Inside the Market’s roundup of some of today’s key analyst actions
National Bank analyst Maxim Sytchev upgraded Bird Construction Inc. (BDT-T) shares to “outperform” while raising his price target to C$11.50 from $10.
He cited eight reasons why investors should buy the stock.
“1) Inaugural Investor Day on 9/9 — don’t expect many numeric targets but greater colour on strategy, positioning, Stuart Olson; 2) LNG Canada is a big project for the company — don’t expect a cliff as contract visibility should lead to profitability (2nd train would be icing on the cake) — recall % of Industrial work correlates positively to margins; 3) Greater emphasis on centralization, best practices sharing, technology are yielding benefits vs. previous localized management style; 4) Underlevered balance sheet (0.5x net debt) can provide M&A optionality as management would like to do 1 deal/year; 5) Oil is on the upswing — 40% of legacy Stuart Olson was commodity-driven; 6) Growth end markets such as nuclear, modular and timber are emerging, and they don’t carry higher risk; 7) Trading at 14% discount vs. own 5-year median while having a better end-market skew; 8) 4.2% dividend is attractive vs. CAD 10-year bond yield~1.2%.”
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At least six analysts have raised price targets on Canadian Imperial Bank of Commerce (CM-T) following the company’s earnings beat on Thursday.
BMO raised its target price to C$165 from C$160; Canaccord Genuity to C$161 from C$157; Credit Suisse to C$156 from C$149; National Bank of Canada to C$168 from C$159; Scotiabank to C$168 from C$166; TD Securities to C$160 from C$155; and Desjardins Securities to C$154 from $150.
The average analyst price target on the Street is now $159.96, up from $151.83 one month ago, according to Refinitiv Eikon data.
CIBC reported better-than-expected financials in the fiscal third quarter, with adjusted EPS of $3.93 easily exceeding the C$3.41 consensus.
Here are a few highlights of what analysts are saying:
Credit Suisse’s Mike Rizvanovic: “Importantly, CM’s better performance was not entirely driven by PCL [Provision for Credit Losses] recoveries with solid PTPP [Pre-Tax Pre-Provision] earnings growth driven by a robust top-line and minimal expense inflation.” He believes CIBC’s share price underperformance on Thursday compared to peers was mostly reflective of the bank’s strong run-up into fiscal Q3 earnings.
Scotiabank’s Meny Grauman: “CIBC entered the pandemic with a lagging retail franchise and a very skeptical investor base, but it exits with a business that is firing on all cylinders and the best six month share performance among the large bank peer group. Besides above-average mortgage growth (second only to RY), the firm also delivered impressive sequential corporate and Canadian commercial loan growth, and high-teen PTPP growth in the US. This was not the best result this earnings season, but was certainly near the top of the pack once again. With the shares outperforming the peer group average by 760bp since Q2 reporting and trading at only a 3% discount to the group based on next year’s consensus EPS versus a historical discount of 10%, valuation is certainly looking more challenging. However, there is no sign that CIBC will not be able to continue to deliver operationally in the quarters ahead. In fact, consensus numbers are likely to move up on the back of this result, and we suspect that they will continue to lag actual results in the quarters ahead. The bottom line is that when it comes to CIBC, the trend is your friend, and we remain constructive on this name until we see signs that momentum is slowing.”
Desjardins Securities’ Doug Young: “Pre-tax, pre-provision (PTPP) earnings were 5% above our estimate, with no division falling below our estimate. More importantly, management delivered above-peer-average mortgage growth. An 11% increase in average mortgage loan balances was, driven by improved origination and retention. Its mortgage pipeline remains robust; however, the pace of growth will likely moderate from peak levels (an industry theme). While we maintain our Hold rating, we like several underlying trends.”
RBC’s Darko Mihelic: “CM’s Q3/21 results were strong with higher than forecast revenues, solid credit performance, and all segments coming in better than expected. We continue to see mortgage loan growth momentum, and although credit card balances remain low, we are seeing credit card purchase volumes pick up, suggesting revenue and earnings momentum should continue. We maintain our Outperform rating [and $158 price target].”
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Analysts were much less pleased with the quarterly results of Toronto-Dominion Bank (TD-T). Its earnings beat was less impressive, with cash EPS of C$1.96 only modestly above the Street consensus of C$1.92.
BMO cut its target price to C$94 from C$96 and National Bank of Canada to C$89 from C$91.
The average analyst price target on TD among analysts is now $92.07, which is almost unchanged from a month ago.
Here are some commentary highlights:
Scotiabank’s Meny Grauman: “While it would be difficult to classify TD’s Q3 numbers as negative, performance remained underwhelming on a relative basis. Not only did the bank post the smallest beat to the Street, but essentially all of the difference came from credit. Meanwhile PTPP growth of just 3% was near the bottom of the pack this earnings season, and asset growth in Canada remained below the peer average while the US loan book continued to contract. The margin story was much improved with allbank NIMs up 2.5 bps Q/Q, but a modest increase in US retail was helped by PPP loan paydowns. We were particularly encouraged by record high card sales and a 13% Q/Q increase in card service fees (no HST rebate), but we are not sure that a recovery here will fully close the gap with peers. Capital remains a key strength for TD, but ... we see M&A risk as elevated on this name.” The analyst has a C$94 price target on TD.
Desjardins Securities’ Doug Young: “Concerns. (1) Wealth management PTPP earnings fell short of our estimate and declined sequentially, driven by lower transaction activity (now 2x pre-pandemic vs 3x previously). Management believes transaction activity will remain elevated. (2) Capital markets results suffered from TD’s larger exposure to trading (under pressure) and less exposure to banking (an area of strength) vs peers. Other. (1) Discount broker fees? In Canada, NA cut fees on trading US and Canadian stocks/ETFs to zip. TD has a larger exposure to discount brokerage vs peers. For context, these fees are ~1% of TD’s revenue. And it doesn’t sound like it plans to cut. (2) US overdraft fees? It’s limiting the number of overdraws a day and launched a new product without an overdraft feature. It pegs the potential revenue impact at ~C$40–50m annually.” He maintained a “buy” rating and C$97 target.
RBC’s Darko Mihelic: “Q3/21 results were good driven by strong results in Canada P&C and U.S. P&C. Although TD could be facing some potential revenue headwinds, we do not view the potential impacts to be overly material. We continue to believe that higher interest rates and a rebound in retail activity can help improve TD’s relative performance and we may be seeing very early signs of rebounding client activity. We maintain our Sector Perform [and C$91 price target].”
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In other analyst actions:
Martello Technologies Group Inc. (MTLO-X): Eight Capital cuts price target to C$0.15 from C$0.30 and downgrades rating to “neutral” from “buy”
Dollar General Corp (DG-N): CFRA cuts to hold from buy;raises target price by US$5 to US$225
CVR Energy Inc (CVI-N): Citigroup cuts price target to US$15 from US $25.03 and downgrades rating to “neutral” from “buy”
Dave & Buster’s Entertainment Inc (PLAY-Q): Truist Securities raises price target to US$54 from US$53 and upgrades rating to “buy” from “hold”
Delek US Holdings Inc (DK-N): Citigroup cuts price target to US$8 from US$25 and downgrades rating to “sell” from “neutral”
Marathon Petroleum Corp (MPC-N): Citigroup cuts price target to US$67 from US$70 and lowers rating to “buy” from “neutral”
Ulta Beauty Inc (ULTA-Q): Wells Fargo cuts target price to US$425 from US$430 and downgrades rating to “equal weight” from “overweight”.
Darcy Keith