are a natural consequence of smelters raising cash to support crashing TC/RCs, where the precipitous drop in smelter charges are a signal to the issue at hand: supply in 2024 has seen nearly 1MMt wiped out from Latin American Tier One assets. With the usual sources of supply elastic copper less available than previous cycles (declining reserve grades), risked industry growth capex intensity of $25k/t returns an IRR of 15 per cent at $5 copper, continuing to provide an impediment to significant supply growth.
“Strong U.S. PMI, tight TC/RCs, new demand drivers alongside substitution insulation as supply hiccups in the aluminum market sending price higher all help inform our positive outlook that is increasingly underpinned by secular demand stories ex China. On top of global urbanization/development (where nearly 50 per cent of global population has similar copper consumption as China thirty years ago), the secular electrification/decarbonization story drives on, with potential to increase global Cu demand to 35MMt by 2030 (27MMt in 2024).”
In a research report released Thursday titled Thoughts into 2H24: From Margin to Multiple Expansion, Mr. McGill said “cost control” is his main takeaway from first-quarter earnings season, believing “margin expansion can drive multiple expansion across [his coverage] universe, help leverage profiles, and aid with growth optionality.” He emphasized the midtier sector is providing fewer sources of exposure than previous cycles.
“Equity response: producers higher as expected; yet to see broadening reflexivity downcap,” he said. “1Q24 was marked by producer multiple expansion leading the red metal. However since April we have seen our coverage tread water on a spot p/nav basis near 0.80 times, as the equities have been hesitant to price in near $5/lb Cu. While producer multiples have tread water, developer/explorco multiples have decreased. We think there is cyclical precedent for investors to begin sharpening their pencils downcap as this valuation disconnect emerges. Producer M&A has been known to take advantage of the ‘buy over build’ arbitrage until valuations and FCF generation provide incentive for firms to look for growth through toeholds/external development.
“Exiting 1Q24, we see producer margin expansion as the main story that can drive growth optionality, and potentially higher multiples. Inflation adjusted, copper’s last peak of $5.51/lb was short-lived in 2022, and so was the equity response. While the red metal rocketed through 1Q22, so did inflation, eroding margin capture, with the equities peaking at 0.70 times spot p/nav in 1Q22. Fast-forward to now, and we think the differing rates of change between copper/inflation support margin expansion. On a company-wide $/t milled basis, our coverage has seen minimal (1 per cent) inflation year-over-year. We think this can inform multiple expansion due to increasing growth optionality via either i) faster than expected deleveraging, allowing firms to bring forward growth projects, and/or ii) for our mid-cap coverage, second order M&A, taking advantage of asset sales from mega mergers likely to happen.”
Mr. McGill said his “favoured exposure” remains Hudbay Minerals Inc. (HBM-T), citing deleveraging and availability of low capital intensity growth. He raised his target for the Toronto-based company’s shares to $15 from $12.50, keeping a “buy” rating. The average on the Street is $15.54.
“HudBay is a growth-oriented mid-tier base metals producer with significant leverage to copper and zinc,” he said. “HudBay offers investors exposure to base metals, primarily to copper through its top tier Constancia mine in Peru. The company is transitioning through a deleveraging period owing to significant FCF due to high grade asset sequencing and operational execution.”
For the risk adverse, he suggested Lundin Mining Corp. (LUN-T) based on its balance sheet strength. His target for its shares increased to $18, above the $17.26 average, from $16.50 with a “buy” recommendation.
“Lundin Mining is a diversified base metal growth story, and will be increasingly anchored in the Andean region,” he said. “Chilean copper mines Candelaria and Caserones will be joined in future by flagship growth project Josemaria, located just across the border in Argentina. With all three assets located in proximity to one another, we believe the company will be able to reap synergies as they develop this emerging copper district.”
His other target changes are:
- Capstone Copper Corp. (CS-T, “buy”) to $11.50 from $10.50. Average: $12.24.
- First Quantum Minerals Ltd. (FM-T, “hold”) to $18 from $15. Average: $18.62.
- Taseko Mines Ltd. (TKO-T, “buy”) to $4.25 from $3.90. Average: $4.09.
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In other analyst actions:
* In the wake of a hostile takeover bid from U.S.-based crypto mining company Riot Platforms Inc. (RIOT-Q), Stifel’s Bill Papanastasiou lowered Bitfarms Ltd. (BITF-Q, BITF-T) to “hold” from “speculative buy” with a US$2.30 target, down from US$3.25 and below the US$4.04 average on the Street.
”The offer (which carried a 20-per-cent premium) was rejected and Bitfarms’ board did not engage in substantive dialogue, which echoes our warning of underlying issues at the board level,” he said. “RIOT has since become the largest shareholder with a 10.0-per-cent stake and intends to propose board changes via a special meeting requisition. While BITF may receive competing bids, there is a high possibility that peers are hesitant to come in given RIOT’s ownership. In our view, RIOT is strategically positioned to benefit given the circumstances, and note that the transaction would represent an attractive combination given scaled operations and access to low-cost power.”
* In response to a positive final investment decision for its Ridley Island Energy Export Facility joint-venture project, ATB Capital Markets’ Nate Heywood bumped his AltaGas Ltd. (ALA-T) target to $36 from $35 with an “outperform” rating, while BMO’s Ben Pham increased his target to $37 from $36 with an “outperform” rating. The average is $34.18.
“The announcement is well aligned with the Company’s telegraphed strategy and the accretive investment multiple highlights the unique positioning to access advantaged markets,” Mr. Heywood said.
* CIBC’s Stephanie Price increased her target for Descartes Systems Group Inc. (DSGX-Q, DSG-T) to US$108 from US$101 with an “outperformer” rating. Other changes include: TD’s Daniel Chan to US$115 from US$110 with a “buy” rating, BMO’s Thanos Moschopoulos increased to US$100 from US$94 with a “market perform” rating and Stephens’ Justin Long to US$110 from US$107 with an “overweight” rating. The average on the Street is US$101.22.
“We remain Market Perform on DSGX following Q1/25 results that were roughly in line for both the quarter and Q2/25 calibration,” said Mr. Moschopoulos. “We’ve modestly raised our FY2025/2026 EBITDA estimates. We think DSGX can continue to execute successfully on its strategy of delivering consistent EBITDA growth (its recent organic services growth, over the last several quarters, provides us with comfort in that regard) but on a relative basis prefer other consolidators in our coverage universe.”
* Echelon Partners’ Andrew Semple lowered his Decibel Cannabis Company Inc. (DB-X) target to 25 cents from 30 cents, reiterating a “speculative buy” recommendation. The average is 37 cents.
“Decibel Cannabis Company Inc. reported Q124 results that were below our estimates and the consensus,” he said. “Sales faced pressure as competition intensified in the infused pre-roll and vape categories, and as the Company’s international sales declined after a temporary halt to Israeli exports due to issues with a local distributor. Decibel gave back some share in Canada as competitors launched new ready-to-consume products that adapted to consumer preferences for larger format, higher potency products.
“Decibel’s recovery initiatives are already well underway. Decibel is addressing a heightened competitive landscape in Canada by launching larger format vape cartridges and disposable vapes in Q224, with plans to roll out additional SKUs to broaden its offering of high potency RTC products. Many of these new provincial listings are expected to be made available for retailers in Q224 and H224. In addition, the Company expects to complete first international shipments to the UK, Australia, and a new partner in Israel in Q224. As a result of these efforts, management guided to a solid sequential improvement in Q224 revenues, with sequential growth likely to continue for the remainder of the year. We therefore view Q124 to be the ‘trough’ for earnings this year, with improvements expected ahead.”
* Mr. Semple raised his Vext Science Inc. (VEXT-CN) target by 10 cents to 60 cents with a “speculative buy” rating. The average is 63 cents.
“Vext Science Inc. reported Q124 results that beat estimates,” he said. “Sales faced ongoing pressure from competition and price compression, but adj. EBITDA significantly beat forecasts, reflecting cost management and improved cash margins.
“In addition, we are optimistic about the outlook for Vext’s operations ahead of the commencement of adult-use sales in Ohio. Ohio regulators recently approved accelerated adult-use cannabis business licensing for incumbent medical operators. Commercial sales could commence as early as June or July, ahead of the initial September timeline. We believe the Ohio market is particularly attractive to Vext and will significantly enhance the growth profile of its business. Ohio’s medical market generated $500-million of cannabis sales in 2022. Compare that to neighbouring Michigan where adult-use sales are legal, which delivered annual cannabis sales of nearly $3.1-billion in 2023 and has 16 per cent fewer residents than Ohio. We believe adult-use sales could cause the Ohio cannabis market to surpass $2-billion within a couple of years, and potentially more than $3-billion over time, representing a 4-6 times increase in total market opportunity once commercial adult-use sales are legal.”
* With the sale of its minority interest in the Labrador Island Link (LIL) transmission line to KKR for $1.192-billion, National Bank’s Patrick Kenny bumped his Emera Inc. (EMA-T) target to $50 from $49 with a “sector perform” rating, while , while BMO’s Ben Pham increased his target to $37 from $36 with an “outperform” rating.
“Based on a total return opportunity of 10.9 per cent, and reduced risk surrounding any potential dilution stemming from the company needing to sell any other regulated utilities in order to fund its three-year capital plan (i.e., New Mexico Gas), we maintain our SP rating,” he said.
* Following “mixed” quarterly results, RBC’s Geoffrey Kwan raised his EQB Inc. (EQB-T) target to $109 from $107 with an “outperform” recommendation. The average is $103.50.
“We have a slightly positive view of Q2/24 results as EPS was ahead of our forecast with loan growth in line with our forecast, but NIM yields were up an impressive 10 basis points quarter-over-quarter,” said Mr. Kwan. “However, similar to bank peers, certain credit metrics continued to worsen and despite gross impaired loans declining slightly quarter-over-quarter, we expect PCLs to improve exiting 2024. RBC Economics’ forecasts don’t reflect a severe economic recession or housing downturn and as such, with EQB’s shares trading at just above 1.0 times P/BV and our forecast of a mid-teen ROE over the next couple of years, we view the shares as attractively valued.”
* In response to the results of its Bandeira feasibility study, BMO’s Greg Jones increased his Lithium Ionic Corp. (LTH-X) target to $3.75 from $3.50. with an “outperform” rating. The average is $4.55.
“In our view, the results continue to show Bandeira is an attractive, low-capital project with potential for a short timeline to production and opportunities for further upside/optimization,” said Mr. Jones.
* Guggenheim’s Gregory Francfort trimmed his Restaurant Brands International Inc. (QSR-N, QSR-T) target to US$73 from US$74 with a “neutral” rating. The average is US$86.10.
David Leeder