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

Credit Suisse analyst Joo Ho Kim was not impressed by the fourth-quarter results from Canadian banks, but he took a more positive view of their outlooks.

“We entered the Canadian banks’ Q4 earning season with a sense of optimism that the banks will finish off a strong year with a solid quarter,” he said. “The actual results underwhelmed our more positive stance, with both the headline and underlying (PTPP) earnings missing our forecast on average (with divergence in results as expected). The good news is that the banks’ guidance for the year ahead was generally constructive in our view, and credit conditions did not show signs of significant deterioration. Looking ahead, we acknowledge that the uncertainties in the macro picture remain the key overhang on the sector’s valuation. Given such, we continue to believe that investors will pay for quality (and ‘defensive’) to a greater degree (as evidenced by the valuation dispersion among the group), in what could potentially be a year of ‘normalization’.”

“”On a sector-wide basis, we saw the banks continue to benefit from NIM expansion (albeit at a more moderate pace), and loan growth was much more robust than expected. Capital Markets revenue was also modestly better than what we expected. That was offset by a miss on expenses and PCLs (although we don’t see any signs of credit concerns yet). Putting them all together, PTPP earnings growth of 8 per cent year-over-year was solid but below both us and consensus.”

In a research report released Friday, Mr. Kim lowered his recommendation for shares of Canadian Imperial Bank of Commerce (CM-T) to “neutral” from “outperform” in response to recent price depreciation.

“While the share price has declined meaningfully (down 10 per cent) since the bank’s weak Q4 results, we do not see a near-term catalyst that could help boost it on a relative basis,” he said. “Partly reflecting CM’s weaker guidance, we now believe the bank could continue to underperform on NIMs relative to peers, an area which should remain a near-term focus for the sector in our view. We also highlight CM’s overweight exposure to the domestic housing market as another factor that could suppress the shares’ relative upside, given the weak growth dynamic and the negative sentiment from a credit perspective (despite our belief to the contrary on a more fundamental basis).”

His target for CIBC shares slid to $63 from $66. The average on the Street is $66.09.

Why CIBC’s shrinking loan margins are causing so much trouble for the bank’s share price

He maintained his recommendations and target prices for the rest of Big 6 banks. They are:

  • Bank of Montreal (BMO-T) with an “outperform” rating and $152 target. Average: $145.81.
  • Bank of Nova Scotia (BNS-T) with a “neutral” rating and $73 target. Average: $79.08.
  • National Bank of Canada (NA-T) with an “outperform” rating and $109 target. Average: $102.71.
  • Royal Bank of Canada (RY-T) with an “outperform” rating and $153 target. Average: $140.34.
  • Toronto-Dominion Bank (TD-T) with a “neutral” rating and $98 target. Average: $101.63.

“Our pecking order for the Outperform-rated stocks is BMO, NA, and RY, with our target prices for these banks implying a very strong total return of 23 per cent,” he said.


Citing its valuation and a limited return to his target for its shares, Credit Suisse analyst Andrew Kuske downgraded Pembina Pipeline Corp. (PPL-T) to “neutral” from “outperform” on Friday.

“Over several timeframes, Pembina Pipeline Corporation’s (PPL) stock delivered outperformance versus the relevant Canadian peer group,” he said.

“Beyond the stock performance and, as a result, a relative valuation view, we consider the company’s positioning amidst commodity prices, the performance of underlying assets, competitive dynamics and the next wave of major frac expansion in the Western Canadian basin. Clearly, there is a lot to like with PPL’s asset network, in part, given structural advantages, financial capacity and business positioning. In the early stages of the industry’s guidance season, prospects exist for growing producer volumes, better utilized processing and tight fracs. Yet, commodity price volatility and the outlook for selected margins may be more challenged into 2023.”

The analyst raised his 2022 earnings per share forecast for the Calgary-based company to $5.50 from $2.88, but his 2023 estimate slid to $2.92 from $3.03.

“Looking Ahead: Notables include: (a) the competitive positioning for the next wave of frac plants in Western Canada with PPL likely being the best positioned with progressed engineering, the overall network along with a financial capability; (b) evolution of the hedging program that may be officially unveiled in either budget season or with Q4 results in 2023; and, (c) overall positioning in Western Canada for legitimate volume growth (as opposed to returning to past levels) on a more prolonged period of time given improved egress efforts – largely related to LNG,” said Mr. Kuske.

His target for Pembina shares slid by $1 to $51 target, above the $50.63 average on the Street.

“PPL’s midstream assets in key WCSB plays underpin critical energy infrastructure with growth opportunities from network expansion. On a near-term basis, the commodity exposure (frac related) is very positive for PPL in the current environment,” he concluded.

In a separate note, Mr. Kuske cut his Enbridge Inc. (ENB-T) target to $52 from $54 with a “neutral” rating following a recent meeting with its management. The average is $58.35,

“Into the year-end rush, ENB provided a generally mildly positive guidance update on November 30th and connected with parts of the Investment Community ... With ENB’s ongoing positive self-funding model and appropriate leverage (in our view, but more than the U.S. peers and less than Canadian peer TC Energy), the business is interestingly positioned on multiple fronts,” he said. “Yet, generally, ENB continues to face a cross-border contrast with, at times, different perspectives on outlook and some consistent themes, including: (a) ENB’s valuation remains at a premium to the group (with duration and risk-profile debates); (b) a larger liquids skew; and, (c) ENB’s network benefits should be helpful in driving risk-adjusted growth into the future.”

He raised his target for Tidewater Midstream and Infrastructure Ltd. (TWM-T) to $1.40 from $1.35 with an “outperform” rating. The average is $1.62.


BMO Nesbitt Burns analyst Jackie Przybylowski lowered her recommendation for Lundin Mining Corp. (LUN-T) to “market perform” from “outperform,” seeing it “fully valued at the present time.”

“The current macro environment has created a scenario where investors want some exposure to metals in the case of global recovery; however, they are cautious near-term risks (geopolitical, or risks to cash flows / balance sheets),” she said. “The result of these competing forces is a crowding into a few large, liquid, and defensive / high-quality names—this is particularly true amongst base metals where holding metals is less practical for most investors.

“We expect to see a shift to value. A China reopening or other catalyst to the global economic outlook could see investor preference shifting towards lower-priced equities — in our coverage universe, this includes Ero Copper, Hudbay, and Nexa Resources.”

While reiterating her view of Lundin’s Josemaria project in Argentina as a “valuable strategic asset,” Ms. Przybylowski said recent delays helped justify her downgrade.

“Josemaria gives Lundin strategic advantage of being the ‘first mover’ in the prospective Vicuña district, Argentina. We continue to believe that this is true,” she said. However, partnership in and/or development of Josemaria has been delayed — Lundin now expects the revised feasibility study will be completed H2/23 (from year-end 2022). We view the study as key for discussions with potential partners; we consider clarity on potential partnerships as an important de-risking activity from both financial and execution risk perspective.”

The analyst cut her target to $8 from $8.50 in response to management’s guidance, including her “more negative outlook for the Neves-Corvo zinc expansion project ramp-up in 2023.” The average is $9.27.

“Disappointing production at the Candelaria mine, delays to ZEP at Neves-Corvo, and longer-than-expected timeline for delivery of expansion plans at Chapada have prompted us to take a more cautious approach,” she concluded.



While Lululemon Athletica Inc. (LULU-Q) forecast holiday-quarter revenue and profit that fell largely below analysts’ estimates, a pair of equity analysts on the Street reaffirmed bullish stances on the Vancouver-based apparel maker.

After the bell on Thursday, it projected fourth-quarter revenue between US$2.6-billion and US$2.66-billion, which is under analysts’ estimates of US$2.6- billion. An estimate of current-quarter profit of between US$4.20 and US$4.30 per share was in line with the Street’s view of US$4.30.

Seeing it well positioned for the holiday quarter based on “brand heat” and inventory availability, Piper Sandler’s Abbie Zvejnieks raised her target to $390 from $350 with an “overweight” rating. The average on the Street is US$395.72.

Elsewhere, J.P. Morgan’s Matthew Boss increased his target to US$440 from US$413 with an “overweight” rating, seeing its brand still having a place domestically and its international business being an untapped opportunity.

Others making changes include:

* Wells Fargo’s Ike Boruchow to US$360 from US$345 with an “equal weight” rating.

“With LULU among the more crowded stocks in our coverage, the 3Q print offered some for both the bulls and the bulls. While 3Q showed a solid beat on top-line (as expected) and management has seen momentum QTD (Black Friday biggest revenue day ever for the company), LULU also saw a GM miss (down 125 basis points year-over-year vs. down 50-70bps plan), with inventories stubbornly at the 85-per-cent level (consistent with 3Q but according to plan). With LULU’s momentum continuing to impress (3-yr CAGR 27 per cent in 3Q), gross margin volatility albeit from non-merchandise items (FX, geo mix, supply chain) is likely to cloud some of the margin recapture bull case looking ahead to FY23 despite still impressive fundamentals,” he said.

* Bernstein’s Aneesha Sherman to US$320 from US$300 with a “market perform” rating.

* Barclays’ Adrienne Yih to US$445 from US$446 with an “overweight” rating.

* Cowen and Co.’s John Kernan to US$516 from US$542 with an “outperform” rating.


After generating “strong” results thus far in 2022, Aritzia Inc.’s (ATZ-T) momentum is likely to continue, according to Stifel analyst Martin Landry, citing “positive industry read-throughs.”

“While demand for apparel has slowed down in recent months globally, there is a clear delineation between the upper-middle class customer and the lower income customer,” he said. “Brands targeting affluent customers such as lululemon and Anthropologie are still posting strong growth. This is reassuring for Aritzia, which is also targeting affluent customers, and suggests that the impact of the economic slowdown could be muted in the near-term.”

Despite a negative initial reaction from the Street, the analyst pointed to Lululemon’s “strong” third-quarter results, released Thursday after the bell, that saw adjusted earnings per share rise 23 per cent year-over-year to US$2, exceeding the Street’s forecast by 3 US cents.

“Similarly to Aritzia, Lululemon has not raised prices significantly over the last year,” he said. “The company raised prices on roughly 10 per cent of their products this year, a very low level when compared to the rest of the industry. As shown by the results thus far this year for both companies, this strategy seems to have paid off. On the flip side, other competitors, which raised prices are now having to discount their products, creating a habit for consumers to look for discounts in the future. Lululemon continues to see strong sell through of full price products, and we would expect a similar dynamic for Aritzia.”

Mr. Landry also emphasized “strong” website traffic generated by Aritzia, enjoying an increase of 17 per cent year-over-year during the third quarter versus a 4-per-cent gain in the previous three months. He also pointed to the outperformance of high-end brands and “positive” Black Friday data points.

“Urban Outfitters (URBN-NASDAQ), reported in-line Q3FY23 results on November 21, for the three months ended October 31, 2022.” he said. “Despite an inline quarter, performance within the company’s higher-end segment was strong with the Anthropologie Group posting comparable sales growth of 13 per cent, while the Free People Group comp sales came-in at 8 per cent, both much higher than the overall group at 4 per cent. These results align with our view that high-end brands, serving a more affluent customer are less impacted by inflationary pressures and rising interest rates relative to ‘value’ brands.”

“Despite the challenging macroeconomic environment, spending during the 2022 Black Friday appear to have increased year-over-year. MasterCard SpendingPulse Advanced Estimates suggested that total retail sales (ex auto) grew 10.9 per cent year-over-year from November 24 to 27. More importantly, apparel sales are estimated to have grown by 14.4 per cent year-over-year, a positive read-through for Aritzia’s Q3FY23 results, which covers the Black Friday period.”

Citing “improved visibility on demand trends” and calling it a “best-in-class” retailer with “significant” growth potential, Mr. Landry raised his target for Artizia shares by $3 to $62, maintaining a “buy” recommendation. The average on the Street is $62.14.

“Aritzia has a long runway for growth, a healthy balance sheet and a proven track record, all appealing characteristics for investors,” he said.


Following “solid” 2023 guidance that exceeded his expectations, National Bank Financial analyst Vishal Shreedhar remains “constructive” on Parkland Corp. (PKI-T), citing its “attractive valuation and moderate growth, supported by fuel/refinery margins and acquisition contribution (integration and synergy capture of completed deals).”

“Notwithstanding, we believe that the investment community will be monitoring operational execution (along with the ability to de-leverage while returning capital) in the coming quarters with increased scrutiny given recent operational misstep,” he added.

Shares of the Calgary-based company surged 6 per cent on Thursday following the release of its 2023 guidance, which includes adjusted EBITDA of $1.7-$1.8-billion, including an approximate $100-million impact as a result of the eight-week turnaround planned at the refinery in Burnaby, B.C., and capex of $500-$550-million. It also reaffirmed its confidence in meeting its 2025 strategic goals of $2-billion in EBITDA without further acquisitions.

“Recently, PKI indicated that it would pause on M&A, pivoting towards integrating its acquired businesses,” said Mr. Shreedhar. “This guidance update continues along the same theme, with a focus on de-leveraging, driving higher returns, optimizing the network and returning excess capital to shareholders. In our view, it is the right strategy for PKI at this juncture (following a period of heightened acquisition activity). Recall that PKI recently announced an NCIB to purchase up to 14 million shares, expiring Nov. 30, 2023 (no activity so far)..”

Raising his 2023 and 2025 EBITDA estimates to $1.701-billion and $1.874-billion, respectively, from $1.644-billion and $1.813-billion, the analyst increased his target for Parkland shares to $36 from $34, maintaining an “outperform” recommendation. The average on the Street is $40.07.


National Bank Financial analyst Dan Payne thinks Anaergia Inc.’s (ANRG-T) operations and execution have “begun to turn a corner” after the Burlington, Ont.-based clean-technology waste processor announced operational and commercial milestones while reinstating its 2023 guidance on Thursday.

However, he warns the revised guidance is “a significant downdraft and material uncertainty remains (including medium-term validation of the tangibility of that guidance) that may cause continued volatility for the equity, execution of funded project growth (as stated) should (with success) re-establish its value potential over the long term.”

Anaergia is projecting revenue of $310-million for the next fiscal year with associated EBITDA of $30-million. Both are “materially” below the Street’s expectations of $414-million and $94-million, respectively.

“Overall, the renewed guidance generally reflects the headwinds being experienced by the business, which has generally set its outlook back by one year (given this quantum of EBITDA was previously suggested for 2022), while management believes that its revised guidance (capital & funding profile through EBTIDA ramp) has been significantly risked (there are noted elements that it has ‘no influence or control’ over, including receipt of an LCFS pathway, ramp of Rialto feedstock, timeliness of government subsidies/incentives),” said Mr. Payne.

Reiterating a “sector perform” rating for its shares, he cut his target to $6 from $10. The average is $10.18.

Elsewhere, BMO’s John Gibson cut his target to $7 from $8.50 with a “market perform” rating.

“We continue to believe the shares hold strong upside longer term as its BOO [build-own-operate] division moves forward, but continue to take a more cautious approach near term as material contribution from the division is still several quarters away,” he said.


In other analyst actions:

* Canaccord Genuity’s Yuri Lynk raised his target for Adentra Inc. (ADEN-T) to $34 from $31, keeping a “buy” rating, following its analyst day event in Dallas. The average is $46.24.

Langley, B.C.-based Adentra was known as Hardwoods Distribution Inc. prior to the completion of a rebranding on Monday.

“We come away from the event encouraged by the company’s long-term prospects and with a better appreciation of the value proposition afforded to customers. Despite our estimates being below consensus, we continue to recommend ADENTRA on its relatively low valuation, clear pathway towards debt repayment over the next year, and the opportunity to eventually deploy capital on value-creating acquisitions,” he said.

* Coming off restriction following its $35-million bought deal financing, Scotia’s Justin Strong increased his Altius Renewable Royalties Corp. (ARR-T) target to $13.25 from $11.75, keeping a “sector outperform” rating. The average is $14.25.

* Scotia’s Maher Yaghi cut his Corus Entertainment Inc. (CJR.B-T) target to $3 from $3.40 with a “sector perform” rating. The average is $3.19.

“We are decreasing our Corus estimates for Q1/FY23 on the account of continued pressure on TV ad revenues,” said Mr. Yaghi. “A theme that we also heard while meeting with NBC Universal management in the US earlier this week. Pressure on linear TV advertising continues to be intense with broadcasters trying to offset that pressure with digital ad supported services to capture lost linear ad revenues. Yesterday, the CRTC also provided an updated policy on radio ownership. While some changes were provided vs prior rules, we don’t view the new updated policy as providing the needed flexibility radio operators in Canada were hoping to see in order to improve overall profitability.”

* Scotia’s Cameron Bean reduced his Crew Energy Inc. (CR-T) target to $10 from $10.50 with a “sector outperform” rating. The average is $8.82.

“We expect CR’s 2023 guidance and new four-year plan to receive a negative initial reaction from the market,” he said. “The company’s plan to ramp capital spending (likely above cash flow in 2024 and 2025) and double production by 2026 runs contrary to the E&P sector mantra of capital discipline and maximizing cash distributions to shareholders. While CR successfully executed on its previous two-year plan (more than 20-per-cent production CAGR through 2022, while reducing the debt to cash flow ratio to 0.5 times), the new plan significantly ups the ante. The ambitious nature of the plan gives us pause; however, as we previously noted, CR showed significant operational improvement over the course of its previous growth program. Given these improvements, we are inclined to stick with the stock and believe the plan to continue growing may put CR ahead of the curve (and accelerate its NAV) as the sector moves forward. Nevertheless, the company’s plan (particularly the 2024 and 2025 spending) injects new risk into the story.”

* RBC’s Jimmy Shan trimmed his Nexus Industrial REIT (NXR.UN-T) target to $11.50 from $11.75, below the $12.50 average, with a “sector perform” rating. Others making changes include: Echelon Partners’ David Chrystal to $13 from $13.50 with a “buy” rating and Raymond James’ Brad Sturges to $13 from $13.25, keeping a “strong buy” rating.

“We have lowered our NAV/unit, FFO/unit and AFFO/unit estimates to reflect Nexus’ planned and completed financing and acquisition activities,” Mr. Sturges said. “Heading into 2023, we anticipate that Nexus can benefit from incremental investment fund flow from those investors seeking to replace their respective pure-play Canadian industrial real estate exposure once the Summit Industrial Income REIT (Summit) privatization / M&A transaction closes in 1Q23 (subject to unitholder approval).”

* Seeing “strong” Strong Black Friday/Cyber Monday sales boding well for its fourth quarter, Wells Fargo’s Jeff Cantwell raised his Shopify Inc. (SHOP-N, SHOP-T) target to US$46 from US$42, above the US$40.97 average, with an “overweight” rating.

“We analyzed the historical relationship between SHOP’s GMV and the US Census Bureau’s retail e-com data. Our analysis indicates 1-5-per-cent potential upside to consensus’ 4Q GMV forecast for SHOP. Similarly, we see 3-6-per-cent potential upside to Merchant Solutions revenue vs. consensus, as detailed in this report ... Taking our 4Q, ‘23, and ‘24 estimates up for SHOP, as trends in retail e-com look firmer than we were expecting,” he said.

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