Inside the Market’s roundup of some of today’s key analyst actions
National Bank Financial analyst Vishal Shreedhar thinks Loblaw Companies Ltd.’s (L-T) fourth-quarter 2022 financial report resulted in “straight-forward strong results” and a “solid” outlook for the current fiscal year.
“We continue to maintain a favourable view on Loblaw and recommend it as our preferred grocer, supported by several key themes: (a) Anticipated continued strong execution, a shift to discount, and benefits from management’s improvement initiatives; (b) Continued EPS growth supported by operational growth, and share repurchases (low double-digit expected in 2023 and 8-per-cent-plus thereafter); and (c) The ability to pass on elevated food inflation coupled with solid performance in drug store,” he said in a report released before the bell.
Loblaw says grocery prices to keep rising, as grocer reports profit increase amid inflation
On Thursday, shares of the rose 1.8 per cent after it reported consolidated revenue of $14.007-billion, up from $12.757-billion a year ago and above both Mr. Shreedhar’s $13.781-billion estimate and the consensus forecast of $13.747-billon. Earnings per share rose to $1.76 from $1.52, also topping projections ($1.70 and $1.71, respectively).
“We consider Q4/22 results to be positive given a beat across key metrics,” said the analyst. “In addition, Loblaw issued a solid outlook, which caused us to revise our estimates slightly higher.”
“L provided 2023 guidance parameters as follows: (a) EPS growth in the low double digits; (b) Favourable operating leverage; (c) Net capex of $1.6-billion ($2.1-billion gross, offset by $500-million in real estate sales) — this level will continue for two to three years; and (d) Share repurchases. L also expects the 2023 gross margin rate to be similar year-over-year. Assuming 10-13-per-cent EPS growth, this suggests 2023 EPS of $7.50-$7.71. We modestly increased our estimates; 2023 EPS goes to $7.53 from $7.38 and 2024 EPS goes to $8.23 from $8.02.”
With his higher estimates, Mr. Shreedhar raised his target for Loblaw shares to $137 from $134, keeping an “outperform” rating. The average target on the Street is $138.65, according to Refinitiv data.
Others making target changes include:
* RBC’s Irene Nattel to $168 from $165 with an “outperform” rating.
“Another quarter of strong and better-than-expected results for Q4 underscore the favourable momentum shift at Loblaw, and the company’s strong positioning, particularly against the backdrop of accelerating inflation and cash-squeezed consumers. Financial results and 2023 outlook supportive of our constructive view and relative ranking with Loblaw our top pick in the grocery space,” said Ms. Nattel.
* TD’s Michael Van Aelst to $140 from $135 with a “buy” rating.
“High inflation (which looks to be extending into H1/23) tends to bode well for grocers as the normal GM% pressure is easily offset by meaningful operating leverage. In this environment, Loblaw is best-positioned among the traditional grocers, considering its disproportionate exposure to pharmacy, discount, and private label,” he said. “Coupled with upgraded merchandising strategies, cost-efficiency opportunities, and alternative profit streams (e.g., Media, Connected Health), we see EPS growth of 13 per cent in 2023 (vs. 8-10 per cent for Metro). Loblaw’s valuation (15.4 times) is roughly in line with its 10-year average, but remains well below MRU’s current 16.7 times despite the stronger growth outlook and FCF yield over the next two years (6-7 per cent vs. 3-4 per cent for Metro).”
* CIBC’s Mark Petrie to $149 from $145 with an “outperformer” rating.
“Loblaw reported strong Q4 results to close an impressive year. We continue to believe there is runway on its retail excellence initiatives across multiple aspects of the business including merchandising, supply chain and procurement. Bottom line, premier assets are being leveraged appropriately and leading to outsized earnings growth,” said Mr. Petrie.
* BMO’s Peter Sklar to $130 from $123 with an “outperform” rating.
Citing cable “pressure” and recent share price appreciation, Canaccord Genuity analyst Aravinda Galappatthige downgraded Quebecor Inc. (QBR.B-T) to “hold” from “buy” after its fourth-quarter financial results fell below his expectations.
“Quebecor reported softer financial results, with very light Media results driving a miss in consolidated adj. EBITDA and sub adds coming in notably weak in the key product categories of internet and wireless,” he said. “Despite the aggressive competitive conditions evident in the province, Telecom revenue and EBITDA held up fairly well and generally in line with our expectations. We also note that the board had opted to maintain the current dividend unchanged, essentially ending a period of sharp dividend growth in recent years. This is likely not surprising given the proposed acquisition of Freedom.”
On Thursday, Quebecor reported adjusted EBITDA of $483-million, down 3.2 per cent year-over-year and below both the analyst’s $507.2-million estimate and the consensus forecast of $499-million. Internet net additions of 1,300 was down significantly from the same period a year ago (8,1000) and also missed the 10,000 projection of both Mr. Galappatthige and the Street.
“Videotron’s internet adds have been tracking below expectations for a while owing to Bell’s aggressive promotional activity alongside their fibre rollouts. Q4 no doubt was notably light,” he said. “Importantly, management did highlight that core wireline churn even during Q4 was relatively stable, suggesting the sharply lower net adds were very much on the new loading side. While a good part of the lower net adds, we suspect, were related to wholesale subs which carry lower margins (likely around Bell’s acquisition of EBOX), we still see this as a significant issue.”
He added: “With the incorporation of the proposed Freedom acquisition (we assume in Q2/23), our estimates are materially changed. On an underlying basis (ex Freedom), we have made moderate reductions to our F2023 and F2024 estimates to factor in weakness in Media and pressure on broadband subs. All in, we still see a path to over $3 per share in FCF in F2023 and F2024. Excluding the spectrum auction, we have QBR’s leverage exiting 2023 at 3.8 times.”
While his 2023 and 2024 earnings per share projections declined (to $2.92 and $3.12, respectively, from $2.93 and $3.16), he maintained a target of $34 per share. The average is $34.50.
“We have maintained our target price of $33 per share which is now based on 8.5 times EV/EBITDA 2024 estimates for Quebec Wireless and 8 times for the newly introduced Freedom business,” said Mr. Galappatthige. “We have opted to take a conservative view given uncertainty around forward estimates at this point. The cable multiple of 5x remains unchanged in light of pressure on sub trends. Given the strong run in the stock starting Q4/22 and only modest implied upside to our target, we have downgraded to HOLD (from Buy). Underlying wireline declines remain a central factor in our rating.”
Elsewhere, others making changes include:
* Scotia’s Maher Yaghi to $33.50 from $33 with a “sector perform” rating.
“Quebecor closed 2022 with revenues flat and EBITDA down 2 per cent year-over-year,” said Mr. Yaghi. “While the company continues to have good success in wireless, clearly the other parts of the business are seeing pressures. Some of these pressures are structural (market share gains by BCE in wireline, legacy service declines in TV & home phone, lower broadcasting revenues), while others are cyclical (advertising pressure). Overall, management has navigated these difficult times by focusing on costs, however, when compared to its larger peers it is clear that Quebecor needs to find new ways to return to growth. We believe the proposed acquisition of Freedom is a good option to gain scale and growth, however, integration of the two entities will be key. We continue to expect ISED to provide its approval, likely not before parliament returns into session on March 6.. We continue to maintain our view that approval is likely to come by late Q1 or early Q2.”
* RBC’s Drew McReynolds to $33 from $32 with a “sector perform” rating.
“While Q4/22 financial and operating results were slightly below our expectations, the acquisition and integration of Freedom Mobile remains the focus with industry-low capex intensity boosting our price target,” he said.
* TD Securities’ Vince Valentini to $37 from $36 with a “buy” rating.
National Bank Financial analyst Maxim Sytchev thinks Stantec Inc. (STN-T) “continues to deliver operationally amid a positive macro backdrop (for the industry).”
Shares of the Edmonton-based firm soared 9.3 per cent on Thursday with the premarket release of better-than-expected fourth-quarter results and “good” 2023 guidance. Revenue for the quarter was reported to be $1.13-billion, up 23.4 per cent year-over-year and ahead of the Street’s expectation of $1.11-billion. Adjusted earnings per share of 82 cents also topped the consensus estimate(71 cents) and Mr. Sytchev’s projection (65 cents).
“While the entire engineering consulting cohort has printed strong Q4/22 and provided positive 2023 organic growth commentary, a dividend increase, more significant beat vs. Street (hence, comping vs. a higher absolute 2022 number), puts STN’s performance in a favourable light (and confirms our top idea status for the name),” the analyst said. “As mentioned previously, over-indexed exposure even vs. some south of the border or international peers to the U.S., is a net positive for the company while Water/Environmental skew is structurally advantageous. Net debt to adjusted EBITDA of 1.6 times will also afford further M&A optionality.”
The analyst said the tone on the company’s conference call was “confident ... as it should be.”
“Q4/22 margin had a lot going for it,” he said. “Weather, strong organic growth, large program cycling through, U.S. utilization ramping up, lower share-based comp and lower uptake in benefit costs vs. prior quarters; however, we should not be looking at the performance as an aberration from an annual perspective, providing confidence in the company’s 2023 guidance which at midpoint sits 20 bps above Street.
“Quarter-over-quarter backlog decline [is] not a concern given amount of incoming work. Strong organic growth in Q4/22 impacted the backlog burn-rate; more importantly, several large programs will be added to the company’s backlog metric in Q1/23E and management was confident in seeing sequential growth; also, little of U.S. stimulus dollars are included in that figure; that will come as the year progresses.”
Mr. Sytchev did emphasize, however, that Stantec’s steep share price gain on Thursday appears “overly exuberant,” adding: “We believe investors REQUIRE U.S. infra exposure now given the lack of visibility in many other industrial verticals.”
Reiterating an “outperform” recommendation for Stantec, he raised his target to $89 from $74. The average is $84.60.
“We adjusted our numbers to reflect high-single-digit organic growth for the year as well as EBITDA margin between 16-17 per cent, along with low teens EPS growth,” he said. “We are still below the midpoint of the guide, despite STN beating this year’s guide as we err on the side of caution. Growth in the U.S. should drive the momentum in organic growth. We also increased our interest expense as well as assuming positive contribution from working capital for the year, as per management’s commentary. The biggest change is our 2024 EBITDA forecasts as we now anchor to a higher level of 2023 profitability.”
Elsewhere, other analysts making adjustments include:
* Desjardins Securities’ Frederic Tremblay to $87 from $76 with a “buy” rating.
“STN reported strong 4Q results and 2023 outlook, supported by the solid slate of organic growth opportunities from the green transition and stimulus funding in the U.S.,” he said. “STN has the highest exposure to the U.S. in our E&C coverage. The environment is ripe for further consolidation in the industry and we view STN as ideally positioned to deploy capital given its healthy balance sheet.”
* ATB Capital Markets’ Chris Murray to $85 from $75 with an “outperform” rating.
“Stantec’s results were ahead of expectations, helped by atypical conditions enhancing utilization and lower SG&A costs,” said Mr. Murray. “Strong year-over-year revenue and EBITDA growth was driven by a mix of organic and M&A growth, reflecting healthy demand conditions across its three regions and the impact of the Cardno acquisition. Guidance for 2023 calls for mid-to-high-single-digit organic net revenue growth, led by the US segment, and a margin profile in line with 2022 levels, consistent with ATBe. Stantec delivered a strong quarter and outlook for 2023 as increasing infrastructure spending in key regions provides greater visibility into organic growth trends in 2023 and 2024 with improving execution and a potential reacceleration in M&A activity offering upside.”
* TD’s Michael Tupholme to $93 from $79 with a “buy” rating.
“We remain constructive on Stantec’s outlook, which we see as supported by the company’s strong backlog, favourable end-market trends, margin improvement potential over time, and acquisition growth potential,” he said.
* CIBC’s Jacob Bout to $86 from $79 with an “outperformer” rating.
* BMO’s Devin Dodge to $86 from $76 with an “outperform” rating.
In a separate note, Mr. Sytchev said he expects sequential improvement from Stelco Holdings Inc. (STLC-T), but wonders whether the recent rally in hot-rolled coil prices is “fundamentally justified.”
“HRC pricing continues to oscillate to the upside, even though scrap pricing (despite some upward movement recently) is sitting materially lower vs. peak 2022 levels,” he said. “The question then is how long can HRC stay decoupled from scrap? Mills are trying to push through price increases, and we will get a better sense over the coming weeks if they stick; that being said, with what seems like higher interest rate backdrop even vs. a few weeks ago, we are generally surprised to see HRC at current levels (believing that it should be lower).
“Overall, we are not convinced that being long a hyper-cyclical now is the right place to be (even a well executing one, as STLC). While the market is ‘seeing through’ the significant Q4 miss, we remain on the sidelines given STLC’s inherently cyclical exposure at a time of significant macro uncertainty.”
Following Wednesday’s release of weaker-than-anticipated quarterly results, Mr. Sytchev thinks “moderation” in capital expenditures is likely to help sequential margin expansion and sees free cash flow generation supporting shareholder returns.
“STLC has been extremely generous in returning cash to shareholders, with over $1-billion in 2022 alone through its NCIB, SIB and the regular as well as the special dividends. In addition, share buybacks have been executed opportunistically at favourable price points. The reversal of the aforementioned tailwinds and some measure of resilience in the wider economy should enable STLC to return to $200-million-plus in quarterly EBITDA in the coming quarters which, along with a net cash balance sheet, should enable further dividend payments and share buybacks.”
Raising his 2023 and 2024 revenue and earnings projections to reflect HRC pricing, the analyst moved his target for Stelco shares to $51 from $49, maintaining a “sector perform” rating. The average is $52.61.
Elsewhere, others making changes include:
* Eight Capital’s Anoop Prihar to $48 from $43.25 with a “sell” rating.
“STC’s share price has appreciated by over 50 per cent since the beginning of November 2022,” he said. “This performance was driven by stronger than expected Q3/22 results, and the announcement of a $3.00/share special dividend. While we believe that management has done an admirable job of running the business and returning capital to shareholders, we continue to believe the stock is more than fairly valued.”
* Stifel’s Ian Gillies to $53 from $49 with a “hold” rating.
“We believe the increasingly positive operating environment with higher pricing, moderating input costs and healthier demand is creating a better-than-expected 2023 outlook for STLC,” he said. “Results from 4Q22 are less relevant, in our view, given the positive outlook. Stelco continues to be one of the best operators and capital allocators in the sector, which we view favourably and have increased our target price.”
* Scotia Capital’s Michael Doumet to $57 from $45.50 with a “sector perform” rating.
After higher realized prices and lower costs drove a fourth-quarter earnings beat, National Bank Financial analyst Shane Nagle upgraded Lundin Mining Corp. (LUN-T) to “sector perform” from “underperform,” seeing “limited risk of further negative headlines until later in [the] year.”
“Since downgrading to Underperform on January 13, 2023, shares of LUN are down 9 per cent relative to the S&P Global Base Metals Index down 5 per cent,” he said. “Over that time, the company reported a softer three-year operating outlook, lower reserves and revised technical reports highlighting lower production growth in the near term. While we would’ve anticipated more material underperformance over this period, there is a lack of catalysts now until Q4/23 when we anticipate an updated technical report on Josemaria.
“As a result, we are upgrading to Sector Perform and remain somewhat cautious as LUN has a deteriorated near-term FCF profile, as well as risks associated with advancement of the Josemaria project in the current inflationary environment; precedent projects have all seen capital cost increases of 20-30 per cent throughout development in recent years. Where our outlook could be wrong is continued support from copper prices throughout 2023, and/or a significant transaction/partnership agreement at Josemaria; however, we wouldn’t anticipate any transaction ahead of the updated technical report in Q4/23.
After the bell on Wednesday, the company reported adjusted earnings before interest, taxes, depreciation and amortization of US$353.7-million, exceeding both Mr. Nagle’s US$292-million estimate and the consensus forecast of US$272-million. Adjusted earnings per share of 25 US cents also topped projections (18 US cents and 11 US cents, respectively).
“Lundin reiterated its 2023 Guidance and provided updated technical reports for Candelaria, Eagle and Neves-Corvo. Recall, Lundin had earlier provided a three-year production outlook as well,” the analyst said. “Lower production growth at these operations has led to a modest reduction in our target to $8.75 (was $9.00).”
Mr. Nagle does thinks a “tighter cash position signals [a] slowdown of buyback,” noting: “Lundin ended the quarter with US$191.4-million in cash, US$27.2-million in longterm debt and lease liabilities, and US$170.2-million of current debt. Lundin has total available liquidity of US$1.7-billion and our cash flow sensitivity analysis suggests current copper prices are supportive of generating sufficient cash flow to fund Josemaria after our Base Case financing assumptions, which includes US$3-billion of project debt and US$1.3-billion precious metal stream sale to help fund the US$6.0-billion initial capital cost assumption from 2024 onwards (NBF Estimates).”
His new $8.75 target sits below the current average on the Street of $9.67.
Elsewhere, Canaccord Genuity’s Dalton Baretto trimmed his target to $9.25 from $9.50 with a “hold” rating.
“While LUN has a number of compelling investment attributes — growing copper and zinc production, a strong balance sheet, and relatively low jurisdictional risk — we believe these are fully reflected in the share price at this time. In addition, we note that the pending technical report (and associated capex bill) at Josemaria could weigh on the shares in the near term, although we acknowledge that an appropriately structured financing plan could be a meaningful positive catalyst for the shares,” said Mr. Baretto.
* Scotia’s Orest Wowkodaw to $9.50 from $9 with a “sector perform” rating.
“LUN reported better-than-anticipated Q4/22 results,” he said. “All recently issued 2023 operating guidance was reaffirmed. LUN released updated NI 43-101 technical reports for Candelaria, Neves-Corvo, and Eagle which had a net positive impact on our NAVPS estimate. Overall, we view the update as positive for the shares.
“We rate LUN shares SP. Despite an attractive valuation and our bullish view on Cu, we anticipate the proposed development of the higher-risk Josemaria project to overhang the shares.”
In a research report titled Unearthing a giant, Desjardins Securities analyst Jonathan Egilo initiated coverage of Aldebaran Resources Inc. (ALDE-X) with a “buy” recommendation, calling its flagship Altar project in Argentina “a giant porphyry cluster that remains underexplored.”
“The current Altar global resource is 1.4Bt grading 0.43-per-cent Cu,” he said. “Last year, management identified a massive resistivity anomaly below the pit shell. Much of Altar’s drilling has not exceeded 500m in depth, driving the current resource pit to cover only a subsection of the geophysics anomaly; the mineralization of that anomaly was proven through drillhole 221 last year. The drillhole delivered a long mineralized intercept of 1,060m grading 0.33-per-cent Cu (0.40-per-cent Cueq) and continued to intercept mineralization nearly 1km below the pit shell. If the geophysics target continues to deliver strong results, we believe Aldebaran has the potential to double, or possibly more than double, the current resource.”
Mr. Egilo thinks the company’s stock “looks compelling based solely on current resources,” noting: “We calculate ALDE trading at approximately US$0.005/lb Cueq, the lowest level among our selected porphyry developer peers. While EV/lb is often not our preferred valuation metric due to its not considering margins or the development costs of in situ copper, we flag that Aldebaran’s copper-equivalent grade of 0.49 per cent screens near the peer average. ALDE is similarly discounted on P/NAV, trading at a 56-per-cent discount.”
Currently the lone analyst covering the Vancouver-based company, he set a target of $1.65 per share.
“While we believe ALDE already trades at a compelling valuation when considering its current 1.4Bt resource, the company hosts significant resource expansion upside below the current resource pit shell, in our view,” he added.
In other analyst actions:
* CIBC World Markets’ John Zamparo downgraded Primo Water Corp. (PRMW-N, PRMW-T) to “neutral” from “outperformer” and reduced his target to US$17.50 from US$18.50. The average is US$19.94.
“Primo Water has proven itself a healthy organic growth story with improving EBITDA margins. However, FCF is likely constrained over the next few years by capex investments, potential drags from working capital, and then in future years, higher cash taxes. The stock has been on a solid run over the past six months, up 13 per cent vs. 3 per cent for the broader U.S. Staples index, and we believe valuation now leaves less upside,” said Mr. Zamparo.
* RBC’s Paul Treiber hiked his target for Altus Group Ltd. (AIF-T) to $75 from $65 with an “outperform” rating. Other analysts making changes include: Cormark Securities’ Gavin Fairweather to $74 from $70 with a “buy” rating, BMO’s Stephen MacLeod to $73 from $65 with an “outperform” rating, National Bank’s Richard Tse to $75 from $65 with an “outperform” rating and Canaccord Genuity’s Yuri Lynk to $69 from $68 with a “buy” rating. The average on the Street is $69.22.
“All in, we believe Altus continues to make progress on expanding its addressable market and growth opportunity through a healthy mix of strategic M&A and organic initiatives, executing on what we’ve called the “3 Ps” being Process, Products and People,” said Mr. Tse. “While the Company’s operating actions have driven continued gains in AA, we see a lot more potential looking ahead given an expanding portfolio of products using a delivery model that should drive higher attach / renewal rates, an increasingly growing recurring revenue base and growing operating leverage.”
* RBC’s Douglas Miehm increased his Bausch Health Companies Inc. (BHC-N, BHC-T) target to US$9 from US$8 with a “sector perform” rating, while BMO’s Gary Nachman bumped his target to US$10 from US$8 with a “market perform” rating. The average is US$13.
“BHC’s Q4/22 revenues and adj. EBITDA were better than estimates,” said Mr. Miehm. “2023 revenue and adj. EBITDA guidance for RemainCo were inline with estimates. BHC executed open market repurchase in Q4, under which $446-million principal value of bonds were purchased for a total of $250-million, resulting in a reduction of net debt by $196-million . Overall, net debt at RemainCo was reduced by $469-million in Q4. Management reiterated that it believes separation of B+L makes strategic sense and is evaluating factors and considerations related to the spin.”
* CIBC’s Dean Wilkinson raised his CAP REIT (CAR.UN-T) target to $53 from $50 with a “neutral” rating. Other changes include: Raymond James’ Brad Sturges to $60 from $58 with a “strong buy” rating, Scotia’s Mario Saric to $55 from $54.50 with a “sector outperform” rating, Canaccord Genuity’s Mark Rothschild to $54.50 from $53 with a “buy” rating, National Bank’s Matt Kornack to $56 from $55 with an “outperform” rating and RBC’s Jimmy Shan to $59 from $58 with an “outperform” rating. The average is $54.92.
* CIBC’s Hamir Patel bumped his target for Cascades Inc. (CAS-T) to $10.50, above the $10.25 average, from $9 with a “neutral” rating. Other changes include: Desjardins Securities’ Frederic Tremblay to $10.50 from $9.50 with a “hold” rating, TD’s Sean Steuart to $11 from $8.50 with a “hold” rating, RBC’s Paul Quinn to $12 from $11 with an “outperform” rating and National Bank’s Zachary Evershed to $11 from $9 with a “sector perform” rating.
“Cascades reported Q422 Adjusted EBITDA of $116-million, which was in line with our forecast and consensus. Cascades’ converted product shipments in its containerboard business continue to outperform peers in a weak market, and we think the updates around Tissue (where operational performance seems ready to improve) and Bear Island (with management confirming a Q1 start up) were neutral to slightly positive. We reiterate our Outperform rating heading into the Strategic Plan update in May despite financial targets for 2024 that in our view look optimistic,” said Mr. Quinn.
* Mr. Patel also increased his CCL Industries Inc. (CCL.B-T) target to $74 from $72 with an “outperformer” rating, while Raymond James’ Michael Glen lowered his target to $71 from $73 with an “outperform” rating. The average is $75.
“We continue to believe CCL’s diversified platform and end-market exposure should support steady top-line growth over the cycle,” said Mr. Patel.
* CIBC’s Dean Wilkinson raised his Crombie REIT (CRR.UN-T) target to $19 from $18.25 with an “outperformer” rating. The average is $18.11.
* CIBC’s Mark Jarvi also increased his Emera Inc. (EMA-T) target to $56 from $55 with a “neutral” rating. Other changes include: National Bank’s Patrick Kenny to $53 from $52 with a “sector perform” rating and TD’s Linda Ezergailis to $64 from $63 with a “buy” rating. The average is $58.73.
“We are optimistic that the Government of Nova Scotia will be more respectful of the independence of the utility regulator going forward and expect the Florida regulator to substantially approve Tampa Electric’s fuel and storm costs recovery plan, which would reduce some uncertainty for the company over the next year. Continued investments over the long term should reduce the carbon intensity of its portfolio through decarbonization initiatives, renewable energy, and storage investments, and extend the visibility of growth for Emera,” said Ms. Ezergailis.
* Haywood Securities’ Kerry Smith cut his Equinox Gold Corp. (EQX-T) target to $9.50 from $10 with a “buy” rating, while CIBC’s Anita Soni lowered her target to $4.70 from $5.70 with an “underperformer” recommendation. The average is $6.22.
* CIBC’s Krista Friesen trimmed her Exchange Income Corp. (EIF-T) target by $1 to $59 with an “outperformer” rating. Other changes include: ATB Capital Markes’ Chris Murray to $66 from $65 with an “outperform” rating, National Bank’s Cameron Doerksen to $65 from $67 with an “outperform” rating and RBC’s Walter Spracklin to $60 from $59 with an “outperform” rating. The average is $62.09.
“We remain positive on EIF post Q4 results. 2023 guidance was reaffirmed implying 15-per-cent growth at the midpoint; but key in our view was commentary on the outlook into 2024 and beyond,” said Mr. Spracklin. “Management pointed to a robust M&A pipeline (we view M&A as an important catalyst), meaningful organic opportunity and a continued recovery at Quest as well as Regional One, all of which we expect to drive high-single digit growth in 2024. We are therefore surprised the shares are trading down post the quarter, and see today’s weakness as a buying opportunity.”
* RBC’s Sabahat Khan raised his High Liner Foods Inc. (HLF-T) target to $16, below the $20.50 average, from $14 with a “sector perform” rating.
“High Liner Foods Inc. reported Q4 sales and Adjusted EBITDA ahead of RBC forecasts, while management is calling for top-line and Adjusted EBITDA growth in 2023. Our forecasts reflect low-single digit Adjusted EBITDA growth in 2023,” said Mr. Khan.
* RBC’s Nelson Ng lowered his target for Innergex Renewable Energy Inc. (INE-T) to $17 from $19 with an “outperform” rating. Others making changes include: Desjardins Securities’ Brent Stadler to $18 from $18.50 with a “hold” rating and CIBC’s Mark Jarvi to $19 from $29 with a “neutral” rating. The average is $20.10.
“After years of providing guidance for the upcoming year, we believe investors took a cautious approach in response to management’s reluctance to provide 2023 guidance,” said Mr. Ng. “Some investors felt that 2023 FCF/share could be much stronger than 2022 due to five acquisitions announced since January 2022, and the potential normalization of renewable resources (2022 generation was 10 per cent below average). We are reducing our price target ... to reflect a more conservative view on the company’s development pipeline and a higher cost of capital (discount rate).”
* RBC’s Sabahat Khan cut his Jamieson Wellness Inc. (JWEL-T) target to $41 from $42, keeping an “outperform” rating, while Scotia Capital’s George Doumet trimmed his target to $38.50 from $39 with a “sector perform” rating. The average is $43.81.
* BMO’s Ben Pham lowered his Northland Power Inc. (NPI-T) target to $45, below the $46.43 average, from $46 with an “outperform” rating.
* Piper Sandler’s Charles Neivert cut his Nutrien Ltd. (NTR-N, NTR-T) target to US$82 from US$93 with a “neutral” rating. The average is US$97.38.
* BMO’s Thanos Moschopoulos raised his Thinkific Labs Inc. (THNC-T) target to $2.50 from $2 with a “market perform” rating, while Cormark’s Gavin Fairweather lowered his target to $4.25 from $4.50 with a “buy” rating. The average is $3.96.
“We remain Market Perform on THNC and have raised our target price to $2.50 following Q4/22 results, which were a beat on both EBITDA and EBITDA guidance,” said Mr. Moschopoulos. “We’ve trimmed our revenue forecasts, but have significantly raised our EBITDA forecasts, reflecting the recent restructuring. We remain neutral on the stock, as we’d like to see THNC make better progress on sales/marketing efficiency. However, management’s focus on opex reduction has been encouraging, as has the consistent growth in ARPU—and we see more upside than downside to the stock, given its depressed valuation.”
* Canaccord Genuity’s Kyle Nikson reduced his Torex Gold Resources Inc. (TXG-T) target to $24 from $25 with a “buy” rating. The average is $22.86.
* CIBC’s Mark Jarvi lowered his TransAlta Corp. (TA-T) target to $16 from $16.50 with an “outperformer” rating. Other changes include: National Bank’s Patrick Kenny to $14 from $15 with an “outperform” rating and TD’s John Mould to $16.50 from $17.50 with a “buy” rating. The average is $15.88.
“We attribute yesterday’s 3-per-cent share price decline to anticipation of a more normalized power pricing environment in H1/23,” said Mr. Mould. “As Alberta’s largest generator by capacity (~3.2 GW), we believe TransAlta’s leading position in Canada’s only deregulated power market cannot be easily duplicated by a competitor. Strong results from the Alberta merchant fleet should support additional investments in contracted renewable power development. TA continues to target reaching final investment decisions in 2023 on 500 MW of additional clean energy projects. We view the current share price as a good entry point, given TransAlta’s discounted valuation, renewable power growth strategy, near-term opportunities in the Alberta market, and quality hydro assets.”
* Mr. Jarvi also cut his TransAlta Renewables Inc. (RNW-T) target to $13, below the $13.52 average, from $13.50 with a “neutral” rating. Other moves include: Scotia’s Robert Hope to $14 from $15 with a “sector perform” rating and TD’s John Mould to $12 from $12.50 with a “hold” rating.
* BMO’s John Gibson cut his Trican Well Service Ltd. (TCW-T) target to $5.50 from $6.50 with an “outperform” rating, while Stifel’s Cole Pereira lowered his target to $5.75 from $6.50. The average is $5.80.