Friday’s analyst upgrades and downgrades

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

National Bank analysts Dan Payne and Travis Wood see the Canadian energy sector screening well on value and enjoying multiple expansion for the first time in over a decade, pointing to “balance sheet and liquidity strength at record levels and return of capital frameworks that are broadly supported by sound return on capital initiatives.”

“Notably, CNQ [Canadian Natural Resources Ltd.] is the first to trade in line with its historical 10-year average forward EV/DACF [enterprise value to debt-adjusted cash flow] multiple,” he said. “We believe companies which showcase sound capital discipline and have an asset base to support an attractive return on capital profile will experience value expansion as well. As a function of our multiple expansion thesis, compounded by a modestly improved commodity price outlook, our target prices now reflect this more constructive outlook, implying a total return of 42 per cent (on average).”

In a research report released Friday previewing the approaching earnings season, the analysts emphasized the energy sector “remains in pole position from a total return standpoint” thus far in 2024, noting the iShares S&P TSX Capped Energy Index ETF (XEG-T) is up 22 per cent versus the broader TSX at 3 per cent. They attribute those gains to “rising oil prices following OPEC+ restraint, compounded by continued geopolitical risks and a growing appreciation that global fossil fuel demand should remain healthy.

“In Canada, full operation of the long anticipated TMX line is imminent (we assume some stops and starts), which has tightened domestic differentials,” they said. “Natural gas remains the laggard, and with an abundance of supply, persistent drilling and completion activity and rising inventory following a mild winter, our assumptions are below the forward strip.

“Balance sheets continue to improve as companies approach net debt targets, most recently demonstrated by CNQ’s move to return 100 per cent of CFCF to shareholders (since this, the stock has outperformed the XEG by 5 per cent). Looking through the rest of 2024, we expect MEG and CVE will be the next to announce 100-per-cent allocation ... Our coverage is set to generate more than $80 billion of cash flow this year, of which we forecast $35 billion will be returned to shareholders.”

Ahead of earnings season, the analysts upgraded their forecasts and target prices for companies in their coverage universe to reflect their “more constructive” outlook.

For senior and integrated companies, their changes were:

• Canadian Natural Resources Ltd. (CNQ-T, “sector perform”) to $120 from $94. The average on the Street is $107.77.
• Cenovus Energy Inc. (CVE-T, “outperform”) to $38 from $29. Average: $32.68.
• Imperial Oil Ltd. (IMO-T, “sector perform”) to $120 from $90. Average: $94.20.
• Suncor Energy Inc. (SU-T, “outperform”) to $75 from $57. Average: $53.58.

Changes for large and mid-cap stocks were:

• Advantage Energy Ltd. (AAV-T, “outperform”) to $12.50 from $12. Average: $12.96.
• Arc Resources Ltd. (ARX-T, “outperform”) to $33 from $25. Average: $27.63.
• Crescent Point Energy Corp. (CPG-T, “outperform”) to $19 from $14. Average: $13.54.
• Freehold Royalties Ltd. (FRU-T, “outperform”) to $18 from $17. Average: $17.88.
• Headwater Exploration Inc. (HWX-T, “outperform”) to $10.50 from $9.50. Average: $9.04.
• Kelt Exploration Ltd. (KEL-T, “outperform”) to $9 from $7.50. Average: $8.30.
• Meg Energy Corp. (MEG-T, “sector perform”) to $37 from $32. Average: $33.85.
• NuVista Energy Ltd. (NVA-T, “sector perform”) to $15 from $14. Average: $15.40.
• Ovintiv Inc. (OVV-N/OVV-T, “outperform”) to US$68 from US$59. Average: $60.99.
• Peyto Exploration & Development Corp. (PEY-T, “outperform”) to $18.50 from $15. Average: $16.55.
• Paramount Resources Ltd. (POU-T, “outperform”) to $40 from $37.50. Average: $35.50.
• Prairiesky Royalty Ltd. (PSK-T, “sector perform”) to $18.50 from $15. Average: $26.81.
• Spartan Delta Corp. (SDE-T, “outperform”) to $5 from $4.50. Average: $4.79.
• Vermilion Energy Inc. (VET-T, “outperform”) to $22 from $21. Average: $20.58.

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Precious metals analysts at National Bank Financial updated estimates across our their coverage universe ahead of quarterly earnings season and highlighted their “conviction” picks for the period on Friday.

“Consensus estimates remain fluid, thus modest differentials vs. NBF may be explained, while larger gaps are a source for our conviction beats/misses,” they said. “At the time of writing, we have conviction in Agnico Eagle (AEM.TO), Lundin Gold (LUG.TO) and New Gold (NGD.TO) beating consensus Adj. EPS estimates, while we expect First Majestic (FR.TO) to miss. Details behind our conviction calls are presented later in this report. For concentrate producers, provisional pricing adjustments are expected to be a net positive for 1Q24 earnings. Timing of sales could also prove positive on average realized gold and/or silver prices given the strong finish to the quarter for both metals.”

“A number of producers have guided to a back-half-weighted production year, and thus, we expect several companies to have lower production Q/Q. The Turkish lira continued to depreciate, providing a potential tailwind. With inflation proving stickier than expected, we are looking for commentary on any inflationary pressures in consumable prices and labour that could have a material impact on costs in 2024.”

The analysts’ top picks are currently:

Seniors

* Kinross Gold Corp. (K-T) with an “outperform” rating and $13.50 target. The average is $10.21.

Analyst Mike Parkin: “Kinross maintains significant opportunities for growth within its North American portfolio, which will improve its geopolitical risk profile. This includes the Great Bear project (Ontario), Manh Choh (Alaska), Curlew Basin (Washington State) and the Round Mountain U/G project (Nevada).

“Kinross also exhibits above-average leverage in a supportive environment for the commodity, with our NAV showing about a 3.1:1 sensitivity to the gold price. This above-average sensitivity comes from a combination of a modestly levered balance sheet, being a pure-play precious metals producer and having an above-average cost structure.”

* Pan American Silver Corp. (PAAS-T) with an “outperform” rating and $34.50 target, rising from $32. Average: $27.20.

Analyst Don DeMarco: “Go-to name for silver exposure (21-per-cent 2024 production, 34-per-cent reserves) with robust liquidity ($75-million/d) and a material catalyst pending with the potential Escobal mine restart. PAAS’s extensive 11-mine, eight-country portfolio mitigates jurisdiction risk with opportunity for asset dispositions and La Arena II is among the next candidates amidst a favourable outlook for Cu supply/demand. Management is experienced and the balance sheet is intact with net debt of $462-million, of which $408-million are Senior notes with an attractive 2.63-per-cent coupon.”

Intermediates/Juniors

* Aya Gold and Silver Inc. (AYA-T) with an “outperform” rating and $18.25 target, up from $16.50. Average: $15.89.

Mr. DeMarco: “Only pure-play silver producer on the TSX, with sight lines for NAV expansion vis-à-vis Zgounder brownfield expansion to 2,700 tons per day (from current 700 tpd), with first pour in H1/24, on budget with $68-million remaining (as at Q4/23) and fully funded with an $68-million surplus (as at Q4/23). Drives peer-leading production CAGR, peaking at 9.0 million ounces in 2028 per the Zgounder Feasibility Study (FS; Dec. 2021), over 4 times the FY23A of 2.0 million oz Ag. Resource accretion compelling with visibility for 150 million oz (NBF est., from the current 103 million). Strong operations with a FY23 guidance beat, while mining rates and throughput buoyant, lending de-risking and confidence ahead of expansion completion.”

* OceanaGold Corp. (OGC-T) with an “outperform” rating and $4.75 target. Average: $4.11.

Mr. Parkin: “Despite some volatility in the near-term ramp-up of the Haile underground mine, OceanaGold continues to exhibit strong operational performance and remains set to deliver significant growth in 2024. The growth will be 2H24 weighted as the Horseshoe U/G ramps up at Haile and elevated stripping weighs on H1 performance at Haile and Macraes.”

Royalty Companies

* Osisko Gold Royalties Ltd. (OR-T) with an “outperform” rating and $26 target. Average: $24.04.

Analyst Shane Nagle: “Osisko Gold Royalties maintains an attractive near-term growth outlook with three- and five-year growth CAGR’s of 9 per cent and 13 per cent, respectively. With a new CEO and Chairman in place, the company will pursue additional growth via traditional royalty/streaming transactions with a continued focus on politically stable jurisdictions.

“As we are forecasting strong FCF throughout the royalty sector at current gold prices, a competitive deal environment is likely to contribute to increased competition for quality opportunities and lead to consolidation within the industry. We view several companies in the sector motivated to acquire OR’s high-quality portfolio given its strong near-term growth pipeline, largely derived from politically stable jurisdictions including: Canadian Malartic, Eagle, Island Gold, Mantos Blancos and the CSA mine.”

Developers

* Artemis Gold Inc. (ARTG-T) with an “outperform” rating and $14 target, up from $12.75. Average: $12.25.

Mr. DeMarco: “FCF inflection on deck (NBF est. first pour Oct. 2024) with Blackwater development led by an experienced COO, fully financed, on time and on budget, with potential development tailwinds from a mild winter in 2023/24. Attractive economics from LOM production of 339k oz/year over 22 years (DFS Sept. 2021) from a sizable 8.0 mln oz reserve endowment and visibility for elevated F5Y production (500k oz/year) upon accelerating Phase 2. Tier One jurisdiction benefits accentuated as headwinds continue to increase in other jurisdictions and for non-permitted projects universally. Additionally, we flag high insider ownership (38%) and M&A appeal as a single-asset producer.”

* G Mining Ventures Corp. (GMIN-T) with an “outperform” rating and $3 target, up from $2.75. Average: $2.63.

Analyst Rabi Nizami: “Expect the ‘G Mining Premium’ to be earned and maintained upon completion and ramp-up of TZ in the coming months. Confidence in the team’s ability to deliver projects on time and budget should also reflect immediately on the valuation of assets they may acquire for their next build.”

Other target price adjustments for senior producers were:

• Agnico Eagle Mines Ltd. (AEM-T, “outperform”) to $104 from $105. Average: $93.25.
• Barrick Gold Corp. (ABX-T, “sector perform”) to $28 from $30. Average: $28.49.
• Endeavour Mining Corp. (EDV-T, “outperform”) to $42 from $41. Average: $37.52.
• Newmont Corp. (NGT-T, “outperform”) to $69 from $71. Average: $64.

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In their own precious metals earnings preview, Stifel analysts Ingrid Rico and Stephen Soock predict rising production through the year will provide a “springboard” in the second quarter.

“Gold price held steady above $2,000/oz in Q1, peaking at $2,083/oz in March 2024 as we saw the start of a solid gold rally,” they said. “Fed policymakers confirmed the expected rate cuts and ruled out possible rate hikes in 2024, which raised demand for the yellow metal. A mixed set of macroeconomic data releases in the US shows policymakers are more inclined towards tackling the sticky inflation and building more confidence towards easing price pressures. The bond market is now projecting two rate cuts in 2024 (vs three at the start of the quarter).

“The rising geo-political tensions in the Middle-East and heavy Chinese buying driven by safe-haven demand also contributed to the higher gold price. The real-estate crisis, tepid stock market and shaky economy have pushed Chinese investors towards gold. Gold reserves at PBoC rose consecutively since November 2022 and now stand at 2,262t (2,050t in March 2023). During the first three months of 2024 the PBoC reported gold purchases of 27t. Gold ETFs’ percentage share of AUM globally is at just 1.19 per cent – the lowest level since 2005. This indicates to us that investors are underexposed to gold and generalists may be ‘forced’ back into the space as gold and gold equities rally. Short interest in futures contracts has held fairly steady since the start of the run-up in price and capitulation on this front could provide another leg up for the yellow metal.”

For the first quarter, they expect gold miners to display “soft” production results, logging 23 per cent of annual output and anticipate a build up through the year. They also think margin expansion is likely to be much more evident in the second quarter and beyond.

“We now forecast an average 2024 gold price of $2,200/oz safe haven demand and expectationsof rate cuts in 2H,” they said. “We have adjusted our long-term gold price forecast to $1,900/oz (from $1,800/oz) with gold establishing a new ‘base’ evidenced by the recent low correlation to real rates. For silver, we are forecasting an average price of $26.50/oz in 2024, as the metal is trading at a significant discount based on the current Au:Ag ratio of 90:1 vs the last 10-year average of 79:1, largely due to slower industrial demand from China. We have also adjusted our longer term silver price upwards to $24.75/oz (from $24.00/oz) as we believe the metal should catch up with China demand picking up.”

With their price deck changes, the duo made a series of target price adjustments.

For senior producers, their changes are:

* Agnico Eagle Mines Ltd. (AEM-T, “buy”) to $104 from $94. The average is $93.25.

Ms. Rico: “We view Agnico Eagle as a high-quality, senior gold producer. Following the merger with Kirkland Lake and consolidating ownership of the Canadian Malartic mine, AEM is cementing its position of dominant Canadian gold producer with production in Canada of more than 2.7Moz/yr (80 per cent of AEM’s total production). The company has a strong track record of creating value for shareholders through excellent execution, and we believe that considerable footprint in the Abitibi offers long-term value opportunities by leveraging infrastructure and regional expertise. The company has routinely chosen smart development and expansion projects from its pipeline, which have been largely funded through internally generated cash flow and low-cost debt. Continuing strong cash flow generation supports reinvestment to develop the project pipeline, and Agnico is expected to maintain its track record of returning cash to shareholders through sustainable dividends.”

* Barrick Gold Corp. (ABX-T, “buy”) to $27 from $25. Average: $28.49.

Ms. Rico: “ABX’s five-year guidance and 10-year roadmap provided a broadly steady production outlook of ± 4.5M oz. Nevada Gold Mines anchors future production outlook. The Pueblo Viejo expansion project has unlocked almost 11Moz of reserves (100-per-cent basis) extending mine life to beyond 2040 with projected average annual production of 800k oz (on 100-per-cent basis). Barrick’s Top Tier mines (NGM, PV, Loulo-Gounkoto and Kibali) are among the top gold mines globally and together represent approximately 70 per cent of our corporate NAV. The integration of Nevada Gold Mines has proven successful, in our view. Tanzania continues to get management’s attention with the Bulyanhulu underground operation ramping up. As strong FCF continues to be generated, a new performance dividend policy has been introduced to supplement the base quarterly dividend as well as a share buyback program of up to $1-billion.”

* Kinross Gold Corp. (K-T, “buy”) to $11.50 from $9. Average: $10.21.

Analyst: “Kinross is re-building its track record of execution and operational performance as the Tasiast 24k project and La Coipa are successfully ramping up. The rebalancing of the company’s portfolio with the exit from Russia and the acquisition of the Great Bear project in Canada shifts K’s jurisdictional profile and places a higher weight of production coming from the Americas. In our view, K provides good longer-term value with the “re-balanced” portfolio poised for a re-rate.”

For royalties companies, their changes are:

• Franco-Nevada Corp. (FNV-T, “buy”) to $196 from $182. Average: $191.62.
• Osisko Gold Royalties Ltd. (OR-T, “buy”) to $28 from $27. Average: $24.04.
• Triple Flag Precious Metals Corp. (TFPM-T, “buy”) to $30 from $27. Average: $24.23.
• Wheaton Precious Metals Corp. (WPM-T, “buy”) to $80 from $72. Average: $79.18.

“The gold rally has seen strong share appreciation for the ‘torquier’ names. Valuation multiples have started to move up, but sustained gold / silver prices at these levels should offer further upside. Our top ideas in the sector are: AEM, K, DPM, KNT. On the silvers: MAG,” they said.

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BMO Capital Markets analyst Thanos Moschopoulos thinks Copperleaf Technologies Inc. (CPLF-T) “should benefit from improving sales execution and, in turn, improving profitability over the coming quarters.”

After meetings with the Vancouver-based decision analytics software company’s management, he reaffirmed his forecast, which includes 28-per-cent year-over-year revenue growth in both fiscal 2024 and 2025, making it the fastest organic-grower among the software stocks in his coverage universe.

“While CPLF, in our view, had a strong product offering and competitive position at the time of its 2021 IPO, its revenue growth and sales productivity fell short of expectations in subsequent quarters (partly, but probably not entirely, due to the macro backdrop),” said Mr. Moschopoulos.

“CEO Paul Sakrzewski was appointed to the role in Jan. 2023 and spent his first year improving the go-to-market, leveraging his prior experience as an SAP executive. This included the establishment of a centralized value engineering team (which develops custom business cases outlining the anticipated ROI that a client should achieve on CPLF’s software), led by an ex-McKinsey consultant; centralized industry specialists; better processes/discipline with respect to pipeline management and forecasting; more aggressive performance management of the salesforce; and the establishment of key partnerships with Accenture and SAP. The return to in-person sales, following the pandemic, has also been helpful. We believe these factors contributed to the 30-per-cent year-over-year ARR [average recurring revenue] growth that CPLF reported in its most recent quarter.”

The analyst now sees Copperleaf “driving” operating leverage and possesing a “better mix” to accomodate growth.

“CPLF had a long history of profitability prior to its IPO, and returning to profitability is a key objective. Incremental hiring will be focused on revenue-generating roles (e.g., quota-carrying sales and billable consultants), while R&D/G&A hiring will be constrained through FY24/25,” he said. CPLF believes it’s well-positioned to scale given the structural elements and leadership, with global coverage, that it already has in place.”

“CPLF’s deal mix has shifted to SaaS [software as a service] vs. perpetual license more rapidly than expected; the vast majority of new deals are now under a SaaS model. We believe SaaS is slated to represent 64 per cent of FY2024E revenue, up from 45 per cent in FY2021. In our view, the mix improvement hasn’t been adequately reflected in the stock’s multiple.”

Reiterating his “outperform” recommendation for Copperleaf shares, Mr. Moschopoulos increased his target by $1 to $9. The average on the Street is $7.83.

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CIBC World Markets analysts Robert Catellier and Mark Jarvi made a series of forecast target price adjustments to stocks in his coverage universe on Friday ahead of the start of earnings season in the energy infrastructure and power and utilities sectors.

“We have modified estimates for the Midstreamers under coverage to reflect milder weather and generally higher marketing results, notably frac spreads,” the said. “Pipeline utilization remains robust despite mild winter weather due to restricted capacity additions, although short periods of extreme cold weather can impact operations in the quarter. Improved egress options are expected to benefit the industry as a whole and create a step change in capacity. Sentiment and performance for the power/utilities group has been weak year to date; we do not believe the Q1/24 results (we are approximately 1 per cent and 6 per cent below consensus for Power and Utility names we cover, on average) nor the quarterly updates (growth, management changes, capital allocation) will be catalysts to turn things around. We believe a recovery in some of the power names will take a few quarters (if not until 2025) to play out absent a change in the macro/market outlook/sentiment.”

Their target changes included:

• Atco Ltd. (ACO.X-T, “outperformer”) to $48 from $49. The average on the Street is $45.71.
• Boralex Inc. (BLX-T, “outperformer”) to $38 from $40. Average: $39.67.
• Canadian Utilities Ltd. (CU-T, “neutral”) to $34 from $35. Average: $34.67.
• Capital Power Corp. (CPX-T, “neutral”) to $40 from $43. Average: $43.55.
• Emera Inc. (EMA-T, “neutral”) to $51 from $53. Average: $53.18.
• Fortis Inc. (FTS-T, “neutral”) to $56 from $59. Average: $57.61.
• Hydro One Ltd. (H-T, “neutral”) to $39 from $40. Average: $40.36.
• Northland Power Inc. (NPI-T, “outperformer”) to $29 from $30. Average: $30.09.
• TransAlta Corp. (TA-T, “outperformer”) to $16 from $18.50. Average: $14.17.

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CIBC analyst Krista Friesen, who covers transportation and industrial stocks, made a group of target changes in her coverage universe on Friday.

“As we head into Q1 reporting season, we expect many of the same themes that dominated Q4 earnings to be topical this quarter,” he said. “For the suppliers, we believe the difference this time is that much of the bad news has been accounted for in their share prices, with the companies trading at historically low valuation on EV/EBITDA and P/B. LNR is our top pick amongst the auto names, driven by its ability to grow above market, and its Industrial division. We have modestly lowered our price targets on BYD, LNR and MGA, and raised our price target for ACQ.”

They include:

• Autocanada Inc. (ACQ-T, “neutral”) to $25 from $22. The average is $28.40.
• Boyd Group Services Inc. (BYD-T, “outperformer”) to $304 from $306. Average: $323.57.
• Linamar Corp. (LNR-T, “outperformer”) to $90 from $91.50. Average: $82.50.
• Magna International Inc. (MGA-N, MG-T, “neutral”) to US$59 from US$61. Average: US$62.10.

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Following weaker-than-anticipated fourth-quarter results, Eight Capital analyst Christian Sgro sees an “uphill reacceleration” for Wishpond Technologies Ltd. (WISH-X), leading him to lower his recommendation for its shares to “neutral” from “buy” previously.

Before the bell on Thursday, the Vancouver-based provider of marketing-focused online business solutions reported revenue of $6.1-million, up 3 per cent year-over-year but narrowly below the Street’s expectation of $6.2-million. Break-even adjusted EBITDA also missed the consensus projection of $0.4-million.

“The 3-per-cent year-over-year growth continued to decline sequentially from recent quarters, as the company’s largest customer reduced activity,” said Mr. Sgro. “[Gross margin] of 66 per cent was on trend with recent quarters and the company’s historical 65-70 per cent.”

“Absent reported metrics like customer count or retention, we expect growth is being held back by customer churn. Macroeconomic conditions are uncertain, and we expect some enduring market headwinds to slow deal cycles and expansion activity across the typical SMB customer base.”

Mr. Sgro now sees growth accelerating in fiscal 2024 following Wishpond’s guidance of flat quarter-over-quarter top-line results in the first quarter.

“We think market penetration of new solutions will improve in the back half of the year, aligned with the seasonally stronger marketing spend period,” he said. “Management expects 5-8-per-cent adj. EBITDA margins in 2024 and we model scale benefits in 2025 and onward.”

With reductions to his 2024 and 2025 revenue and earnings expectations, the analyst cut his target for the company’s shares to 75 cents from $1.30. The average is $1.57.

“Wishpond’s platform enhancements and refreshed go-to-market support the outlook for a reacceleration in growth,” he said. “However, we think a challenging macro creates an uphill battle penetrating and retaining SMB clients at historical rates. New hires may take time to ramp up as new solutions are sold in the market, which may push out scale benefits to margins. We think growth can reaccelerate in the back half of the year and beyond, as the sales motion is streamlined and market conditions stabilize.”

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In other analyst actions:

* Morgan Stanley’s Keith Weiss upgraded Shopify Inc. (SHOP-N, SHOP-T) to “overweight” from “equal-weight” previously, seeing its valuation as reasonable and believing its well-positioned to maintaining 20-per-cent-plus annual growth through fiscal 2030. His target is now US$85, up from US$74 and above the US$82.70 average.

* Scotia Capital’s Jonathan Goldman resumed coverage of Langley, B.C.-based Adentra Inc. (ADEN-T), formerly known as Hardwoods Distribution Inc., with a “sector outperform” recommendation and $51 target. The average on the Street is $50.71.

“ADENTRA is one of the largest building products distributors in North America,” he said. “A nascent housing recovery cycle (and favourable secular/demographic trends), an opportunity to continue to play consolidator in the highly fragmented building products industry, and margin expansion initiatives should support a multi-year runway for double-digit EBITDA growth (as outlined in the company’s ‘Destination 2028′ targets). Assuming the company achieves its 2028 targets, and shares trade in line with historicals, implies a five-year share price of $120 (or a three-bagger from current levels). That’s before considering a potential re-rate in line with specialty building products distributors given what we view as a structurally improved mix and midcycle margin profile.”

* In a report previewing earnings season for Canadian industrial names titled “Can you take me higher?”, Stifel analyst Ian Gillies made a trio of target price adjustments: Aecon Group Inc. (ARE-T, “hold”) to $17 from $16.50; Russel Metals Inc. (RUS-T, “buy”) to $54 from $55.50 and Stelco Holdings Inc. (STLC-T, “buy”) to $49 from $52. The averages on the Street are $18.21, $49.19 and $52.71, respectively.

“Year-to-date, share price performance for our coverage universe has been mixed with exactly half our coverage outpacing the S&P 500,” said Mr. Gillies. “As we head into 1Q24 reporting, we will be trying to identify incremental supportive data points to our ‘own the infrastructure build-out’ thesis. We believe ongoing spending by governments can accelerate organic revenue growth forecasts ‘higher’ in 24/25, even in spite of a higher-for-longer rate environment. Moreover, our review of provincial budgets in Canada reflects a better-than-expected spend 24/25. Meanwhile, U.S. government grants and loans have been coming out at a jarring pace YTD, particularly for semi fabs. Our Stifel Select List stock pick continues to be MATR, but we continue to have a positive disposition towards Stantec, Badger Infrastructure Solutions and Bird Construction.”

* Raymond James’ Daryl Swetlishoff raised his targets for Canfor Pulp Products Inc. (CFX-T, “outperform”) to $2.75 from $2.40 and Mercer International Inc. (MERC-Q, “market perform”) to US$10.50 from US$8.50. The averages are $1.98 and US$10, respectively.

“Beyond the quarter, we highlight our top picks remain West Fraser and Strong Buy rated Doman Building Materials,” he said. “With West Fraser’s LTM [last 12-month] earnings generation almost entirely driven by OSB [oriented strandboard], we highlight the company’s geographic and product diversification remains a key tailwind. With respect to Doman, we note stable gross margin generation, ‘lean and mean’ working capital management, plus recent accretive M&A as key drivers of our constructive earnings outlook.

“With respect to our pulp coverage, we have hiked our targets across the board reflecting supply chain driven global commodity price strength. Outperform rated Canfor Pulp remains our top pick in the sector, reflecting the inexpensive absolute and relative valuation inherent in the shares along with improving operations. Similarly, Mercer’s Euro & Western Canadian pulp division is facing tailwinds, however the challenged solid wood products segment represents ongoing earnings drag.”

* RBC’s Paul Quinn made these target changes: Canfor Corp. (CFP-T, “outperform”) to $19 from $22, Canfor Pulp Products Inc. (CFX-T, “sector perform”) to $1.50 from $2, Cascades Inc. (CAS-T, “sector perform”) to $11 from $14 and Interfor Corp. (IFP-T, “outperform”) to $28 from $30. The averages are $22.17, $1.98, $12.42 and $27.50, respectively.

* Baird’s Mark Altschwager cut his target for Lululemon Athletica Inc. (LULU-Q) to US$505 from US$550, keeping an “outperform” rating. The average is US$466.11.

* Stifel’s Cole Pereira raised his Pembina Pipeline Corp. (PPL-T) target to $56 from $55 with a “buy” recommendation, while CIBC’s Robert Catellier increased his target to $57 from $56 with an “outperformer” rating. The average is $53.60.

“[Thursday] morning we added PPL to the Stifel Select List, as we now view the stock as our top name in the Canadian Energy Infrastructure sector,” said Mr. Pereira. “Pembina screens attractively given its strong earnings quality, leading FCF conversion and lower leverage, which enhances its lower-risk path to attractive dividend growth. Perhaps more relevant in the current market, PPL remains less of a rate-driven trade than its larger peers ENB and TRP and has a number of nearterm catalysts including potential FIDs on Cedar LNG and new ethane infrastructure, as well as its May 16, 2024 investor day. While PPL does trade at a slight premium to its peers at 10.3 times 2025 estimated EV/EBITDA, we believe this premium needs to widen to better reflect the points above. Our EBITDA forecasts increase 2 per cent in 2024 and 1 per cent in 2025 to reflect its updated guidance, bumping our target price.”