Inside the Market’s roundup of some of today’s key analyst actions
With the release of “solid” third-quarter results and “strong” guidance for the remainder of the year as well as fiscal 2023 “against the backdrop of macro uncertainty,” RBC Dominion Securities analyst Paul Treiber attributed Celestica Inc.’s (CLS-N, CLS-T) outperformance to its “execution, market share gains and improved supply environment.”
“Additionally, Celestica is benefiting from the company’s strategic transition to more resilient and sticky end markets,” he added.
Shares of the Toronto-based electronics manufacturing services company surged 16 per cent on Tuesday after it reported revenue of US$1.92-billion and adjusted earnings per share of 52 US cents, exceeding the Street’s forecast of US$1.72-billion and 45 US cents.
“Q3 is Celestica’s 4th consecutive quarter with revenue above consensus. Q3 upside stems largely from Celestica’s execution amidst an improved supply environment,” said Mr. Treiber.
The company provided fourth-quarter guidance for revenue of US$1.875-2.025-billion and adjusted earnings per share of 49-55 US cents, also topping the consensus expectations (US$1.71-billion and 44 US cents). It also introduced better-than-expected 2023 guidance with mid-points of more than US$7.5-billion revenue and US$2 adjusted EPS (versus the Street’s view of US$7.2-billion and US$1.85).
“Stronger than expected guidance reflects: 1) Celestica’s focus on more resilient/high demand segments in capital equipment; 2) expected continued recovery in A&D and industrial (e.g., PCI revenue likely up another $100-million vs. $300-million pre-acquisition run-rate); and 3) demand resiliency at hyperscalers,” he said.
Seeing near-term indicators as “solid,” Mr. Treiber emphasized Celestica’s margins are improving despite indications of slowing growth.
“The mid-point of guidance implies organic growth slows from 22 per cent FY22 to 5 per cent FY23,” he said. “While Celestica is benefiting from an improved mix of business, these markets aren’t immune to a cyclical slowdown. For example, we estimate HPS (largely hyperscaler driven) up just 4 per cent in FY23 compared to 64 per cent in FY22. Despite the slowdown in growth, higher volumes should lead to further margin expansion. Our revised outlook calls for FY23 adj. EBIT margins up 10 basis points year-over-year to 5.0 per cent, with adj. EPS increasing 8 per cent year-over-year to $2.05 (up from $1.95).”
Keeping a “sector perform” recommendation for Celestica shares, Mr. Treiber raised his target to US$12 from US$11. The average target on the Street is US$12.88.
“In spite of a higher quality revenue mix, Celestica’s valuation has compressed, given macro uncertainty and potentially cyclically lower growth,” he said. “Celestica is only trading at 5.5 times FTM P/E [forward 12-month price to earnings], below EMS peers at 11.6 times and toward the low end of its 10-year historical range of 5-13 times.”
Other analysts making target adjustments include:
* Citi’s Jim Suva to US$12 from US$10 with a “neutral” rating.
“Celestica has so many new business wins and commitments for product orders that the company is already guiding 2023 even though it is only October,” said Mr. Suva. “Specifically the company is guiding sales to at least $7.5B and EPS of $1.95-$2.05 which are 3 per cent and 6 per cent above consensus. While some may discount the decision to give 2023 guidance so early, especially with the macro uncertainty, we note the company materially beat this quarter and has a very strong pipeline of new business. We highlight the company has also been mix shifting to higher margin products and being very focused and not diverted to noncore business endeavors. We are raising our sales and EPS estimates.”
* Canaccord’s Robert Young to US$15 from US$14 with a “buy” rating.
“In our view, Celestica’s 2023 EPS guide midpoint of $2.00 may prove conservative, particularly if we consider potential normalization in A&D and Industrial, which are currently operating below target margins. Despite the strong bounce in the stock today, we see the potential for further upside, particularly if we consider Celestica’s valuation is at a discount versus peers despite guided 5-10-per-cent EPS growth,” he said.
* BMO Nesbitt Burns’ Thanos Moschopoulos to US$14 from US$12.50 with an “outperform” rating.
“We believe the stock’s valuation remains compelling given CLS’s growth outlook and margin trajectory, as well as the fact that CLS continues to trade at a significant discount to peers. Further, we believe that CLS’s introduction of FY2023 guidance, a quarter earlier than we’d expected, speaks to a strong backlog and good level of demand visibility,” said Mr. Moschopoulos.
* TD Securities’ Daniel Chan to US$13 from US$11 with a “hold” rating.
“Celestica is executing very well amidst a challenging supply chain backdrop. We continue to believe that the stock could perform well in the near-term, especially as supplies improve, but remain cautious of the macro backdrop,” said Mr. Chan.
* CIBC’s Todd Coupland to US$14 from US$12 with a “neutral” rating.
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Scotia Capital’s Maher Yaghi sees “higher odds of success” for Quebecor Inc.’s (QBR-A-T) proposed acquisition of Shaw Communications Inc.’s (SJR-B-T) wireless business after Industry Minister François-Philippe Champagne laid out strict conditions for the transaction on Tuesday.
That led the equity analyst to raise his recommendation for shares of Shaw to “sector outperform” from “sector perform” previously.
“The two conditions of Quebecor holding on to the spectrum for a minimum of 10 years and an expectation of a normalization of prices across Canada are already what we had assumed would occur if the transaction was allowed to go through,” he said. “We don’t see why Quebecor would not back these requests. While this announcement is a positive, we still need the current litigation by the Competition Bureau to get resolved. We believe this pragmatic view by the minister has the chance to provide a good middle ground to build on between the parties.”
Mr. Yaghi now sees a 90-per-cent of the deal proceeding, which would help clear the way for Shaw’s proposed $26-billion merger with Rogers Communications Inc. (RCI.B-T), up from his previous estimate of 80 per cent.
He increased his target for Shaw shares by $1 to $39. The average on the Street is $40.17.
“We view the minister’s statement as potentially a positive catalyst to bring the parties closer together as they head towards mediation on October 27th,” the analyst said. “We had the view that mediation might not bring any positive outcomes; however, it is possible that the minister’s request for specific guarantees, which we don’t see why Quebecor would not back, could open the door to a possible agreement. However, even if the Commissioner does not back the deal, we still believe the Competition Tribunal will likely do so in due course.”
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National Bank Financial analyst Jaeme Gloyn is expecting a “softer” third-quarter from TMX Group Ltd. (X-T) when it reports after the bell on Wednesday,
Pointing to lower equities and derivatives trading as well as Capital Formation revenues, he cut his core earnings per share projection to $1.58 from $1.81, below the $1.72 consensus on the Street. His full-year 2022 forecast slid to $7.12 from $7.27 to reflect the revisions as well as “persistent” capital markets activity in the fourth quarter.
However, citing “continued Bank of Canada rate hikes that drive higher TSX Trust revenues,” Mr. Gloyn raised his 2023 estimate to $7.78 from $7.71.
“The upshot of softer capital market performance in 2022 is that easier comps are coming,” he said. “Our current estimates imply a near double-digit EPS growth rate in 2023. For example, additional listings revenues will rebound as they have countless times over the past decade. In addition, TMX has announced several pricing initiatives that will support baseline 2023 revenue growth. Moreover, we expect TMX will announce more pricing initiatives that drive revenue growth in the high-single digits from pricing upside alone.”
Despite his negative revisions for the near term, Mr. Gloyn raised his target for TMX shares to $148 from $143 with a “sector perform” rating. The average is $151.29.
“While we maintain a favourable view of TMX’s long-term growth outlook, strong track record of strategic execution (e.g., diversify business mix, invest in tech/data, grow derivatives and drive cost control) and defensive attributes (e.g., more than 50-per-cent recurring revenue, diversified/countercyclical revenue drivers, strong balance sheet and solid FCF generation), we preserve our Sector Perform rating in light of a still weak capital markets backdrop (both with respect to trading and listings activity). A lower total return to our target price relative to other companies in our coverage universe also compels a SP rating.”
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Canadian National Railway Co.’s (CNR-T, CNI-N) “strong” discipline is “paying off,” according to Desjardins Securities’ Benoit Poirier.
He was one of several equity analysts on the Street to raise their financial forecast for the company and target price for its shares following the release of strong third-quarter results and an improved outlook for the next fiscal year after the bell on Tuesday.
“CN reported better-than-expected 3Q results, driven by a strong yield (up 22 per cent year-over-year) and solid network fluidity,” said Mr. Poirier. “Management stated that the current demand environment remains strong and increased its 2022 guidance. We are encouraged by the steps taken and the strong discipline demonstrated so far by CEO Tracy Robinson and the CN team.”
CN reported revenue of $4.5-billion, up 26 per cent year-over-year and above the $4.3-billion estimate of both Mr. Poirier and the Street. Fully diluted earnings per share of $2.13 also topped expectations of $2.
For 2023, the railway company is now projecting adjusted diluted earnings per share growth of 25 per cent, rising from its previous range of 15-20 per cent.
“Management reiterated the strong outlook for Canadian and U.S. grain, automotive (9–12 months of backlog) and coal, although it is starting to see some softness in international intermodal, which represents about two-thirds of intermodal volume,” said Mr. Poirier. “For 2023, we forecast growth in RTMs [revenue ton miles] of 2.1 per cent and adjusted fully diluted EPS of 7.1 per cent, which we believe is achievable in light of the current demand outlook and pricing environment. We expect greater clarity in January when CN reports its 4Q22 results. Management reiterated on the call that it still sees plenty of growth opportunities and further cost-reduction initiatives in the long term, which will be discussed in greater detail at the investor day on May 2–3.”
Maintaining a “hold” recommendation for CN shares given his view that it is currently “fairly valued,” Mr. Poirier raised his target to $171 from $168. The average on the Street is $160.93.
Those making changes include:
* BMO’s Fadi Chamoun to $180 from $170 with an “outperform” rating.
“CNR’s strong Q3/22 earnings and increased F2023 guidance stand out within the transportation sector where earnings/guidance have generally been less than inspiring so far this earnings season,” he said. “We credit strategic initiatives to improve revenue quality; strong momentum towards restoration of PSR/network fluidity; and a generally more constructive demand for Canadian rail capacity for the strong earnings and margin improvement momentum. Despite tougher comps, we expect the double-digit EPS growth momentum to continue through F2023, notwithstanding a more challenging macro.”
* Scotia Capital’s Konark Gupta to $159 from $156 with a “sector perform” rating.
“CNR delivered yet another record-breaking quarter while raising guidance when other businesses are maintaining or slashing guidance. Yield and operations remain at the forefront and continue to surprise on the upside. With Canadian grain ramping up to record levels, a few commodities catching up on their backlogs, and competing barges facing low water levels, we think the Q4 setup could be even stronger, barring any winter surprises. We have raised our estimates to slightly above revised guidance but remain cautious heading into 2023 due to CNR’s relative valuation and potential downside risk to consensus on macro uncertainties,” said Mr. Gupta.
* Stifel’s Steven Paget to US$121 from US$118 with a “market perform” rating.
“Canadian National posted results dramatically better than we or the street had anticipated and once again (and very quickly) is looking like a best in class railroad,” said Mr. Paget said. “EPS growth is expected to be 25 per cent this year, and while next year will probably not be able to keep up that pace with much harder comps, certainly the first several quarters for new CEO Tracy Robinson are some for the record books. Going forward, while we do not entirely believe CN is ‘recession proof,’ we do believe it should be relatively more recession resistant than most other rails and virtually all other modes of transportation. While we are taking up estimates and our target, given the current valuation there is still not quite enough upside to justify a Buy rating in our view.”
* Barclays’ Brandon Oglenski to $160 from $150 with an “equal-weight” rating.
“Canadian National is benefiting from strong commodity demand near-term, and regaining long-term operational credibility with continued consistent earnings growth in 2022,” he said.
* CIBC World Markets’ Kevin Chiang to $170 from $163 with an “outperformer” rating.
* JP Morgan’s Brian Ossenbeck to $174 from $162 with a “neutral” rating.
* Stephens’ Justin Long to US$127 from US$125 with an “equal-weight” rating.
* Credit Suisse’s Ariel Rosa to US$127 from US$124 with a “neutral” rating.
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After taking a “significant” step toward consolidating and improving its U.S. THC operations, Canaccord Genuity analyst Matt Bottomley raised his recommendation for Canopy Growth Corp. (WEED-T) to “buy” from “hold,” pointing to its current trading level.
Shares of the Smiths Falls, Ont.-based company soared 25.7 per cent on Tuesday after it announced it was establishing Canopy USA LLC. The venture will help it exercise its rights to acquire U.S. cannabis companies Acreage, Wanna and Jetty, which it signed deals to take a stake in contingent on federal legalization of THC.
“We believe the ability to consolidate contributions from its US THC exposure under US GAAP Variable Interest Entity accounting would be a significant benefit to the company,” said Mr. Bottomley. “Although we understand that the above arrangements have no impact on Canopy’s underlying operations, management has long voiced its concern that the scale of its US THC optionality has not been fully appreciated by the market. As such, we believe the ability for it to include such performance in its earnings could help offset ongoing headwinds in the Canadian market as well as garner more attention from larger pools of capital. Further, upon federal permissibility, Canopy USA could eventually represent a more streamlined key-turn vehicle for the company to more formally launch its U.S. operations. Although the arrangement is structured in a way where Canopy has no legal ownership in Canopy USA, given its plan to consolidate earnings from its US THC operations into its financial statements, we believe clearance from the TSX and NASDAQ still represents a necessary hurdle that the company will need to pass in order to bring its plan to fruition.”
Mr. Bottomley said he will not update his estimates “until the formalization of these arrangements are complete and would continue to stay on the sidelines for the time being as Canopy’s prospects of reaching profitability (independent of its U.S. exposure) continue to remain challenged with material debt maturities coming due in 2023.”
His target for Canopy shares jumped to $4.25 from $2.75. The average is $4.07.
Concurrently, Mr. Bottomley downgraded Acreage Holdings Inc. (AGR-A-U-CN) to “hold” from “speculative buy” with a US$1.40 target, down from $2.75.
“After applying our revised Canopy target price to the planned 0.45 exchange ratio as part of Canopy USA’s proposed acquisition of Series D Acreage shares, we are lowering our PT ... which at current trading levels now supports a HOLD recommendation,” he said.
Elsewhere, Alliance Global Partners’ Aaron Grey raised his Canopy target to $4 from $3.50 with a “neutral” rating.
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Scotia Capital analyst Phil Hardie acknowledged he’s “a bit cautious” heading into the earnings season for Canada’s P&C insurance companies due to an unsettling market tone brought on by the spectre of a recession as well as risks from supply chain disruptions, transitory inflationary pressures, and unrest in Eastern Europe.
However, he thinks the sector “appears well-positioned for times of uncertainty and is well-aligned to the way investors are looking to position themselves within the financial sector.”
“A number of the stocks in the P&C insurance sector have generated significant outperformance this year,” said Mr. Hardie. “We believe the sector benefits from a combination of (1) defensive positioning, (2) positive industry trends, and more recently, (3) potential M&A activity coming back on the radar as a potential catalyst. Given Intact and Definity’s strong stock performance, valuation has likely become the primary investor holdback. While this may limit near-term upside, we remain constructive, given the potential for M&A as embedded optionality. Further, given heightened uncertainties and market volatility, investors appear to be willing to embrace a ‘winning by not losing’ mantra over the near term, and so we see limited near-term downside risk in the names.”
Keeping “sector outperform” recommendations for stocks in his coverage universe, he made these target changes:
* Definity Financial Corp. (DFY-T) to $42 from $39. Average: $40.86.
“We view Definity as an evolutionary story, but what we believe truly sets it apart from its publicly traded peers are the themes related to excess capital and M&A, and what they mean for the ROE outlook and the stock’s valuation,” he said.
* Fairfax Financial Holdings Ltd. (FFH-T) to $910 from $950. Average: $935.95.
“We see attractive opportunities for investors to buy Fairfax shares given its discounted valuation does not likely reflect the company’s underlying earnings power. We believe the stock should garner a sustainable re-rate on the back of the organic expansion of its insurance operations that likely enhance its ROE and growth rate potential of its book value, as well as potentially adding greater consistency to both metrics,” he said.
* Intact Financial Corp. (IFC-T) to $221 from $215. Average: $215.86.
“Intact is our ‘Go-To’ Defensive Quality name, and we believe it can be attractive for large-cap investors looking for a high-quality name to reduce portfolio beta that trades at a reasonable valuation,” he said. “We remain constructive on Intact, given its defensive characteristics, solid growth outlook, and sustainable mid-teen ROEs supported by a favourable pricing environment. The RSA acquisition offers a number of strategic and financial benefits; and integration and execution will be a key investor focus over the next 24 months. We continue to see upside potential for IFC’s stock as management delivers on targeted synergies and accretion opportunities.”
* Trisura Group Ltd. (TSU-T) to $55 from $49. Average: $55.71.
“We view Trisura as a unique and diversified Specialty P&C insurance platform that provides a high-growth business with an attractive risk profile. TSU’s unique hybrid fronting platform should enable it to generate a more consistent and capital-efficient earnings stream than traditional insurers, resulting in a superior ROE and risk profile than that of more traditional insurers. As the business continues to transform, we believe these characteristics can support a premium valuation relative to its peers,” said Mr. Hardie.
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Neighbourly Pharmacy Inc. (NBLY-T) is “gradually working through labour headwinds,” according to National Bank Financial analyst Zachary Evershed.
Following Tuesday’s release of better-than-expected second-quarter 2023 results, which send its shares soaring 9.7 per cent, Mr. Evershed raised his earnings expectations through 2025, emphasizing on the cost savings brought from its focus on hiring and calling its aggressive M&A strategy “unwavering.”
“Compounding the lift from the higher-margin Rubicon acquisition, NBLY’s profitability outperformance in the quarter was driven by better-than-expected labour availability as measures to attract pharmacists proved successful, lowering vacancies by 25 per cent,” said Mr. Evershed. “We raise our margin estimates in H2/23 and into FY2024 to reflect progress on the labour front, though we continue to expect a full recovery only in the summer with the next graduating cohort of pharmacists.”
“Despite the rising rate environment, management’s strategy remains unchanged and the previously communicated pace of 35-40 new locations acquired annually is expected to continue. The company’s pipeline remains robust, supported by retirements, and independents tapping the brakes on their own acquisition programs. Despite these tailwinds, management indicates it is unlikely NBLY would materially exceed guidance on this front given the company’s strict criteria and smaller overall size of remaining targets.”
For the quarter, Neighbourly reported revenue of $178.9-million, up 97.3 per cent year-over-year and marginally higher than the analyst’s $178.6-million estimate. Adjusted earnings per share rose 37.6 per cent to 12 cents, beating Mr. Evershed’s projection by 2 cents.
“Better-than-anticipated traction on talent acquisition has us modeling sequential margin improvement in FY2023, but we still do not expect a full recovery until the summer, when the next cohort of graduating pharmacists joins the workforce in July and early August to help balance supply with demand for labour in the industry,” he said.
“Despite management’s constructive tone on the M&A pipeline, we maintain our assumption of 8 new locations acquired per quarter, slightly below guidance for 35-40 annually, as the pace of acquisitions in our model is limited by the balance sheet. We also note that even if FCF generation outpaced our expectations or the company availed itself of additional financing, management stated NBLY was unlikely to materially exceed the pace of guidance as they intended to remain disciplined on their strict criteria, and the remaining takeout candidates fall off quickly in size after Rubicon, comprised of independents and small networks in the 10-30 location bucket.”
Maintaining a “sector perform” rating, seeing its valuation as “full” and leverage remaining “elevated,” Mr. Evershed raised his Street-low target for its shares to $22 from $20. The average is $29.50.
Elsewhere, others making changes include:
* Scotia Capital’s George Doumet to $27 from $25 with a “sector outperform” rating.
“We believe organic margins have troughed and expect more gradual improvement over the near to medium term (which we believe will also be supportive of the current recovery in the company’s trading multiple). Furthermore, we continue to like NBLY’s defensive characteristics and see substantial FCF generation over the NTM [next 12 months] – allowing it to attain (at least) the lower end of its 35-40 acquisition cadence, in a leverage-neutral manner,” said Mr. Doumet.
* BMO’s Peter Sklar to $25 from $20 with a “market perform” rating.
“Following a disappointing FQ1/23, Neighbourly reported a more positive FQ2/23 with stronger same-store-sales and improved margin, reflecting operating leverage over its corporate costs (a previous issue). Given this improvement, the stock rebounded sharply [on Tuesday] ... However, the stock has declined from $40 to the $20-level this year, and today’s $2+ bounce, although large in terms of percentage return, should be seen in the overall context of that decline. [Tuesday’s] quarterly result was essentially in line, we consider Neighbourly to be appropriately valued,” he said.
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Ahead of the start of third-quarter earnings season for Canadian telecommunications companies, CIBC World Markets analyst Stephanie Price downgrades Cogeco Inc. (CGO-T) to “neutral” from “outperformer” and lowered her target for its shares to $64 from $84. The average target on the Street is $92.
“We have reduced valuations in our coverage by an average of half a turn given the current environment,” she said. “We reduced the CCA multiple by one turn given its exposure to the more competitive U.S. market. .... We downgrade CGO from Outperformer to Neutral as a result of our price target revision for CCA and the narrowed CGO trading discount to CCA. We will be watching U.S. cableco net adds closely with Q3 results and look to a more stable U.S. competitive environment to become more constructive on Cogeco.”
Ms. Price also made these target adjustments:
* BCE Inc. (BCE-T, “neutral”) to $62 from $68. Average: $66.83.
* Cogeco Communications Inc. (CCA-T, “neutral”) to $76 from $100. Average: $95.56.
* Quebecor Inc. (QBR.B-T, “outperformer”) to $29 from $33. Average: $33.77.
* Rogers Communications Inc. (RCI.B-T, “outperformer”) to $69 from $75. Average: $73.50.
* Telus Corp. (T-T, “neutral”) to $30 from $33. Average: $33.37.
“We see a solid market backdrop heading into Q3 earnings, with average EBITDA growth of 3% expected within our coverage universe,” he said. “We expect the focus will be on the regulatory environment, with investors looking for an update on the ongoing Rogers/Shaw/Quebecor Tribunal process and assessing any longer-term impacts from the Rogers outage. Amid rising interest rates and with an uncertain macroeconomic environment, we are reducing valuations under coverage by an average of half a turn. Overall, the telcos are trading in line with medium-term averages, while the cablecos are trading at a 1 times discount.”
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CIBC’s Paul Holden lowered his target for a trio of insurance companies in his coverage universe prior to the start of earnings season in the sector.
“We are cautious heading into Q3 given a number of earnings and balance sheet headwinds,” said Mr. Holden. “Our earnings estimates have been adjusted lower. The lifecos are market sensitive names, and market volatility is generally bad for results with the potential for previously unknown risks to surface. Valuations are discounted, but not overly so considering elevated macro risks. SLF remains our lone Outperformer and we maintain MFC at Underperformer.”
His changes include:
* Great-West Lifeco Inc. (GWO-T, “neutral”) to $32 from $35. Average: $34.44.
* IA Financial Corp. Inc. (IAG-T, “neutral”) to $74 from $73. Average: $83.22.
* Sun Life Financial Inc. (SLF-T) to $62 from $65. Average: $67.12.
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Canaccord Genuity’s Katie Lachapelle expects investors will be “keenly focused on any incremental colour” on its proposed acquisition of Westinghouse Electric when Cameco Corp. (CCO-T, CCO-N) reports its third-quarter results on Oct. 26, calling its financial release “largely irrelevant” given many performance metrics were pre-released.
Earlier this month, Saskatoon-based Cameco and Brookfield Asset Management Inc.’s (BAM-A-T) renewables company announced a deal to acquire the nuclear company for US$4.5-billion plus more than US$3-billion in assumed debt.
“Based on our discussions with investors post-deal, there was a general frustration around the lack of disclosure, Cameco’s decision to reduce its leverage to rising uranium prices, and the significant capital outlay required, as well as the considerable debt carried by WEC,” Ms. Lachapelle said. “Despite this, we still believe there is strong long-term rationale for the transaction and opportunities for Cameco to surface value.”
Adding Westinghouse’s downstream capabilities, Cameco can be come a “one-stop shop for utilities, the analyst said
“With the exception of enrichment (which could be addressed via CCO’s GLE process by the late 2020s), Cameco could provide end-to-end solutions throughout the nuclear fuel cycle,” she said. “We view this as particularly relevant in the current geopolitical environment as utilities look to diversify their supply chain away from Rosatom (Russia).”
“Based on Brookfield Business Partners’ (BBU) September 2022 investor day, WEC is expected to generate run-rate forward EBITDA of US$800 million per year. This is before considering incremental opportunities to win business for new reactor builds and services in Eastern Europe (Bulgaria, Slovakia, etc.), which could add another $50-million in revenue in the year following the closing of the acquisition (CCO guidance). For context, Westinghouse already won a contract with Ukraine’s Energoatom for the supply of nuclear fuel and new builds, and could potentially be a front-runner in the bid to build Poland’s first nuclear reactor (Bloomberg link, FP link).”
Maintaining a “buy” rating for Cameco shares, the analyst raised her target to $44 from $43. The average is $43.13.
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In other analyst actions:
* Lowering his estimates prior to its third-quarter earnings results on Nov. 8, TD Securities’ Tim James cut his AirBoss of America Corp. (BOS-T) target to $20 from $26 with a “buy” rating. The average is $23.75.
“We believe that the significant pull-back in the share price more than compensates investors for the uncertainty and challenges faced by AirBoss. Our target takes into account the earnings potential from the base business and our view of its franchise strength which we believe the current valuation fails to reflect,” HE said.
* Lowering his estimates due to “challenging” market conditions, Raymond James’ Stephen Boland cut his target for Canaccord Genuity Group Inc. (CF-T) by $1 to $9.50 with an “outperform” rating. The average on the Street is $12.
“With Capital Markets (CM) activity heavily depressed in F1Q23, we had assumed a moderate pickup in CF’s IPO and new issue business heading into the quarter,” he said.” However, with the latest quarterly data for the U.S. and Canada now available, overall CM activity appears more or less in-line with recent levels. In addition, data from fpadvisor suggests CF’s bookrunner deal volumes in Canada were relatively flat quarter-over-quarter. With this new information in hand, we are reducing our near-term revenue estimates for CF’s investment banking business heading into reporting. Conversely, we have left our assumptions for CF’s wealth management business relatively unchanged. We still expect F2Q23 Assets Under Administration (AUA) to remain relatively flat quarter-over-quarter, with lower valuations offset by new asset inflows.
“While F2Q23 is likely to be another challenging quarter for CF, our long-term outlook for the business remains unchanged. Although a sustained recovery in the stock is unlikely until markets rebound, we suspect much of the near-term challenges are reflected in the current valuation. As such, we believe the downside is much more limited at these levels.”
* TD Securities’ Meaghen Annett cut her Canada Goose Holdings Inc. (GOOS-T) target to $49 from $54, remaining above the $35.18 average on the Street, with a “buy” rating.
“We see several attributes that support our street high target price/applied multiple,” she said. “GOOS has ample runway for global growth supported by an expanded product offering and seasonal relevance. Beyond store expansion, capex and working capital requirements should be modest over the next several years. With a strong balance sheet, GOOS is well positioned to navigate macro headwinds and drive its growth strategy forward, in our view. In addition, we believe opportunistic share repurchases will be considered in the near-term.”
“In the context of our forecast EPS CAGR of 45 per cent, we view the risk/reward profile of GOOS shares as attractive. As we progress through GOOS’ seasonally stronger periods, we believe there could be upside to current consensus expectations.”
* Barclays’ Ian Rossouw lowered his First Quantum Minerals Ltd. (FM-T) target by $1 to $21 with an “equal-weight” rating. The average is $30.14.
* CIBC’s Kevin Chiang lowered his target for NFI Group Inc. (NFI-T) to a Street-low $10 from $14, below the $13.30 average, with a “neutral” rating, while TD’s Daryl Young cut his target to $11.50 from $14.50 with a “hold” rating.
“We are maintaining our HOLD recommendation, but increasing our risk rating to SPECULATIVE given the significant forecast uncertainty, elevated leverage and need for further covenant relief,” said Mr. Young. “It remains our view that NFI has industry-leading products and that it is best-positioned to capitalize on the transition to ZEBs over the long term. However, given the significant near-term forecast uncertainty and elevated financial leverage, we are inclined to wait for evidence of stability in results before becoming more constructive on the shares.”
* CIBC’s Jamie Kubik raised his PrairieSky Royalty Ltd. (PSK-T) target to $27 from $26 with an “outperformer” rating. The average is $24.71.
* After weaker-than-anticipated third-quarter results, iA Capital Markets’ Matthew Weekes lowered his Pulse Seismic Inc. (PSD-T) target to $2 from $2.60 with a “hold” rating.
“PSD’s Q3/22 results were below our forecasts as Transactional revenue continued to be close to zero,” he said. “PSD maintains a minimal amount of fixed costs and zero debt, positioning the Company to manage through low periods of sales and generate revenue from licensing data from its incumbent library when demand picks up. Industry activity continues to trend positively, which tends to roughly correlate to Traditional sales, and material Transactional sales can occur at any time. However, market conditions have made the M&A market in the WCSB more challenging, particularly in contrast to 2021, which was a robust year.”
* CIBC’s Robert Catellier cut his Tidewater Renewables Ltd. (LCFS-T) target by $1 to $20 with an “outperformer” recommendation. The average is $20.30.