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Inside the Market’s roundup of some of today’s key analyst actions

Boralex Inc. (BLX-T) ended 2020 on “solid footing,” said Industrial Alliance Securities analyst Naji Baydoun following Thursday’s release of “good” fourth-quarter financial results.

Accordingly, with its shares “trailing peers,” he raised his rating for the Kingsey Falls, Que.-based power producer to a “buy” recommendation from “hold” previously.

Boralex reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted funds from operations per share of $155-million and 65 cents, respectively, exceeding Mr. Baydoun’s projections of $148-million and 50 cents as the company continued to exhibit “solid” organic growth amid a “flurry” of complementary M&A moves.

“Overall, we expect BLX’s organic growth projects, ongoing development activities, and recent acquisitions to drive solid FCF/share growth (5-8 per cent per year compound annual growth rate 2020-25), which could support modest dividend increases within the Company’s 40-60-per-cent FCF payout target range,” said the analyst. “BLX expects to provide an update on its strategic plan later this year to reflect the Company’s recent successes and revised expectations for future growth.”

Mr. Baydoun trimmed his target for Boralex shares to $53 from $55. The average target on the Street is $56.10, according to Refinitiv data.

“Overall, we view BLX as the best organic growth investment vehicle in the Canadian renewable IPP space, with (1) highly contracted operations (13-year weighted average contract term), (2) solid FCF/share growth (5-8 per cent per year, CAGR 2020-25E), (3) potential upside from the Company’s development pipeline (more than 2.5GW of prospects), (4) potential for dividend increases (1.5-per-cent yield, 40-60-per-cent FCF payout target), and (5) potential upside from M&A (not included in our estimates/valuation). In our view, the recent share price pullback represents an attractive buying opportunity for long-term investors, with BLX’s shares now trailing peers.”

Elsewhere, CIBC World Markets analyst Mark Jarvi upgraded the stock to “outperformer” from “neutral” with a $48 target, down from $55, while BMO Nesbitt Burns’ Ben Pham trimmed his target to $48 from $55 with an “outperform” rating.

“BLX continues to deliver consistently on growth and the outlook for more wind projects in Quebec is encouraging as it broadens its growth prospects,” said Mr. Jarvi. “We’ve revised our price target down ... to reflect a valuation reset across the sector. While our target is down, we see a more attractive total return potential after the substantial pullback in the shares (down 25 per cent) in the last month and see the current levels as a better entry point.”


Though its three-year growth plan fell in line with expectations alongside better-than-anticipated fourth-quarter results, Industrial Alliance Securities analyst Elias Foscolos lowered his rating for Canadian Utilities Ltd. (CU-T) to “hold” from “buy” based on valuation “compression.”

Before the bell on Thursday, the Calgary-based company reported adjusted earnings per share for the quarter of 68 cents, topping the 61-cent estimate of both Mr. Foscolos and the Street. The beat came largely due to a strong performance from its Alberta Natural Gas Distribution segment, which the analyst said “surprised” with a “substantial” year-over-year increase.

It also unveiled its 2020-2023 growth plan, which includes projected annual regulated rate base growth of approximately 2 per cent.

“The Company’s 2020-2023 growth plan is in line with our expectations and our forecasts remain intact,” said Mr. Foscolos. “We remain constructive on CU’s fundamentals as the Company earns regulated or stable long-term cash flows, consistently delivers ROEs above the stated regulatory ROE, and has balance sheet flexibility to pursue new avenues for growth.

“However, since our upgrade in September, the valuation gap has narrowed as CU has outperformed.”

Accordingly, he trimmed his target for Canadian Utilities shares to $35 from $37 per share based on lower comparable trading multiples, leading him to “move to the sidelines with a Hold rating.” The average target on the Street is $35.42.

Elsewhere, CIBC’s Mark Jarvi cut his target to $35 from $36 with a “neutral” recommendation.


Despite it sliding 1.7 per cent on Thursday in the wake of its premarket release of its first-quarter results, analysts on the Street responded positively to Toronto-Dominion Bank’s (TD-T) report, leading many to raise their target prices for its shares.

Those making changes included:

* RBC Dominion Securities’ Darko Mihelic to $82 from $79 with a “sector perform” rating. The average on the Street is $78.98.

“Q1/21 results came in better than expected. We think TD can grow revenues faster than peers in Canada later this year and into the next but U.S. headwinds/NIM uncertainty and relative valuation keep us from getting more positive,” he said.

* Desjardins Securities’ Doug Young to $83 from $79 with a “buy” rating.

“Due to the noise with the strategic card portfolio, and the fact that a larger chunk of the EPS beat was driven by lower provisions for credit losses (PCL) vs peers, we say neutral. That said, why we like TD has not changed — large capital buffer, lower exposure to capital markets, high-quality banking franchises and interest rate headwinds that are mostly in the rear-view mirror,” he said.

* Credit Suisse’s Mike Rizvanovic to $76 from $71 with an “underperform” rating.

“We view TD’s EPS beat in the quarter ($1.83 vs. our $1.44 [estimate] and consensus of $1.50) as lower quality relative to the bank’s peers, as it was exclusively driven by PCL’s that included a sizable recovery on performing loans,” he said. “While cost containment through branch closures in U.S. Retail is a positive, we remain concerned about continued margin pressure in the segment. That headwind, combined with group-low year-over-year growth in PTPP earnings in Canadian P&C Banking, does not justify a premium valuation, in our view, and thus we maintain our Underperform rating.”

* CIBC World Markets’ Paul Holden to $88 from $84 with an “outperformer” rating.

“After removing accounting noise related to expenses, we would say that TD reported a good quarter. Adjusted PTPP was nearly 8 per cent higher than our estimate. We continue to expect that TD will capitalize on a U.S. consumer recovery that has just started. Our EPS estimates move higher and our price target increases,” said Mr. Holden.

* Scotia Capital’s Meny Grauman to $91 from $82 with a “sector perform” rating.

* BMO Nesbitt Burns’ Sohrab Movahedi to $82 from $75 with a “market perform” rating.

* National Bank Financial’s Gabriel Dechaine to $82 from $75 with a “sector perform” rating.


RBC Dominion Securities’ Darko Mihelic called Canadian Imperial Bank of Commerce’s (CM-T) first-quarter results a “good start to the year,” emphasizing “spending in anticipation of a stronger economy is good.”

“CM’s adjusted EPS was $3.58, well above our estimate of $2.90 and consensus of $2.81,” he said. “Better than expected results versus our forecast were mainly driven by higher than forecast revenues and lower than forecast provisions for credit losses (PCLs). On a segmented basis, Capital Markets and Canada P&C helped drive results higher than expected.”

After raising his core 2021 and 2022 EPS projections to $12.26 and $13.47, respectively, from $11.27 and $12.31, Mr. Mihelic increased his target for CIBC shares to a Street-high $141 from $130, keeping an “outperform” rating. The average target is $127.06.

“Changes in our model largely reflect Q1/21 actual results, lower PCL assumptions across all segments, higher assumed loan growth for Canadian Personal and Small Business Banking specifically, and our share buyback assumptions,” he said. “This was partly offset by higher assumed losses in Corporate through lower assumed revenues and higher assumed expenses. We have also updated our model to reflect the resegmentations of Simplii Financial and Investor’s Edge, previously disclosed in Canadian Personal and Business Banking, to the Capital Markets segment and U.S. treasury activities, previously disclosed in U.S. Commercial Banking and Wealth, to the Corporate and Other segment.”

Elsewhere, BMO Nesbitt Burns analyst Sohrab Movahedi raised CIBC to “outperform” from “market perform” with a $130 target, rising from $124.

Others making target adjustments included:

* Desjardins Securities’ Doug Young to $122 from $117 with a “hold” rating.

“Pre-tax, pre-provision earnings increased 5 per cent year-over-year; however, expense growth is expected to accelerate through FY21, which somewhat tempers our outlook in a tough revenue growth environment,” said Mr. Young

* Scotia Capital’s Meny Grauman to $144 from $139 with a “sector outperform” rating.

* TD Securities’ Mario Mendonca to $130 from $125 with a “buy” rating.

* National Bank Financial’s Gabriel Dechaine to $130 from $126 with an “outperform” rating.

* Credit Suisse’s Mike Rizvanovic to $118 from $110 with an “underperform” rating.

* Canaccord Genuity’s Scott Chan to $131 from $124.50 with a “buy” rating.


While it experienced a “strong” fourth quarter, Citi analyst Paul Lejuez cautions investors that there could still be “some bumps along the way” for Gildan Activewear Inc. (GIL-N, GIL-T).

Projected 70 per cent of its business is related to social gatherings, he said the Montreal-based clothing manufacturer is “taking the steps to align costs that should drive leverage once its core business recovers.”

However, he warned: “There is no guarantee that large gatherings come back quickly.”

On Thursday, Gildan reported sales of US$690-million, up 4.8 per cent year-over-year and well above the Street’s US$615-million forecast. Adjusted earnings per share rose 9.6 per cent to 45 US cents, exceeding the consensus by 23 US cents.

“4Q was a strong quarter with sales coming in above expectations, driven by better-than-expected activewear business,” said Mr. Lejuez. “Management commented that 1Q sales trends quarter-to-date in the U.S. have slowed from 4Q levels but believes this is primarily due to weather. Innerwear has been challenged by a weak sock business, which GIL is actively cleaning up as part of its SKU reduction, partially offset by strong underwear sales (up 20 per cent in 4Q).”

After increasing his 2021 EPS estimate to US$1.63 from US$1.48 based on the result and improved margin expectation, he raised his target for Gildan shares to US$31 from US$28, keeping a “neutral” rating. The average target is US$29.42.

“GIL is a leader in the ‘imprintable’ activewear market and has developed a solid innerwear (underwear and hosiery) business,” said Mr. Lejuez. “Although being a low-cost producer enables the company to pivot and win private label business as mass merchants move away from branded products, this still results in GM pressure. In addition, there is limited visibility in the activewear business in 2020 and 2021 and the macroeconomic environment is very uncertain.”

Elsewhere, TD Securities’ Brian Morrison cut his rating to “buy” from “action list buy” with a US$36 target, up from US$33.

Other analysts making target changes included:

* BMO Nesbitt Burns’ Stephen MacLeod to US$37 from US$27 with an “outperform” rating.

“We believe Gildan is well-positioned to aggressively pursue market share gains as trends improve H2/21E and into 2022E and demand recovers in weaker end markets. We also see margin upside from “Back to Basics” and improved capacity utilization,” said Mr. MacLeod.

* CIBC World Markets’ Mark Petrie to US$36 from US$28 with an “outperformer” rating.

“Strong Q4 results were boosted by re-stocking, but still highlight the improving foundation of the business. This year will likely be a recovery year, and it is impossible to forecast 2022 with precision, but we are confident GIL is on a path to record profitability as end markets recover. Our 2022 forecasts rise on increasing conviction on margin expansion along with resumed share buybacks,” said Mr. Petrie.

* RBC Dominion Securities’ Sabahat Khan to US$33 from US$31 with an “outperform” rating.

* Canaccord Genuity’s Derek Dley to US$29 from US$27 with a “hold” rating.

* Scotia Capital’s Patricia Baker to US$35 from US$25.50 with a “sector outperform” rating.

* National Bank Financial’s Vishal Shreedhar to $43 (Canadian) from $40 with an “outperform” rating.


Despite its quarterly results topping expectations on Thursday, a group of equity analysts trimmed their target prices for shares of Loblaw Companies Ltd. (L-T).

“Solid 4Q results, low-double-digit EPS growth in 2021, strong FCF and capital return support our view that L remains well-positioned to create shareholder value,” said Desjardins Securities’ Chris Li. “The forward P/E of 14 times is largely in line with the long-term average. We expect sector rotation and the industry lapping against strong food sales to weigh on sector valuation in the near term.”

Maintaining a “hold” rating, Mr. Li lowered his target by a loonie to $69. The average is $76.45.

Others making changes include:

* RBC Dominion Securities’ Irene Nattel to $91 from $95 with an “outperform” rating.

* CIBC’s Mark Petrie to $78 from $82 with an “outperformer” rating.

* Scotia Capital’s Patricia Baker to $72 from $76 with a “sector perform” rating.

* National Bank Financial’s Vishal Shreedhar to $75 from $76 with a “sector perform” rating.


In the wake of weaker-than-anticipated fourth-quarter financial results, Desjardins Securities analyst David Newman lowered his rating for Pinnacle Renewable Energy Inc. (PL-T) in response to its potential acquisition by Drax Group PLC.

On Wednesday after the bell, the Vancouver-based pellet producer reported adjusted EBITDA for the quarter of $15.4-million, falling below Mr. Newman’s $17-million estimate and the consensus projection of $18-million.

“Aside from inclement weather in B.C. and Alabama which hindered logging, the company still has not steered clear of operational mishaps,” the analyst said. “The High Level facility, which started commissioning in 4Q (produced 8kMT), was a drag of $0.7-million to EBITDA (ramping up over 9 months).”

The release came on the heels of the Feb. 7 announcement of a defintive agreement with Drax, a Britain-based bio-energy firm, to be acquired for $13 per share, which represents a 33-per-cent premium to the closing price on Dec. 4 when the companies entered an exclusivity agreement.

“The share price has risen since then, bringing the premium down to only 13 per cent to the closing price and 15 per cent to the 20-day VWAP on February 5, 2021 (the day prior to PL’s announcement),” said Mr. Newman. “Management noted mixed reactions from shareholders, given many long-term investors have exited after a tough period in 2019–1Q20, while newer investors will not enjoy as much upside to their holdings. On February 9, Prospect announced it has disposed of 2.3 million shares of PL (6.89 per cent of total shares outstanding) at $11.086 per share for an aggregate price of $25.5-million. Effectively, its ownership has been reduced to 3.11 per cent of total shares outstanding (from 10.70 per cent).”

He added: “We believe other potential bidders could emerge, such as Enviva Partners (EVA, NYSE, not rated) or PL’s Japanese and Korean customers (eg Sumitomo, Mitsubishi, Toyota Tshusho, CGN Daesan or Mitsui). The agreement with Drax allows PL to receive superior offers, to which Drax will have five days to respond. While there is a risk that PL could be sold to some other bidder, especially as the termination fees are not onerous ($12.5-million for PL and $25-million reverse termination fee plus $5-million expense reimbursement fee for Drax), it is looking increasingly unlikely at this juncture.”

Based on the transaction, he moved Pinnacle shares to “hold” from “buy” with an $11.30 target, up $11. The average on the Street is $11.58.


In other analyst actions:

* Canaccord Genuity analyst Yuri Lynk raised WSP Global Inc. (WSP-T) to “buy” from “hold” with a $122 target, up from $120. ATB Capital Markets’ Chris Murray cut his target to $126 from $128 with an “outperform” rating, while Laurentian Bank Securities’ Mona Nazir raised his target to $126 from $123 with a “buy” recommendation. The average on the Street is $131.69.

* RBC Dominion Securities analyst Paul Quinn raised Canfor Pulp Products Inc. (CFX-T) to “outperform” from “sector perform” with a $12 target, up from $8. The average on the Street is $8.50.

* Mr. Quinn also bumped up his target for Cascades Inc. (CAS-T) to $20 from $18, maintaining an “outperform” rating. The average is $18.93.

* JP Morgan analyst Stephanie Yee lowered GFL Environmental Inc. (GFL-T) to “neutral” from “overweight” with a $31 target, falling from $37 and below the $35.06 average.

* Cormark Securities analyst Lemar Persaud upgraded National Bank of Canada (NA-T) to “buy” from “market perform” with an $86 target, up from $77 and 36 cents higher than the consensus.

* Cormark initiated coverage of Automotive Properties REIT (APR.UN-T) with a “buy” rating and $12 target, exceeding the $11.55 average.

* Scotia Capital analyst George Doumet lowered his target for Jamieson Wellness Inc. (JWEL-T) to $40 from $42 with a “sector outperform” rating, while CIBC World Markets’ Matt Bank cut his target by a loonie to $45 with an “outperformer” recommendation. RBC Dominion Securities’ Sabahat Khan trimmed his target to $42 from $44 with an “outperform” rating. The average target is $44.75.

* Scotia’s Konark Gupta cut his target for Andlauer Healthcare Group Inc. (AND-T) to $39 from $40 with a “sector perform” rating, while CIBC World Markets’ Kevin Chiang raised his target to $47 from $45 with a “neutral” recommendation. The average is $45.50.

* RBC’s Keith Mackey increased his Secure Energy Services Inc. (SES-T) target to $5 from $4.75 with an “outperform” rating, while BMO Nesbitt Burns’ John Gibson raised his rating to $4.25 from $3.75 with an “outperform” recommendation. The average is $3.75.

* CIBC World Markets analyst Jacob Bout increased his Stantec Inc. (STN-T) target to $56 from $52 with an “outperformer” rating, while RBC Dominion Securities’ Sabahat Khan raised his target to $48 from $45, keeping an “outperform” recommendation. BMO Nesbitt Burns analyst Devin Dodge raised his target to $56 from $50 also with an “outperform” rating, while Raymond James’ Frederic Bastien moved his target to $58 from $54 with an “outperform” rating. The average is $52.77.

“Based on the continued improvement in Stantec’s financial performance, an ESG profile that ought to turn the competition green with envy, and what we perceive as a low relative valuation still, we believe there is room for the stock price to keep running,” said Mr. Bastien.

* CIBC’s Robert Bek increased his target for Quebecor Inc. (QBR.B-T) to $40 from $38 with an “outperformer” rating. The average is $38.41.

“We continue to view Quebecor as an attractive investment, valued at an unreasonable discount to its Canadian and U.S. peers. We continue to highlight strong operational execution, the value proposition of its bundled platform, and still-material Wireless potential that should continue to drive valuation gains. A meaningful dividend is now in place, fulfilling a five-year strategic commitment by management,” said Mr. Bek.

* Scotia Capital’s Mark Neville increased his target for CCL Industries Inc. (CCL.B-T) to $77 from $72 with a “sector outperform” rating, while BMO Nesbitt Burns’ Stephen MacLeod raised his target to $78 from $68 with an “outperform” rating. The average is $73.

“Q1 outlook reflects a good start to the year, with ongoing strength at CCL and a return to growth at Checkpoint, partially offset by ongoing headwinds at Avery (although seeing gradual recovery) and resin inflation at Innovia,” said Mr. MacLeod.

“CCL’s performance through the pandemic (& 17-per-cent dividend raise) has highlighted its resilience. We view CCL as a best-in-class packaging company.”

* CIBC’s Robert Catellier trimmed his target for Pembina Pipeline Corp. (PPL-T) to $39 from $40 with an “outperformer” rating, while BMO Nesbitt Burns’ Ben Pham increased his target to $37 from $35 with a “market perform” rating. The current average is $38.33.

“Q4/20 results highlight that volumes are recovering, growth projects are tracking to expectations, and that there is better line of sight to achieving 2021 guidance especially with the improved commodity price backdrop,” said Mr. Pham.

“While we continue to like the 7.3-per-cent yield (65-per-cent cash payout) and free upside optionality to new projects, we are maintaining our Market Perform rating on recent trading levels and relative risk-adjusted potential total return to our new $37 target.”

* CIBC’s Mark Petrie for Maple Leaf Foods Inc. (MFI-T) to $37 from $35, exceeding the $35.19 average. He kept an “outperformer” recommendation.

“The Meat business is soaring, while the path to profitability in Plant is rockier than ever,” he said. “With Meat making up 95 per cent of sales and more than 100 per cent of profits, this strength far outweighs, and we view the stock as overly penalized on its Plant woes. Even with us now valuing the Plant business at zero – despite the assets and brands having clear value – we see significant return potential even using a conservative multiple on the Meat business. Our price target increases ... on higher Meat earnings and rolling forward our valuation, more than offsetting the lower Plant valuation.”

* TD Securities analyst Meno Hulshof raised his Imperial Oil Ltd. (IMO-T) target to $29 from $28 with a “hold” rating. The average is $27.80.

* CIBC’s David Popowich raised his target for Enerflex Ltd. (EFX-T) to $9.50 from $8.50, maintaining a “neutral” recommendation, while BMO Nesbitt Burns’ John Gibson increased his target to $11 from $9 with an “outperform” rating. The average is $10.75.

“The quarter was driven by continued strength in the company’s Rentals and Aftermarket Service platforms, which have remained very stable through the downturn,” said Mr. Gibson. “We have yet to see increased customer inquiries translate into better bookings, but believe we are now at an inflection point.”

* CIBC’s Nik Priebe increased his target for ECN Capital Corp. (ECN-T) to $9.50 from $9 with an “outperformer” rating, while BMO’s Tom MacKinnon raised his target to $10 from $9.50 with an “outperform” recommendation. The current average is $9.32.

“Adjusted EPS came in slightly below our estimate, but included a few onetime non-recurring expenses. Excluding these items, adjusted EPS was slightly above our estimate. Origination volumes were strong again in Q4, and we think the tailwinds and momentum are constructive entering 2021. We continue to like ECN for its attractive growth profile and diversified, resilient business model,” said Mr. Priebe.

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