Inside the Market’s roundup of some of today’s key analyst actions
This week’s selloff in shares of Toronto-Dominion Bank (TD-T) is “overdone,” according to Scotia Capital analyst Meny Grauman.
Also calling lingering capital concerns after Thursday’s release of its first-quarter results “overblown,” he raised his recommendation for TD shares to “sector outperform” from “sector perform” previously.
“While we certainly believe that TD’s Q1 result had its challenges and was generally less impressive than it appeared on the surface, the sell-off on earnings day stood out as excessive in our view,” said Mr. Grauman. “The key issue in our mind is the obvious slowdown in NIM expansion which we can clearly see in the results themselves, and which management guided to for the year as a whole. Less of an issue in our mind is capital concerns. True, TD was one of the few banks (alongside NA and CM) that saw its CET1 ratio contract quarter-over-quarter, but its 12-per-cent stake in Schwab provides it with a significant amount of capital flexibility as it showed when it sold down this stake to buy Cowen. The shares are now trading at a 3.5-per-cent discount to consensus on F23 EPS and a 4.3-per-cent discount on consensus F24. For a long time we have argued that TD’s premium should narrow, but we believe that the pendulum has swung too far creating a buying opportunity.”
TD shares dropped 2.4 per cent on Thursday despite reporting core cash earnings per share of $2.23, up 7 per cent year-over-year and exceeding the consensus projection on the Street of $2.19.
Mr. Grauman said acknowledged lingering concerns over the state of its US$13.4-billion acquisition of First Horizon Corp. (FHN-N) remain an “overhang,” but emphasized the impact of his financial forecast is “very modest” this year.
On Wednesday, Memphis-based First Horizon disclosed in an annual regulatory filing that TD recently told its management team that TD does not expect to get the required regulatory approvals in time to complete the deal before May 27, which is when their merger agreement is set to expire.
“Our 2023 estimated core cash EPS fell 2 per cent to $9.05 while our 2024 core cash EPS declined by 1 per cent to $9.72 to reflect the shift in closing date of the First Horizon acquisition from Q3/23 to Q4/23,” the analyst said. “We now value the shares at 10.5 times our 2024E core EPS, which is a 1-per-cent premium to the group and as a result our price target remains unchanged at $104. We believe our estimates and relative multiple are quite conservative, and despite that conservatism we still see significant upside to the shares given their recent underperformance which we know believe is overdone. We upgrade the shares.”
Mr. Grauman’s $104 target exceeds the consensus target on the Street of $102.16, according to Refinitiv data.
Elsewhere, others making changes include:
* Credit Suisse analyst Joo Ho Kim to $94 from $97, reiterating a “neutral” rating
“TD reported best-in-class PTPP earnings performance this quarter, driven by a strong beat to our NII estimate that more than offset only somewhat higher expenses,” said Mr. Kim. “Yet, we believe the story on the bank remained squarely focused on its First Horizon transaction, particularly given other news of a potential delay in its closing. While a lot of questions were understandably left unanswered (especially given the nature and recency of the matter), we look for further clarity to come in the near term. The other focus of the day was on capital, given the surprising magnitude of decline this quarter. While TD expects to remain comfortably above 11 per cent post-FHN (and near 12 per cent by the first half of 2024), the timing also remains of the essence here in light of the new regulatory range.”
* Barclays’ John Aiken to $101 from $102 with an “overweight” rating.
“Outside of some relative credit deterioration, TD posted solid results with additional expansion in its net interest margin. However, the market’s focus is centred almost solely on First Horizon, as regulatory timing remains a key issue,” said Mr. Aiken.
* BMO’s Sohrab Movahedi to $93 from $98 with an “outperform” rating.
In a separate report, Mr. Kim said he’s “remaining cautious on the path forward” for Canadian Western Bank (CWB-T) after its quarterly release, which sent its share plummeting 5.5 per cent on Thursday.
“CWB’s Q1 results were weaker especially on an underlying basis, as the PTPP miss (vs. our numbers) rightfully remained in focus for investors on the earnings day,” he said. “Credit was certainly a good news story this quarter given the very low impaired losses (excluding the reversal), which again showcased the bank’s secured-lending model and should aid in the uphill path of ‘normalization’. While the guided path forward remains somewhat constructive on several fronts, we continue to layer in a modest level of conservatism in our numbers and remain on the sideline for the shares at this time.”
The Edmonton-based bank reported core cash earnings per share of $1.02, exceeding Mr. Kim’s 89-cent estimate and the consensus projection on the Street of 91 cents.
“Relative to our estimates, the results were driven by lower than expected PCLs (21 cents per share) as both revenues and expenses missed our estimates (negative 5 cents per share and negative 3 cents per share, respectively),” the analyst said. “The pre-tax pre-provision earnings were down 3 per cent quarter-over-quarter, 6 per cent year-over-year, and missed our estimate by 8 per cent. The bank reported a core ROE of 12.0 per cent this quarter, which was up 150 basis points quarter-over-quarter. The CET1 ratio of 9.1 per cent was up 30 basis points sequentially. As expected, CWB left its quarterly dividend unchanged at 32 cents per share. The bank also utilized its previously launched ATM program ($44-million this quarter out of $150-million authorized).”
Saying the beat on his estimates is “more than offset by a more modest margin improvement assumption and higher expenses,” Mr. Kim cut his full-year 2023 and 2024 EPS estimates by 3 per cent and 4 per cent, respectively, to $3.62 and $3.82, leading him to trim his target for CWB shares by $1 to $29 with a “neutral” recommendation (unchanged). The average is $31.50.
Elsewhere, others making changes include:
* Desjardins Securities’ Doug Young to $33 from $35 with a “buy” rating.
“Adjusted pre-tax, pre-provision (PTPP) earnings were 7 per cent below our estimate. Unfortunately, it was another disappointing quarter,” said Mr. Young. “That said, looking forward we like CWB’s tilt toward commercial lending, and valuation. And there is potential upside to our estimates if management achieves its FY23 targets.”
* Barclays’ John Aiken to $29 from $30 with an “overweight” rating.
“Overall, we view CWB’s Q1 as a somewhat neutral quarter,” he said. “While we anticipate margins will improve over the course of 2023, with the possibility of a recession on the horizon, slowing loan growth, along with credit normalization, could dampen the bottom line, and result in a re-test of valuation coming out of the quarter.”
* RBC’s Darko Mihelic to $35 from $36 with an “outperform” rating.
* CIBC World Markets’ Paul Holden to $30 from $31 with a “neutral” recommendation.
* Cormark Securities’ Lemar Persaud to $29 from $30 with a “buy” rating.
* TD Securities’ Mario Mendonca to $33 from $34 with a “buy” rating.
Citing “affordability and general inflation pressures,” National Bank Financial’s Maxim Sytchev thinks he’s “not sure investors need to be exposed to a consumer discretionary name now.”
With that view, he was one of a group of equity analysts on the Street to reduce their forecast and target price for AutoCanada Inc. (ACQ-T) following Thursday’s premarket release of its fourth-quarter 2022 financial results, which resulted in a 15.9-per-cent share price dropped.
“We believe it will take some time for the market to realize that the peak margins of 2021 are firmly in the rearview window,” said Mr. Sytchev. “Consumers continue to be pressured by higher rates, impacting affordability while the same rates are also having a negative impact on floorplan financing. One can make all kinds of arguments about why ACQ today is better vs. five years ago (it is, objectively, stronger), but the macro headwinds are too large to ignore. Overall, we understand that the management team needs to be forward-looking and upbeat (lots of discussion around growth, creating CarMax-like business model, potential M&A) but given affordability and general inflation pressures, we are not sure investors need to be exposed to a consumer discretionary name now.”
The Edmonton-based company reported quarterly revenue of $1.388-billion, up 6.7 per cent year-over-year and above Mr. Sytchev’s $1.301-billion estimate but below the consensus of $1.451-billion. Adjusted EBITDA, including IFRS 16, fell 23.1 per cent to $50.7-billion, missing expectations ($60.7-billion and $62.1-million, respectively.
Hurt by a $12.4-million used vehicle write down and $13.3-million from the increased cost of floorplan financing, adjusted earnings per share of 52 cents fell short of Mr. Sytchev’s 74-cent forecast and the Street’s expectation of 90 cents.
Mr. Sytchev thinks management took an “positive tone” in its conference call, however he emphasized inventories continue to rise and “execution and operational efficiency [are] the key focus in a persistently volume-challenged market.”
“Management sees ability to do incremental M&A now for assets that perhaps wouldn’t have been available prior (question of peak margins of course needs to be asked here as well); 2) New / Used inventory now close to 3 months vs. 2 months a year ago; management is looking to turn over inventory faster to avoid fluctuations from mark-to-market; this will likely take time to implement; 3) Even with New availability improving, management believes Used product can continue to climb as % of total,” he said.
Following “minor seasonality tweaks” to his forecast, Mr. Sytchev cut his target for AutoCanada shares to $26 from $27, keeping a “sector perform” rating. The average is $38.45.
“As our Revenue and EBITDA 2023 / 2024 estimates are below consensus, our numbers remain largely unchanged other than some seasonality cadence adjustments (Q2 and Q3 are the highest contributing quarters),” he said. “Our margins are currently at the lower end of consensus projections which we expect will come down post the quarter. Given the company’s higher net debt load and rising floorplan interest expenses, EPS is slightly compressed despite the lower share count (after repurchases). We assume a moderation of Used car pricing as well as slight normalization of New car supply going forward.”
Other analysts making changes include:
* Canaccord Genuity’s Luke Hannan to $32 from $40 with a “buy” rating.
“We continue to hold a favourable view of ACQ shares even in the context of a challenging economic environment, given ACQ’s (1) position of scale in the Canadian market; (2) focus on retailing used vehicles, which are counter-cyclical to new car sales; and (3) free cash flow generation that can support both accretive M&A and returns to shareholders in the form of share buybacks,” said Mr. Hannan.
* Scotia Capital’s Michael Doumet to $34 from $35 with a “sector outperform” rating.
“We view the strong momentum in F&I [Finance & Insurance] and PS&CR [Parts, service and collision repair] as evidence of structural earnings growth. Despite the recent earnings variability, we maintain our view of ACQ’s earnings profile (mid-cycle EBITDA of $250 million), on which we continue see attractive value,” said Mr. Doumet.
“On the call, management discussed (and alluded) to several initiatives the company was undertaking to continue to expand its used vehicle platform. ACQ has already shown success: in 2022, new vehicle sales declined 12 per cent versus 2019 (due to supply chain challenges), but its used vehicle sales grew more than 140 per cent – which, in turn, expands its F&I and PS&CR opportunity. We believe growth in its used vehicle sales would drive significant value creation, through EBITDA growth and a potential a re-rate.”
* Acumen Capital’s Trevor Reynolds to $35 from $40 with a “buy” rating.
“We believe our estimates are adequately risked however uncertainty remains as to how impactful increasing rates and inflationary pressure will be on the Canadian vehicle market. As a result, we are reducing our target multiple,” said Mr. Reynolds.
* CIBC’s Krista Friesen to $27 from $28 with a “neutral” rating.
“While we commend ACQ for the changes this management team has been able to implement and its ability to manage through the pandemic, we view the current macro environment as challenging for the company. With used car prices declining, cracks in new car demand starting to show, and consumers falling behind on their car payments, we expect 2023 will be a difficult year,” said Ms. Friesen.
* Cormark Securities’ David Ocampo to $36.25 from $43.50 with a “buy” rating.
Following the late Wednesday release of better-than-anticipated fourth-quarter 2022 financial results, a series of equity analysts raised their targets for Kinaxis Inc. (KXS-T) shares.
The Ottawa-based supply chain management and sales and operation planning software company reported revenue of US$98.5-million, up 44 per cent year-over-year and in line with the consensus forecast of US$99.4-million. Adjusted EBITDA of US$21.1-million beat the Street’s projection (US$13.7-million).
With its 2023 guidance also exceeding expectations, these analysts made target changes:
* Scotia Capital’s Kevin Krishnaratne to $225 from $203 with a “sector outperform” rating. The average on the Street is $217.73.
“Following 2022 results that featured accelerating ARR [annual recurring revenue] growth year-over-year ex. FX (26 per cent vs 21 per cent) and an impressive ‘Rule of 50′ operating profile (SaaS growth + EBITDA margin), we continue to have confidence in management and its vision of enabling supply chain resilience for businesses large and small,” he said. “We view the initial 2023 guide as strong (at least a Rule of 40 profile with 26-per-cent SaaS growth and 14-per-cent margins at the mid-point) with room for upside as the year progresses on continued momentum in the business.”
* ATB Capital Markets’ Martin Toner to $210 from $200 with an “outperform” rating.
“As supply chain disruptions over the past two years have reinforced the need for companies to have effective supply chain planning, Kinaxis has continued to benefit from these secular tailwinds,” said Mr. Toner. “The Company remains highly confident that it can sustain the current growth rate over the medium term, and it issued a medium-term target for the first time. We believe Kinaxis’ combination of growth, stability and profitability should be rewarded with an above average multiple, and we continue to recommend the shares.”
* BMO’s Thanos Moschopoulos to $200 from $185 with an “outperform” rating.
“We remain Outperform on KXS and have raised our target price to $200 following solid Q4/22 results and FY2023 guidance that was a beat on revenue but light on EBITDA. KXS continues to benefit from a strong demand backdrop and competitive position,” said Mr. Moschopoulos. “We view management’s mid-term targets, which call for accelerating growth and operating leverage, as achievable, given its many levers for growth and an expanding TAM. We’ve raised our estimates and see further room for multiple expansion relative to the enterprise SaaS universe.”
* RBC’s Paul Treiber to $210 from $200 with an “outperform” rating.
* TD Securities’ Daniel Chan to $210 from $200 with a “buy” rating.
Desjardins Securities analyst John Sclodnick sees shares of Victoria Gold Corp. (VGCX-T) are “at an inflection point following recent underperformance due to operational challenges.”
“However, with the block model reconciling well and recoveries meeting expectations, we are confident that management can improve performance,” he said. “In our view, the shares are now trading at a highly attractive entry point for a clear takeout candidate as Victoria is the only single-asset Canadian producer of scale.”
Initiating coverage with a “buy” recommendation on Friday, Mr. Sclodnick said the Toronto-based miner is likely to gain the attention of larger peers if management is able to demonstrate operational improvements this year, believing would “fit nicely in the portfolio of an intermediate producer.”
“The company missed guidance in its first two full years of operations and investors have accordingly punished the stock, which underperformed the S&P/TSX Global Gold Index by 45 per cent in 2022,” he said. “Management knows that it cannot afford another guidance miss and that creating a more positive track record has to be a top priority. The issues hampering the company have been operational in nature—specifically, supply chain issues and a broken conveyor—so we are relieved that it is not a fundamental issue with the orebody or metallurgy. This supports our expectations that the management team can learn from past missteps and significantly improve operational performance going forward, specifically the crushing and stacking rates. The shares have not regained their prior trading range and are currently 55 per cent below the 52-week high of $18.90 vs the S&P/TSX Global Gold Index at 30 per cent below its 52-week high; we view the current depressed price as an attractive entry point. The stock is now trading at 0.49 times NAV, a 23-per-cent discount to the junior producer peer average of 0.64 times, despite exhibiting higher production and relatively in-line costs. We therefore believe that investors will accord the company a premium valuation once it demonstrates improved operational performance, particularly when considering its takeout potential as the only single-asset Canadian producer of scale.”
Calling it a “clear takeover candidate” and viewing it as a “natural consolidator” in Nunavut, he set a target of $15 per share. The average is $16.07.
“Given it is the only single-asset gold producer of scale in Canada, we believe Victoria should trade at a premium to peers and expect that the valuation gap should close as the mine gets back on track after some operational hiccups in its first two years,” he concluded.
In other analyst actions:
* Cormark Securities’ Gavin Fairweather upgraded Tecsys Inc. (TCS-T) to “buy” from “market perform” with a $43 target, up from $41 but below the $45.43 average.
* RBC Dominion Securities’ Keith Mackey downgraded Step Energy Services Ltd. (STEP-T) to “sector perform” from “outperform” with a $7 target, down from $9. Elsewhere, Stifel’s Cole Pereira cut his target to $8.50 from $12 with a “buy” rating. The average is $9.36.
* RBC’s Irene Nattel raised her Alimentation Couche-Tard Inc. (ATD-T) target to $82 from $80, exceeding the $70.05 average, with an “outperform” rating.
* Stifel’s Ian Gillies raised his targets for a trio of stocks: Algoma Steel Group Inc. (ASTL-T, “buy”) to $17.50 from $15, Russel Metals Inc. (RUS-T, “buy”) to $43 from $42 and Stelco Holdings Inc. (STLC-T, “hold”) to $54 from $53. The averages are $13.50, $40 and $54.65, respectively.
* BMO’s Ben Pham trimmed his AltaGas Ltd. (ALA-T) target to $35 from $36 with an “outperform” rating. The average is $31.97.
“While Q4/22 results missed expectations for the third consecutive quarter, big picture is that ALA still delivered to the top half of full-year guidance, despite higher interest rates and LPG export margin compression. Also, these prior headwinds are moderating and/or well known, esp. in the export business, and new tolling agreements are derisking cash flows,” said Mr. Pham.
* RBC’s Tom Callaghan lowered his target for American Hotel Income Properties REIT (HOT.UN-T) to $2.25, below the $2.47 average, from $2.75 with a “sector perform” rating.
* CIBC’s Mark Jarvi cut his Atco Ltd. (ACO.X-T) target to $49 from $51 with an “outperformer” rating, while TD Securities’ Linda Ezergailis trimmed her target to $51 from $53 with a “buy” rating. The average is $49.56.
* Mr. Jarvi also lowered his target for shares of Canadian Utilities Ltd. (CU-T) to $37, below the $38.06 average, from $38 with a “neutral” rating.
“While Q4 results were below expectations, full-year results were strong and there are reasons to believe that 2023 could prove resilient as the company looks to manage pressures from rebasing of the Alberta distribution utilities (pull-forward in maintenance in Q4 could help),” he said. “We take a conservative stance, moderating distribution utility earnings in Alberta, and lowering our estimates for unregulated assets.”
* Raymond James’ Frederic Bastien increased his Black Diamond Group Ltd. (BDI-T) target to $10 from $8 with a “strong buy” rating, while BMO’s John Gibson bumped his target to $8.50 from $7 with an “outperform” rating. The average is $8.04.
“After what seemed like an eternity, investors are finally waking up to the Black Diamond opportunity,” said Mr. Bastien. “They are coming upon a broadly diversified Modular Space Solutions (MSS) segment that is driving stable and predictable growth (per its 5-year rental revenue CAGR of 20 per cent), a de-risked Workforce Solutions (WFS) business that is delivering significant operating leverage, and a disruptive digital platform that is approaching a critical revenue milestone.
“BDI is leading our Infrastructure & Construction (I&C) stocks with a year-to-date gain of 41 per cent that makes the TSX’s 5-per-cent advance look dismal in contrast. But with good visibility on rate increases, an expanded presence in the attractive Ontario education sector, and limited exposure to the vulnerable residential and commercial construction sectors, we believe the stock has a lot left in the tank.”
* National Bank’s Travis Wood lowered his Canadian Natural Resources Ltd. (CNQ-T) target to $100 from $105 with an “outperform” rating. The average is $91.95.
* Mr. Wood also trimmed his target for Crescent Point Energy Corp. (CPG-T) to $14.50 from $15 with an “outperform” rating, while Stifel’s Cody Kwong raised his target to $15.50 from $15.25 with a “buy” rating. The average is $13.88.
“There were no surprises with CPG’s year-end results which makes it easy for investors to focus on a leverage multiple that improved to 0.5 times DCF in the period, while it also returned 60 per cent of its FCF to shareholders via its base dividend, special dividend, and meaningful share buyback activity,” said Mr. Kwong. “We believe the next catalyst for the stock will be a ‘teach-in’ on its Kaybob Duvernay assets (March 21st) which we believe will highlight the underappreciated economics and depth of inventory that CPG holds within this play of focus. Between our 2023/24 estimates moving modestly higher and a potential shift in sentiment that could help bridge the valuation gap between its peers, we are increasing our target price.”
* CIBC’s Hamir Patel reduced his targets for Canfor Corp. (CFP-T) to $28 from $29 with an “outperformer” rating and Canfor Pulp Products Inc. (CFX-T) to $4.25 from $4.75 with a “neutral” rating. The averages are $31.83 and $5.15, respectively.
* Canaccord Genuity’s Tania Armstrong-Whitworth cut her DRI Healthcare Trust (DHT.UN-T) target to $14 from $15 with a “buy” rating, while CIBC’s Scott Fletcher reduced his target to $11.50 from $11.75 with an “outperformer” rating. The average is $13.65.
“Although DHT reported relatively healthy Q4 numbers, a decline in future royalty estimates off the base portfolio and the addition of performance fees reduces our long-term FCF estimates. This results in our price target declining,” said Ms. Armstrong-Whitworth.
* Canaccord Genuity’s Robert Young lowered his target for Evertz Technologies Ltd. (ET-T) to $15 from $16.50 with a “buy” rating. Other changes include: Raymond James’ Steven Li to $15.50 from $16.50 with an “outperform” rating and BMO’s Thanos Moschopoulos to $15 from $16 with an “outperform” rating. The average is $15.50.
“Although Evertz continues to highlight strong demand, we have modestly taken down our F23 and F24 revenue estimates to reflect uncertain timing of deployments and projects. We have also increased our opex estimate to reflect higher R&D and S&M spend, which leads to lower EBITDA. We expect inventory to remain high, although plateau at some point in the near term as lead times normalize,” said Mr. Young.
* CIBC’s John Zamparo reduced his GDI Integrated Facility Services Inc. (GDI-T) target to $60 from $62 with an “outperformer” rating, while Scotia’s Jonathan Goldman raised his target to $54 from $53.50 with a “sector perform” rating. The average is $60.07.
“Results were in-line, but a couple of positive surprises portend well for 2023,” said Mr. Goldman. “Janitorial USA margins were in-line with pre-COVID levels, but ahead of our estimates as we expected more margin pressure from a legacy contract (at least through 1H23). But maybe more impressive, Technical Services sales increased 20 per cent on an organic basis – and management expects that high-single/low-double digit growth is sustainable underpinned by a record backlog and recent share gains. Segment margins are also back to pre-COVID levels (when they were on an upward trajectory).
“GDI remains on track to hit its 2025 goal of sales of $2.7 billion to $3.0 billion and adjusted EBITDA of $180 million to $200 million. Industry dynamics and M&A should continue to support 15-per-cent top-line growth. And management continues to execute well (especially in a challenging operating environment). But valuation, in the context of a potential mean reversion of margins, keeps us on the sidelines.”
* Credit Suisse’s Fahad Tariq cut his targets for Hudbay Minerals Inc. (HBM-T) to $8.50 from $9 with an “outperform” rating and Lundin Mining Corp. (LUN-T) to $10 from $10.25 with a “neutral” rating. The averages are $9.17 and $9.67, respectively.
“For most of 2022, there were concerns on Lundin Mining’s operations (e.g., sinkhole near Candelaria, ramp-up issues at Neves-Corvo, and capex risk at Josemaria) as well as the political situation in Chile (specifically on tax reform), while Hudbay’s operations ran relatively smoothly and the political situation in Peru appeared relatively more stable,” said Mr. Tariq. “Fast forward to Q4-22 and 2023 and in many ways the script flipped, with protests/blockades in Peru impacting Hudbay’s Constancia production. Specifically, in response to the road blockades, Hudbay had to adjust its near-term mine plan at Constancia to conserve supplies (e.g., fuel), resulting in lower grades and effectively, deferred production (i.e., Pampacancha now expected to extend into H1-25). The protests for now appear to have subsided, and Hudbay expects its elevated inventory at the mine (47kt copper in mid-February) to normalize in Q2-23. Given the improving Peru situation, valuation, and torque to the copper price, we continue to prefer Hudbay (Outperform-rated), and we continue to see elevated capex risk for Lundin Mining’s (Neutral-rated) Josemaria project, although we won’t get a capex update until H2-23 (engineering is currently 40 per cent complete). Looking at year-to-date share price performance, Lundin Mining is up 8.2 per cent and Hudbay is up 4.7 per cent (vs. the Global X Copper Miners ETF up 11.7 per cent).”
* CIBC’s Krista Friesen increased her Martinrea International Inc. (MRE-T) target to $16 from $15 with a “neutral” rating. Others making changes include: TD Securities’ Brian Morrison to $21 from $16 with an “action list buy” rating, BMO’s Peter Sklar to $18 from $15 with an “outperform” rating and Raymond James’ Michael Glen to $20 from $16.50 with an “outperform” rating. The average is $16.56.
“MRE reported solid Q4 results, coming in above our and Street expectations,” said Ms. Friesen. “After a difficult 2+ years, the company is looking to be getting back on track. Supply chain issues appear to be easing, leading to improved operational efficiencies, and commercial settlements in the face of higher costs have been a tailwind. MRE maintained its guidance for 2023, and with its leverage declining to below 2.0 times and being well within its 3.0 times covenant, it noted that it would be re-introducing its buyback in May.”
* Canaccord Genuity’s John Bereznicki raised his Secure Energy Services Inc. (SES-T) target to $10.50 from $9.75, keeping a “buy” rating. The average is $10.59.
“With Secure’s leverage now in its target range, we expect the company to focus excess FCF on opportunistic share repurchases and (potentially) further dividend increases. In our view, Secure is benefitting from a multiple re-rating as it continues to reposition itself as a midstream service provider focused on shareholder returns (we believe successful resolution of the Commissioner of Competition’s Section 92 filing could further bolster Secure’s trading multiple). We are making modest estimate revisions,” said Mr. Bereznicki.
* RBC’s Sabahat Khan moved his Sleep Country Canada Holdings Inc. (ZZZ-T) target to $27 from $26 with an “outperform” rating. The average is $27.92.
* CIBC’s Dean Wilkinson cut his target for Tricon Residential Inc. (TCN-N, TCN-T) to US$11 from US$13.35 with an “outperformer” rating. Others making changes include: Scotia’s Mario Saric to US$11.50 from US$12 with a “sector outperform” rating, Raymond James’ Brad Sturges to US$11 from US$13 with a “strong buy” rating and TD’s Jonathan Kelcher to US$11.50 from US$13 with a “buy” rating. The average is US$10.75.
“We think the near-term negative market sentiment on TCN creates a very attractive reward-risk opportunity (45-per-cent upside/15-per-cent downside), with our confidence grounded in the portfolio’s ability to generate mid-single-digit SSNOI growth over time,” said Mr. Saric.