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

Quebecor Inc.’s (QBR-B-T) quarterly results this week were not as strong as many analysts expected, leading to several price target cuts on Friday.

Still, with the stock dropping 5% on Thursday, some analysts believe it’s a good time to buy shares. And with the company announcing a 9% dividend hike, they note there’s a good stream of income to be had as well.

BMO cut its target price to C$37 from C$40; Canaccord Genuity cuts its target to C$32 from C$33; National Bank of Canada trimmed its target to C$37 from C$40; and RBC reduced its target to C$36 from C$38.

Desjardins Securities also cut its target, to C$35 from C$37.50, but reiterated a “buy” rating and suggested the stock will outperform “in the next few months.”

“QBR’s 4Q results were not strong, but the 5% decline yesterday, coupled with our view that the stock was already cheap - with a free cash flow yield almost 6% above the industry’s weighted average - creates an attractive buying opportunity, in our view, since issues that affected QBR in the quarter are generally transient,” Desjardins analyst Jerome Dubreuil said in a note.

“Following QBR’s 9% dividend increase, its dividend yield of 4.3% is only surpassed by BCE, even though QBR has one of the lowest FCF distribution ratios in the industry at 36%. The company is also actively buying back shares,” he added.

“We have reduced the multiple we use to value the wireless assets, as we are starting to see signs of market share plateauing. However, this observation is rather conservative, in our view, as the pandemic is hampering the growth of smaller companies,” he said.

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Canaccord Genuity analyst Mark Rothschild upgraded Crombie REIT (CRR-U-T) to “buy” from “hold”, believing that the pullback in the REIT’s units presents an attractive entry point.

“Crombie REIT’s operational performance has recovered well from the pandemic, evident by healthy leasing spreads, strong occupancy and steady internal growth,” the analyst said in a note. “Compared to Q4/20, occupancy has increased 160 bps to 95.6% in Q4/21 while internal growth was 1.2% in Q4/21, and 5.0% for 2021, as compared to negative 1.1% in 2020. With investor demand for grocery-anchored retail properties extremely strong, recent transaction activity provides evidence that cap rates have stabilized from pre-covid levels.

“We utilize a 5.8% cap rate (unchanged) to value Crombie’s portfolio and our Net Asset Value estimate increases to $19.14 per unit (previously $18.40). Our target price remains $19.25, in line with our NAV estimate. Despite improving operational and financial performance, Crombie’s unit price has declined 6.6% so far in 2022, and is now at a 10.9% discount to NAV. With a total implied forecast return of 19.2%, we believe the units present attractive value.”

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Analysts have tweaked their price targets in the wake of Royal Bank of Canada’s (RY-T) quarterly earnings on Thursday, providing a relatively upbeat assessment of a first quarter that saw a 6% boost to profit.

The median price target is now C$150, up $5 from a month ago, according to Eikon data.

Retail banking profit was up 10 per cent, even as profit margins on loans shrank. Spending and borrowing by consumers and businesses has been picking up, and loans to personal and commercial customers were 8 per cent higher year over year, driven primarily by a growing mortgage book. Fees from managing investments and mutual funds also surged amid a strong run for stock markets.

But there are also mounting geopolitical tensions as Russia invaded Ukraine, which has compounded existing risks to the global economy from supply chain disruptions, labour shortages and high levels of inflation.

Among the price target changes were: Scotiabank raising its target to C$163 from C$162; and Canaccord Genuity cutting its target to C$147 from $150.

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At least two analysts have upgraded ratings on Bombardier Inc. (BBD-B-T) in the wake of the company reiterating its 2025 financial targets this week. The company reported solid progress on its four strategic priorities under a five-year plan that started last year. Performance metrics in the first year of the plan beat some analysts’ expectations

CIBC raised its price target to C$1.80 from C$1.70 and upgraded its rating to “neutral” from “underperformer”. Scotiabank raised its target price to C$2.35 from C$2 and upgraded its rating to “sector outperform” from “sector perform.”

Scotiabank analyst Konark Gupta said his upgrade was in response to “increased confidence in management’s ability to execute on most, if not all, of its 2025 goals.” He also cited the stock’s 33% pullback since early October for supporting the upgrade.

“Our single biggest takeaway was that management still expects greater than $500-million in free cash flow in 2025 even if capex increases to $600-milion vs. last year’s assumption of $200-million,” Mr. Gupta said in a note.

“This $400-million capex cushion is what improves our confidence in free cash flow guidance given we were not convinced with BBD’s $200-million capex assumption last year in light of rising competition from Gulfstream and Dassault. That said, we still prefer to wait for further margin execution before giving full credit to BBD’s 20% EBITDA margin guidance,” he said.

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An overall disappointing earnings report has analysts lowering their price targets for shares of Stelco Holdings Inc (STLC-T)

BMO cut its target price to C$45 from C$53; National Bank of Canada cut its target to C$48 from C$53; RBC reduced its target price to C$51 from C$53; and Scotiabank trimmed its target to C$48 from C$54.

Profits were a little lower at Stelco, commented Scotiabank analyst Michael Doumet, but they were “still plenty high.”

Stelco reported fourth quarter 2021 sales, adjusted EBITDA, and adjusted EPS of $1.186-billion, $673-million, and $6.79, respectively. That compared with consensus of $1.254-billion, $695-million, and $6.67. Steel shipments were in-line with what was pre-released by the company on Jan. 6.

“In the context of the steel price decline (and reduced shipments), we view the 4Q21 results as a modest positive and the moderated 1Q22 earnings outlook as largely in-line with expectations,” Mr. Doumet said in a note. “In 2021, inventory restocking and surging demand drove significant upside in HRC prices as supply gradually caught up. Supply has now caught up; as prices slide, inventory destocking is, naturally, putting incremental downward pressure on demand and pricing.”

He expects the company will continue to purchase its own shares going forward.

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At least six analysts raised their price targets on Loblaw Companies Ltd. (L-T) in the wake of the grocer’s better-than-expected earnings this week.

The median price target is now $111.50, up from $105 a month ago.

RBC has one of the highest targets now on the Street, at C$120.

RBC analyst Irene Nattel titled her research report reacting to the earnings as a “basket runneth over.”

“With Loblaw in the early innings of implementing broad-based initiatives in core retail, leveraging loyalty, and de-emphasizing/eliminating businesses and investments that are likely to remain marginal, and likely gaining market share, we view share price as also offering compelling value,” she said.

She sees inflationary trends as being beneficial to the company - more so than many of its peers, given its ownership of discount grocery brands.

“Management tone on the conference call was constructive, with much discussion on inflation, the ability to pass it on and consumer reaction to rising prices. Momentum in the discount channel is accelerating as inflation takes hold and consumer price sensitivity increases. Loblaw has many tools that serve the company well in this environment: network over-indexes to discount (60%), prior price investments in market division, strength of the loyalty program, and leading private label offering including deep value No Name, recently rejuvenated and highlighted in-store,” Ms. Nattel said.

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Several analysts aggressively slashed their price targets on Beyond Meat Inc. (BYND-Q) after the company’s latest earning failed to fire up much enthusiasm.

Beyond Meat reported a 1.2% year-over-year drop in fourth quarter 2021 revenue, to $100.7-million, and EBITDA fell well short of some analysts’ expectations.

Canaccord Genuity cut its price target to US$50 from US$80; JP Morgan cut its target price to US$32 from US$54; Mizuho cut its target price to US$45 from US$59; and Piper Sandler cut its target price to US$50 from US$64.

“Following a tough quarter where EBITDA again disappointed, management is calling for a return to form in 2022 for its largest channel, US Retail, driven by several factors. These include expanding distribution, new products, additional marketing muscle gained through QSR and PepsiCo partnerships, and the ability to sample in-store,” Canaccord analyst Bobby Burleson said in a note. “We also note YoY comparisons should get easier.”

“Despite these attractive tailwinds, we remain cautious. Our primary concerns are that weak category trends may persist, while the competitive environment is likely to remain intense. Management also noted that although overall investment intensity should ease, cost headwinds related to the use of co-manufacturers and new products ramps could linger in the first half, making below-the-line performance choppy,” Mr. Burleson said. He has a “hold” rating on the stock.

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In other analyst actions:

* Tesla Inc (TSLA-Q): Daiwa Capital Markets cuts target price to US$900 from US$980 and raises rating to “outperform” from “neutral.”

* Pan American Silver Corp (PAAS-Q): Canaccord Genuity cuts to “hold” from “buy” and lowers price target to US$25 from $27. Scotiabank also cut its price target to US$23 from US$28.

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