Inside the Market’s roundup of some of today’s key analyst actions
Following the release of in-line second-quarter results, iA Capital Markets analyst Matthew Weekes raised his recommendation for shares of Enbridge Inc. (ENB-T), emphasizing the potential from its secured growth program moving forward.
In a research note released early Tuesday, he moved the Calgary-based company to “buy” from “hold,” citing: “ (a) positive momentum in project sanctioning, (b) low-risk commercial underpinnings for the majority of cash flows, much of which include revenue escalators or cost of service recovery for inflation, (c) stable and growing dividends, which currently provide investors with an attractive 6-per-cent yield, and (d) strong financial position, with ENB forecasting that it will exit 2022 close to the low end of its target leverage range.”
On Friday, Enbridge reported adjusted earnings before interest, taxes, depreciation and amortization of $3.715-billion, up 12.5 per cent year-over-year and above the estimates of both Mr. Weekes ($3.647-billion) and the Street ($3.695-billion). Adjusted earnings per share of 67 cents was flat from the same period a year ago, matching the analyst’s forecast and 4 cents below the consensus expectation.
Concurrently. the company also reaffirmed its full-year guidance, projecting adjusted EBITDA of $15.0-$15.6-billion and distributable cash flow per share of $5.20-5.50.
Mr. Weekes said the results reflect “solid EBITDA and DCF per share growth driven by the numerous capital projects placed into service during the year, the acquisition of the Ingleside Energy Centre, and favourable operating conditions in several areas of the business.”
He sees Enbridge continues to advancing its capital plan and developing new opportunities, “including investment downstream into LNG liquefaction that aligns with risk preference.”
“In addition to advancing its existing capital program, ENB added new secured growth in the quarter ,including $0.4-billion of new projects previously announced to serve natural gas demand from the Plaquemines LNG facility and an estimated $1.2-billion expansion to BC Pipeline’s T-North section (est. ISD 2026),” said Mr. Weekes.
“ENB is investing a 30-per-cent equity interest in the $5.1-billion, 2.1 MTPA Woodfibre floating LNG project in BC alongside partner Pacific Energy Corp.(Private). In exchange for its capital contribution, ENB will receive a preferred equity interest that provides predictable future cash flows. Woodfibre is expected to enter service in 2027. Along with this announcement, ENB has launched a binding open season for a $2.5-billion-plus expansion of BC Pipeline’s T-South section.”
Believing its “strong leverage metrics remain supportive of equity self-funded growth mode,” Mr. Weekes raised his target for Enbridge shares by $1 to $60, matching the average target on the Street.
Elsewhere, other analysts making target changes include:
* National Bank’s Patrick Kenny to $61 from $60 with an “outperform” rating.
“Based on longer-term accretion from the more than $3-billion of newly secured LNG-related growth projects, our target bumps up $1 to $61,” Mr. Kenny said. “Combined with several near-term energy security catalysts potentially offering further export-related opportunities, we maintain our Outperform rating alongside a total return opportunity of 12.1 per cent.”
* Raymond James’ Michael Shaw to $57 from $55 with a “market perform” rating.
“Combined with expansions of the T-North and T-South Pipelines, in part to accommodate Woodfibre volumes, and continued development of US Gulf Coast LNG related investments, Enbridge is adeptly pursuing its export oriented strategy,” said Mr. Shaw. “The strategy is growing ENB’s exposure to increased North American energy exports while simultaneously connecting ENB’s assets to those export terminals – further reinforcing the ‘demand pull’ characteristics of the existing footprint. These projects, along with investments in renewable energy and Enbridge gas, should support ENB’s targets of $5-$6-billion project sanctioning annually and 5-7-per-cent DCF per share growth.”
* CIBC World Markets’ Robert Catellier to $61 from $60 with an “outperformer” rating.
While Desjardins Securities analyst Benoit Poirier sees value in Aecon Group Inc. (ARE-T), he thinks it will “take time to crystalize in the current environment.”
Accordingly, following weaker-than-expected second-quarter results, he lowered his recommendation for the Toronto-based company to “hold” from “buy” previously.
“Aecon has a market-leading position in the growing Canadian infrastructure market as well as a strong operational track record,” said Mr. Poirier. “However, given the length of possible disputes/litigation is unknown and given the possibility of future project adjustments due to the current environment (increasing interest rates, high inflation, labour and supply chain issues), visibility on consistent future cash flows is less clear and more difficult to predict.”
On July 28, Aecon reported revenue of $1.123-billion, up 16 per cent year-over-year and above Mr. Poirier’s $1.01-billion estimate. However, EBITDA fell 37 per cent to $38.4-million, below the analyst’s $64.1-million projection as expenses increases and margins diminished.
“Four large fixed-price legacy projects, including the CGL pipeline project, are being negatively impacted by additional costs,” he said. “During 2Q, the impacts became more pronounced and, as a result, ARE is in the process of submitting claims for compensation. Interestingly, management stated on the call that the recent settlement between TC Energy and LNG Canada could help ARE with its disputes.”
“Backlog increased sequentially to $6.6-billion (from $6.4-billion)—the four large fixed-price legacy projects being disputed make up C$1.1–1.2b. New contract awards of $1.3-billion were booked in 2Q, compared with $1.6-billion in 2Q21. Management disclosed on the call that the four large fixed-price legacy projects being disputed make up $1.1–1.2-billion (CGL accounts for about half of that) of the total $6.6-billion backlog.”
Preferring to “wait on the sidelines until we gain visibility on future cash flows and project risks,” Mr. Poirier cut his target for Aecon shares to $17 from $23 after reducing his financial forecast through 2023. The average target on the Street is $15.67.
Elsewhere, TD Securities’ Michael Tupholme cut his rating to “hold” from “buy” with a $21.50 target, up from $19.50.
“Aecon faces a considerably more uncertain near-to-medium term outlook, in our view,” said Mr. Tupholme. “Until mitigated (or at least better understood from a quantum/recovery potential perspective), we believe that risks related to possible negative cost reforecasts on fixed-price projects are likely to meaningfully limit investor interest in the stock.”
Others making target adjustments include:
* National Bank Financial’s Maxim Sytchev to $13 from $18 with a “sector perform” recommendation.
“It feels that a lot of backlog won around the failed Chinese bid is now coming to roost,” said Mr. Sytchev. “Given the long-dated nature of projects’ duration, once there are provisions, rarely do these contracts ‘get better’. They do not. In addition, working capital consumption only tends to increase as we get close to official completion dates. As a result, there is a lot of unanalyzable risk with ARE’s investment thesis. Last time when ARE took a material provision (2011 – oil & gas job), it took the shares almost a year to get back to prewrite-down levels (we also provide context around the market return at that time + WSP – used as a consulting proxy). At this point, we see no reason to bottom fish (yet).”
* Stifel’s Ian Gillies to $11 from $14 with a “hold” rating.
“Aecon’s 2Q22 EBITDA was 33 per cent below our forecast, due to a margin adjustment for an LRT contract,” said Mr. Gillies. “The company also disclosed four large projects that could have material adverse impacts to financial performance due to inflationary pressures, scope changes, site readiness and other factors. As such, we expect future quarters could have negative EBITDA surprises albeit it is unclear which periods this may occur in. This type of uncertainty is bound to weigh on the company’s valuation and increase concern around capital allocation.”
* RBC’s Sabahat Khan to $13 from $16 with a “sector perform” rating.
Following lower-than-expected Q2 earnings, we maintain a cautious view on Aecon shares. We expect further risk in the Construction segment given the ongoing impact of inflation and supply chain headwinds, while the earnings contribution from the Concessions segment should improve (driven by a recovery in air traffic volumes at the Bermuda airport),” he said.
* Raymond James’ Frederic Bastien to $17 from $21 with an “outperform” rating.
“When we published our earnings preview for Aecon Group, we cautioned that today’s labour shortages, supply chain bottlenecks and inflated material costs were posing downside risk to our estimates and the Street’s,” said Mr. Bastien. “Lo and behold, the contractor’s 2Q22 results missed expectations due to an unfavourable margin adjustment taken on a legacy light rail transit (LRT) project in Ontario. Management also noted that while the pricing and commercial terms of the company’s recent contract awards appropriately reflect today’s volatile market conditions, three more fixed-price assignments entered into in or before 2018, including CGL, are at risk of incurring additional costs. Against this seemingly uninspiring backdrop, investors are probably wondering why we are sticking to an Outperform rating. There are five considerations supporting our recommendation: (1) in our time covering Aecon, the stock has never traded below tangible book value for extended periods of time; (2) a well-capitalized balance sheet continues to support the dividend; (3) the potential for a takeout increases significantly at current levels; (4) the monetization of the Bermuda Skyport can be explored again with the ongoing recovery in airport traffic; and, (5) the backlog points to significant growth over the next 12 months. Investing in construction isn’t for the faint of heart, but we firmly believe ARE’s risk-reward profile is skewed to the upside.”
* BMO’s Devin Dodge to $13 from $14 with a “market perform” rating.
“Though the demand environment remains strong and ARE continues to secure attractive new contracts, the focus remains on its current portfolio of large fixed-price projects, where cost pressures intensified during Q2. We believe the risks for material cost overruns is elevated, visibility into potential recoveries is limited, and claims resolutions could still be a few quarters away,” said Mr. Dodge.
* CIBC World Markets’ Jacob Bout to $14 from $16 with a “neutral” rating.
Despite its second-quarter earnings per share falling short of expectations and continuing to face headwinds on its pipeline assets, National Bank Financial analyst Don DeMarco said Dundee Precious Metals Inc.’s (DPM-T) free cash flow “did not disappoint and net cash reached an all-time high.”
“We had a conviction miss on Q2/22 and DPM’s shares underperformed the S&P TSX Gold Index by 2.5 per cent following the release,” he said.
“Since our downgrade in mid-Feb., DPM’s shares are in line with the benchmark, down 26.0 per cent (vs. S&P TSX gold index down 25.9 per cent), yet in the last three months have rallied 12.2 per cent showing a recent change in sentiment.”
With that turnaround, Mr. DeMarco raised his rating for Dundee shares to “outperform” from “sector perform” on Tuesday, pointing to four factors: cost “outperformance” in the second quarter, seeing signs inflation “is in check” and expecting Dundee to “sustain best-in-class margins and FCF”; an outlook for higher production and lower costs; a supported target price based on the lowest enterprise value-to-EBITDA multiple and intermediate producer universe and expecting EBITDA to “trend higher” and emphasizing its net cash is growing.
He raised his target for Dundee shares to $10 from $8.75. The average on the Street is $11.64.
Elsewhere, CIBC’s Cosmos Chiu lowered his target for to $10 from $11.50 with an “outperformer” rating.
IA Capital Markets analyst Naji Baydoun continues to see a “fundamentally health” growth outlook for Bird Construction Inc. (BDT-T).
However, seeing “heightened macro-economic uncertainties,” he lowered his recommendation for the Mississauga-based company to “hold” from “buy” on Tuesday, expecting its expansion to “become challenged” over the near term.
“BDT has meaningfully de-risked its business profile over the past several years; the Company has taken deliberate steps to (1) diversify its client base/market exposure (reducing concentration risk), (2) develop self-perform capabilities, and (3) focus on lower-risk contract structures,” said Mr. Baydoun. “These initiatives, along with (1) the transformational acquisition of Stuart Olson (SOX) in 2020, and (2) Dagmar Construction in 2021, have materially rebalanced the Company’s risk profile and improved its backlog (via a more stable portfolio).”
“The previously noted significant transformation of BDT has translated into more sustainable top-line growth and impressive margin improvements; however, we are turning more cautious on the overall industry outlook. BDT’s Q1/22 results were impacted by a combination of productivity issues and supply chain challenges; along with heightened inflation, we see the potential for these variables to impact the near-term outlook for BDT via (1) cost increases, (2) project delays, and (3) a potential slowdown in new project activity. We do not see any material risks to BDT’s balance sheet from any potential near-term margin pressures given the Company’s relatively low leverage profile.”
Seeing the potential for industry challenges in the near term, Mr. Baydoun reduced his financial forecast for Bird, taking a “more conservative” stance. Now seeing compound annual growth of 3.5 per cent, down from 4.6 per cent previously, his full-year earnings per share estimates for 2022, 2023 and 2024 slid to $1, $1.07 and $1.09, respectively, from $1.07, $1.15 and $1.13.
His target for Bird shares fell to $10 from $11.50. The average on the Street is $11.36.
“We continue to like the long-term value proposition in BDT’s shares (from a combination of sustainable growth and an attractive dividend yield); however, at this time, we prefer to wait for either a better entry point or additional developments before accumulating the shares further,” said Mr. Baydoun.
“BDT offers investors (1) mid-single-digit revenue, Adj. EBITDA, and FCF/share growth (4-6 per cent per year, CAGR 2021-26), (2) exposure to the Canadian construction sector with potential upside from additional infrastructure investments and tuck-in M&A, (3) an attractive dividend (more than 5-per-cent yield, 20-30-per-cent FCF payout), and (4) a discounted valuation compared with peers.”
Touting an “improved relative value and favourable near-term AFFO growth outlook,” Raymond James analyst Brad Sturges raised his recommendation for Tricon Residential Inc. (TCN-N, TCN-T) to “strong buy” from “outperform” on Tuesday.
“We are upgrading ... to reflect: 1) strong U.S. single-family rental (SFR) demand trends supported by eroding home-ownership affordability in a higher mortgage cost environment year-over-year; 2) its relative discount valuation after Tricon’s relatively greater share price decline in 2Q22; 3) its above-average near-term AFFO/share growth prospects; and 4) potential near-term positive catalysts that include a possible recapitalization event of Tricon’s JV U.S. multifamily rental (MFR) fund,” he said.
His target for Tricon’s NYSE-listed shares slid by US$1 to US$16. The average on the Street is US$14.22.
“After generating a very robust 73-per-cent total return in 2021, Tricon’s share price has experienced a relatively greater correction during this broader public market sell-off over the past few months,” said Mr. Sturges. “In 2Q22, Tricon’s market valuation has contracted from a relative P/AFFO multiple premium of 6 times to its U.S. SFR peers, down to an 5 times P/AFFO multiple discount currently. However, we generally expect Tricon to maintain its 2022 growth guidance, and we currently forecast Tricon to generate a similar ‘21A-’23E AFFO CAGR relative to its U.S. SFR peers of up 14 per cent year-over-year.”
Citing “sustained volatility” in lumber and building materials prices and “a broader slowdown” in North American housing activity, Raymond James analyst Steve Hansen lowered his rating for Doman Building Materials Group Ltd. (DBM-T) to “market perform” from “outperform.”
“While Doman remains well positioned to weather any slowdown, in our view, we believe it prudent to adopt a more cautious positioning until better visibility emerges with respect to the macro outlook. We will continue to monitor accordingly,” he said.
After trimming his 2022 and 2023 earnings per share projections to $1.07 and 73 cents, respectively, from $1.39 and 83 cents, Mr. Hansen cut his target for Doman shares to $7.50 from $9.50. The current average is $8.43.
While Sleep Country Canada Holdings Inc. (ZZZ-T) “handily” beat the Street’s expectations for a 10th consecutive quarter, Stifel analyst Martin Landry reduced his financial forecast for the retailer, seeing “tough” comps ahead.
“Sleep Country generated impressive same-store-sales growth of 15 per cent year-over-year during Q2/22, boosted by price increases and an easy comparable as stores were closed for the equivalent of 32 operating days last quarter,” he said in a note. “As expected, online sales contracted by 28 per cent year-over-year and likely more when excluding the recent acquisition of Hush Blankets. Nonetheless, online sales represent 18 per cent of total sales, a proportion that is sustainable in our view. Gross margin expanded by 140 basis points year-over-year, but management indicated that further year-over-year expansion is unlikely in the near-term as the company is lapping price increases starting in Q3.”
Pointing to lower revenue stemming from the “difficult” year-over-year comps and expecting “subdued” gross margin improvement “as H2 will lap prior periods when price increases had already been implemented,” Mr. Landry cut his full-year earnings per share projection for 2022 to $3.15 from $3.19 and 2023 to $3.26 from $3.30.
“The company has gained significant market share since the start of the pandemic by opening new channels of distribution and executing clever partnership turning competitors into partners,” he said. “This resulted in EBITDA nearly doubling in the last four years, an impressive accomplishment, as we see it. However, the pace of growth is likely to slow down, in our view, given the macroeconomic outlook. Absent acquisitions, we believe that EBITDA growth will be muted in the coming year. As a result, we now take a more conservative approach with our forecasts and expect 1 per cent year-over-year EBITDA growth in the next 12 months. Current valuation (6 times forward EBITDA) reflects subdued investor expectations and could provide appealing returns for long-term investors. The company has a strong balance sheet and is active on its NCIB, which should reduce downside risk nearterm.”
That led him to maintain a “buy” rating for Sleep Country shares with a lower target of $38, matching the current consensus but down from $42 previously.
Elsewhere, others making changes include:
* RBC’s Sabahat Khan to $34 from $32 with a “sector perform” rating.
“Sleep Country Canada Holdings Inc. reported Q2 results that were ahead of RBC/consensus forecasts. While the quarterly results were strong, we maintain our cautious view given the weakening/uncertain macro backdrop and the potential for an economic slowdown,” said Mr. Khan.
* BMO’s Stephen MacLeod to $36 from $35 with an “outperform” rating.
“Sleep Country’s strong competitive positioning and resilience drove 15.1 per cent SSSG vs. a tough comp,” he said. “Sleep Country has a multi-year opportunity for growth and market share gains for everything “sleep”, with a focus on sleep as part of wellbeing (pushes AUSP higher) and leveraging its portfolio of brands. While comp headwinds strengthen in Q3 (both SSSG & GM), we think these are priced into the stock (down 26 per cent year-to-date) and we see attractive risk-reward.”
In other analyst actions:
* Following “solid” second-quarter results, National Bank Financial’s Patrick Kenny raised his Atco Ltd. (ACO.X-T) target to $49 from $46, keeping a “sector perform” rating. The average on the Street is $50.07.
“We continue to highlight valuation support from various energy transition opportunities currently under development as we maintain our Sector Perform rating alongside a total return opportunity of 7.4 per cent,” he said.
* Mr. Kenny also raised his target for Canadian Utilities Ltd. (CU-T), an Atco company, to $40 from $37, maintaining a “sector perform” rating after a quarterly earnings beat. The average is $39.84.
* Seeing it “well positioned for improving market fundamentals,” Scotia Capital’s Orest Wowkodaw raised his target for Cameco Corp. (CCO-T) shares by $1 to $44 with a “sector outperform” rating. The average is $42.91.
“CCO released better-than-anticipated Q2/22 results,” he said. “The company’s 2022 and five-year U3O8 sales volume outlook were both modestly improved. Long-term contract book additions also grew. Overall, we view the update as positive for the shares.
“We rate CCO shares SO based on improving fundamentals driven by the dual Western World agendas of decarbonization and energy independence.”
* CIBC’s Christopher Thompson raised his Cardinal Energy Ltd. (CJ-T) target to $11 from $10 with a “neutral” rating, while Stifel’s Cody Kwong bumped his target to $13 from $12.25 with a “buy” rating and Raymond James’ Jeremy McCrea increased his target to $10 from $9.50 with an “outperform” rating. The average is $10.75.
“Cardinal is firing on all cylinders on both an operational and financial basis,” said Mr. Kwong. “Not only did the Company post a 2Q22 production and FFO beat, the better than expected FCF was used to reestablish a compelling base dividend (6.8-per-cent yield) as well as a stealthy share buyback of 3.0 mm shares (2 per cent of the stock) over the past month. The catalysts will continue to roll, as we anticipate the Company reaching its $50 debt target in 3Q22 where we expected to see a meaningful increase, to an already robust, base dividend payout. With this differentiated commitment to shareholder returns, we are increasing our target.”
* CIBC’s Bryce Adams trimmed his Copper Mountain Mining Corp. (CMMC-T) target to $2.50 from $2.90, below the $3.23 average, with a “neutral” rating.
* Mr. Adams cut his First Quantum Minerals Ltd. (FM-T) target to $28 from $35, maintaining a “neutral” rating. The average is $32.70.
* He also reduced his target for Lundin Mining Corp. (LUN-T) to $9.50, below the $10.26 average, from $11 with a “neutral” recommendation.
* His target for Teck Resources Ltd. (TECK.B-T) fell to $58 from $70, below the $52.98 average, with a “neutral” rating.
“In our Q2/22 Preview, we highlighted Copper Mountain and Lundin Mining as notable outliers for missing consensus expectations; both companies missed consensus estimates and cut their full-year guidance,” said Mr. Adams. “Further, common and recurring themes across the companies that have reported thus far are higher costs and guidance revisions. Some issuers have noted an easing on the cost front and that Q2/22 potentially marks the peak for costs in the year. Lastly, we expect that guidance updates will remain a focus for issuers reporting in the coming weeks, although those that we flagged as candidates mostly likely to revise guidance have already reported, except for Sierra Metals where we expect cost guidance is at risk.”
* National Bank Financial’s Mike Parkin bumped his Eldorado Gold Corp. (ELD-T) target to $15.50 from $15 with an “outperform” rating. The average is $15.38.
* National Bank Financial’s Jaeme Gloyn raised his Fairfax Financial Holdings Ltd. (FFH-T) target to $1,100 from $1,050, exceeding the $921.38 average, with an “outperform” rating. Other changes include: Scotia Capital’s Phil Hardie to $860 from $845 with a “sector outperform” rating and RBC’s Mark Dwelle to $725 from $750 with an “outperform” rating.
“Although one of the best-performing Financials stocks year-to-date, FFH remains the best value idea in our coverage universe,” Mr. Gloyn said. “Still trading below book value at 0.9 times, the market is pricing FFH at an ROE [return on equity] of 7 per cent. We believe FFH can deliver sustainable long-run ROE of at least 10 per cent through a combination of consistently strong underwriting growth/profits and improving total investment return performance.”
* National Bank Financial’s Tal Woolley raised his First Capital REIT (FCR.UN-T) target by $1 to $18 with a “sector perform” rating. The average is $19.
* Raymond James’ Stephen Boland hiked his Intact Financial Corp. (IFC-T) target to $229 from $206 with a “strong buy” rating. Other changes include: BMO’s Tom MacKinnon to $220 from $215 with an “outperform” rating and Scotia’s Phil Hardie to $210 from $195 with a “sector outperform” rating. The average is $209.29.
“While the stock has significantly outperformed the TSX year-to-date (up 15.9 per cent vs down 5.7 per cent), at 2.0 times our 2023 estimated BVPS, it remains well below its 5-year average of 2.5 times,” Mr. Boland said. “This is despite a significantly higher ROE and a more diversified book of business. As such, we view IFC as a key holding for investors and note the company’s historically resilient performance during periods of heightened market volatility.”
* RBC’s Wayne Lam cut his Osisko Development Corp. (ODV-X) target to $16 from $24 with an “outperform” rating. The average is $17.08.
“We update our model for a phased construction at Cariboo along with the property-wide resource update. In our view, the planned expansion allows for a significant portion of upfront capital to be deferred, with potential cost optimization and resource upside to be outlined via the FS in H2/22. We remain constructive on the overall portfolio and view valuation at an attractive entry point,” said Mr. Lam.
* CIBC’s Jamie Kubik raised his Precision Drilling Corp. (PD-T) target to $120 from $115 with a “neutral” rating. The average is $130.91.
“The acquisition of well servicing and rental assets from High Arctic provides PD with added operating leverage and synergy potential that we see as being a good piece of business. Field activity has continued to grind higher, and although margin capture has been tenuous, we do believe PD is poised to generate growing EBITDA margins through H2/22 and 2023. The company also announced it contracted numerous rigs through Q2/22, which should offer downside protection if industry fundamentals weaken,” said Mr. Kubik.
* Ahead of the Aug. 5 release of its second-quarter results. Desjardins Securities’ Chris Li cut his Premium Brands Holdings Corp. (PBH-T) target to $130 from $150, keeping a “buy” rating. The average is $137.
“Overall, we expect 2Q results to reflect continuing solid execution against a backdrop of ongoing industry challenges,” he said. “We have trimmed our estimates to reflect pressures that are largely transitory. We expect profitability to continue to improve in 2H22. As macro conditions improve and commodity input costs stabilize, PBH should receive nice margin torque next year, with EBITDA upside from M&A.”
* Stephens’ Jack Atkins raised his TFI International Inc. (TFII-N, TFII-T) target for US$135 from US$120 with an “overweight” rating. Others making changes include: Scotia Capital’s Konark Gupta to $157 from $143 with a “sector outperform” rating, RBC’s Walter Spracklin to $112 from $100 with an “outperform” rating, Desjardins Securities’ Benoit Poirier to $174 from $170 with a “buy” rating, TD Securities’ Tim James to $160 from $125 with a “buy” rating, BMO’s Fadi Chamoun to US$105 from US$95 with a “market perform” rating and CIBC’s Kevin Chiang to US$127 from US$110 with an “outperformer” rating. The average is $120.86.
“We are very pleased with TFII’s results, which once again show that TFII is ideally positioned to unlock shareholder value,” said Mr. Poirier. “If a slowdown did occur, TFII’s robust diversified business segments across two countries should provide an extra layer of protection. The stock is a compelling proposition at current levels, with investors not paying for this potential upside, in our view. TFII remains our preferred transportation stock for 2022.”
* In a preview of its Aug. 5 earnings release, TD Securities’ Daryl Young raised his Uni-Select Inc. (UNS-T) target to $43 from $36, exceeding the $37.07 average, with a “buy” rating.
“We anticipate strong Q2/22 results and highlight that UNS’ DIFM auto-parts distribution peers (LKQ/GPC) and the refinish paint OEMs (PPG/Axalta) posted healthy organic growth in the regions overlapping with UNS,” he said. “Broadly speaking, we believe the current environment is very positive for UNS, given strong inflationary price pass-throughs, which are bolstering organic growth (and margins) for both the paint and parts segments, and demand tailwinds as consumers look to repair versus replace vehicles, given high car prices (new/used) and lack of new car supply. Additionally, we see possible benefits of customers trading down to lower-priced (but higher-margin) private label parts brands to mitigate inflation, and substitution of OEM parts, given lack of availability.”
* CIBC’s Hamir Patel raised his West Fraser Timber Co. Ltd. (WFT-T) target to $156 from $124 with an “outperformer” rating. The average is $122.48.
“While Street estimates for 2023 look optimistic (particularly on the OSB side), valuation remains compelling,” said Mr. Patel. “As the largest (and one of the lowest-cost) lumber and OSB producers, WFG is well-positioned to navigate volatile wood markets. The company’s strong balance sheet should support sustained large share repurchase activity (even as commodity prices moderate), and provide the company flexibility to consider additional growth opportunities. We also see potential M&A optionality in the name given the reported interest from major strategic holder, Kronospan.”