Inside the Market’s roundup of some of today’s key analyst actions
Several analysts have raised their price targets on Canadian convenience-store operator Alimentation Couche-Tard Inc. (ATD-T) after its deal announced Thursday to buy service stations in Europe from French oil giant TotalEnergies SE.
The deal, which was announced shortly after the company released quarterly results, involved Couche-Tard making a binding offer to buy 2,193 stations for €3.1-billion in cash (about US$3.3-billion at current exchange rates).
If finalized, the deal would be the Canadian company’s first major acquisition in more than five years.
“We like the potential acquisition of the assets from TotalEnergies as it is a natural extension of Couche-Tard’s European network, with minimal overlap,” commented Canaccord Genuity analyst Derek Dley, who reiterated a “buy” rating and raised his target price to C$70.00 from C$68.00.
“We believe the company will be able to drive meaningful synergies as it integrates this acquisition, and we believe the transaction multiple paid appears very reasonable. While the acquisition is subject to a consultation process and competition authority review, our assumption is the transaction will close by the end of calendar 2023. Once we get confirmation on closing and timing, we will incorporate the acquisition into our estimates, but at first blush, our math suggests the acquisition is roughly 9% accretive to EPS,” Mr. Dley said.
Analysts at CIBC raised their target price to C$76 from C$73, while RBC’s target went to C$85 from C$82 and Scotiabank’s went to C$74 from C$71. National Bank’s went to C$71 from C$68, Stifel GMP’s to C$74 from C$68, and TD Securities’ to C$74 from C$71.
Commented Scotiabank analyst George Doumet: “We view this acquisition favorably as it (i) was acquired at a desirable/highly accretive multiple, (ii) has substantial strategic merit in that it almost doubles ATD’s presence in Europe (a market of focus) giving it increased scale and market share in Belgium, Germany and the Netherlands, (iii) provides €120M of largely top-line synergies (from expanded merchandising, especially food) – and could provide additional synergies driven by cost efficiencies and fuel procurement (although we understand this could come later), and (iv) the deal leaves additional room on the balance sheet to further pursue M&A (and share buybacks). ATD remains a top pick.”
Raymond James analyst Rahul Sarugaser downgraded HLS Therapeutics Inc (HLS-T) to “market perform” from “outperform” after the drug maker reported fourth quarter, net income and EBITDA that all came in below expectations. He cut his price target to C$15 from C$24.
HLS’s mainstay product, Clozaril, continued to generate steady sales in Canada, but sales of the drug continue to be impeded by lasting effects of the pandemic on patient access to assessment and treatment, Mr. Sarugaser noted. In the U.S., Clozaril sales decreased by 8% year over year, driven by a slight loss of market share.
Meanwhile, the company’s flagship Vascepa drug, which is prescribed to reduce heart attack risks, saw sales volumes grow 22% from the last quarter, with 500 new physicians across Canada now prescribing it.
“While these trends are positive, we understand that physicians in Ontario—home to about 40% of Canada’s population—are being faced with challenging claims processing and authorization under the provincial drug plan, which HLS indicates has been a barrier to onboarding new prescribers,” the analyst said.
Meanwhile, fourth quarter sales and marketing expenses escalated as a result of escalating physician interactions, he added.
Elsewhere, Canaccord Genuity cut its target price to C$17.50 from C$21.75 and Stifel GMP cut its target to C$18 from C$26.
A handful of analysts have modestly trimmed their price targets on Empire Company Ltd (EMP.A-T) in the wake of the grocer’s fiscal third quarter results.
CIBC cut its target price to C$41 from C$42; TD Securities cut its target price to C$42 from C$43; and Desjardins Securities lowered its target to C$41 from C$44.
“As expected, 3Q results reflected very tough challenges from high inflation driving shoppers to discount, heavy e-commerce dilution and a one-time cyberattack impact, partly mitigated by continuing Project Horizon benefits, which we believe are underappreciated by the market,” commented Desjardins Securities’ analyst Chris Li.
Project Horizon is the company’s new three-year growth strategy for core business expansion and e-commerce acceleration.
Mr. Li maintained a “buy” rating despite the company’s current challenges.
“We believe EMP’s discounted valuation largely reflects near-term industry challenges,” he said. “Moderation in inflation is key to improving results and sentiment, but it probably will not happen at least until 2H. Patience is required.”
Analysts are tweaking price targets on Premium Brands Holdings Corp (PBH-T) after the specialty food manufacturer reported fourth quarter results and unveiled a new five-year plan.
CIBC cut its target price to C$98 from C$99; RBC cut its target price to C$104 from C$107; and Stifel GMP raised its price target to C$111 from C$105.
Desjardins Securities analyst Chris Li maintained a “buy” rating and C$110 price target on the stock.
He commented: “Results were largely in line with modestly improved leverage. 2023 guidance reflects strong revenue growth and more moderate margin expectations. The new fiveyear plan calls for ambitious organic growth and conservative margins. While macro uncertainties could keep the shares rangebound, our positive view is based on below-average valuation (~11x forward EBITDA vs ~14x), with improvement driven by reacceleration of organic volume growth, deleveraging, M&A and margin expansion.”
Desjardins Securities analyst Gary Ho believes AGF Management Ltd. (AGF.B-T) will deliver a dividend increase and overall solid results when it announces fiscal first quarter results on March 22.
His takeaway: “We look for another solid quarter from AGF, with C$133m of retail net inflows and a 10% dividend increase (C$0.01/share quarterly). Our EPS of C$0.29 (vs consensus of C $0.31) reflects seasonally higher 1Q SG&A expense (our FY23 SG&A of C$202m is in line with guidance). We favour AGF given its strong fund performance, positive retail net flows, enviable balance sheet position with net cash and a healthy FCF profile. We have raised our target to C$10.50 (from C$10.00) and reiterate our Buy rating.”
Desjardins Securities analyst Frederic Tremblay believes shares of Savaria Corp. (SIS-T) are trading too cheaply. The manufacturer of products for personal mobility reported fourth quarter results this week.
“4Q22 results and 2023 guidance were consistent with last month’s announcements and, in our view, are positive signals on Accessibility’s resiliency and Patient Care’s inflection point. We view the large valuation discount (vs historical average) as unwarranted based on Savaria’s resiliency, profitable growth outlook and declining leverage,” the analyst said.
SIS trades at 9.5x Desjardins’ 2024 adjusted EBITDA estimate. That’s a large discount to the five-year average of 11.3x.
Mr. Tremblay raised his price target to C$22. Elsewhere, Stifel GMP raised its target price to C$26 from C$25 and National Bank of Canada cut its target price to C$18.50 from C$19.
A slew of analysts hiked their price targets on Fedex Corp (FDX-N) after the company reported results Thursday night that mostly beat Street expectations.
Citigroup raised its price target to US$275 from US$250; Credit Suisse raised its target price to $269 from $257; JP Morgan raised its target price to $233 from $199; Stephens raised its target price to $290 from $200; TD Cowen raised its target price to $235 from $185; and BMO hiked its target to $235 from $210.
“FDX Q3/F23 results were above expectations as strong pricing, revenue quality initiatives, and progress on cost savings more than offset weaker than expected volumes,” commented BMO analyst Fadi Chamoun.
A number of analysts cut their price target on Calfrac Well Services Ltd (CFW-T) in the wake of quarterly results - some of which were quite significant.
Atb Capital Markets cut its target to C$12 from C$14.50; RBC cut its target price to C$8 from C$8.50; BMO cut its target price to C$5 from C$8.50; and Stifel GMP cut its target price to C$8.5 from C$14.
BMO analyst John Gibson, who reiterated a “market perform” rating, cited both company factors and macroeconomic in his reduced price target.
“CFW’s Q4/22 results were modestly light of expectations and pre-released guidance, driven mostly by some adverse weather that has also carried into early-2023. The company expects solid utilization through 2023 across its North American platform, while Argentina should also remain strong. That said, we have moderated expectations somewhat given: 1) the company is now expensing fluid ends; and 2) the recent macro environment brings more caution for 2H/23,” he said in a note to clients.
RBC analyst Geoffrey Kwan raised his price target on Power Corporation of Canada (POW-T) to C$41 from C$39 after what he termed as “noisy” fourth quarter earnings, which also saw a dividend hike of 6%. He maintained a “sector perform” rating on the stock.
His view: “Excluding investment income, which can vary significantly quarter-to-quarter, EPS was largely in line with our forecast. Bigger picture, fundamentals at GWO and IGM continue to improve. POW’s third-party asset management continues to grow its AUM as it makes progress toward becoming profitable. And POW continues to simplify its corporate structure and surface value, which we expect to continue. POW’s shares trade at a 24% discount to NAV, wider than its 1- year average of 21% but narrower than the 5-year average of 26%, and also offer an attractive 6% dividend yield.”
In other analyst actions:
Aimia Inc (AIM-T): Jefferies cuts target price to C$5.25 from C$5.75
Birchcliff Energy Ltd (BIR-T): Stifel GMP downgrades to hold from buy and cuts target price to C$8 from C$9; Haywood Securities cuts target price to C$13 from C$14
Chesswood Group Ltd (CHW-T): RBC cuts target price to C$12 from C$13
Guru Organic Energy Corp (GURU-T): Stifel GMP raises target price to C$3.15 from C$2.85; CIBC raises target price to C$3.25 from C$3
Royal Bank of Canada (RY-T): Erste Group cuts to hold from buy
Nvidia Corp (NVDA-Q): Citigroup raises price target to US$305 from US$245
Warner Bros Discovery Inc (WBD-Q): Wells Fargo raises target price to US$20 from US$13
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