Friday’s analyst upgrades and downgrades

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

While he expects Stelco Holdings Inc. (STLC-T) to start to benefit from higher steel prices and lower costs in the near term, Eight Capital analyst Anoop Prihar downgraded its shares to “neutral” from “sell” in response to “underwhelming” first-quarter financial results and predicting difficult macroeconomic conditions will linger,

Shares of Hamilton, Ont.-based company slid 3.8 per cent on Thursday after it reported adjusted earnings before interest, taxes, depreciation and amortization of $65-million, down from $82-million in the fourth quarter of 2022 and below the estimates of both Mr. Prihar and the Street ($81-million and $75-million, respectively). He attributed the “underperformance” to higher input costs and lower realized prices.

“On the conference call, CEO Alan Kestenbaum stated that compared to Q1/23, the Q2/23 EBITDA will be materially higher due to improved steel prices and lower input costs,” the analyst said. “While STLC’s average realized sales price was $960 per ton in Q1/23, we estimate that it could appreciate by 36 per cent to around $1,300 per ton in Q2/23. On the cost side, management highlighted that they expect to see a $20/ton reduction in costs, largely driven by lower coal, natural gas, and scrap prices. We estimate that STLC will generate EBITDA of $289-million in Q2/23.

“Although we expect STLC’s Q2/23 profitability to improve relative to the Q1/23 results, we anticipate H2/23 steel pricing to trend lower compared to Q2/23, given the concerns surrounding the macro outlook for North America. We would note that the HRC futures curve at around US$800 per ton for H2/23, is likely reflecting these same concerns. Having said this, these conditions might allow STLC management to opportunistically execute on its NCIB. It is worth noting that in 2022, the Company repurchased 4.35 million shares at an average price of $34.09 per share.”

While he sees its normal course issuer bid providing downside protection and thinks its balance sheet “remains sound,” Mr. Prihar cut his target for Stelco shares to $45 from $48. The average is $52.07.

Elsewhere, others making changes include:

* BMO’s Katja Jancic to $60 from $65 with an “outperform” rating.

“Stelco’s 1Q’23 was adversely impacted by lower prices and cost pressures,” she said. “Looking ahead, Stelco indicated demand remains healthy, with 2Q earnings expected to increase meaningfully on higher realized prices and some easing in costs, with the latter expected to decline further as the year progresses. Meanwhile, healthy balance sheet and growing cash balance in our view imply potential for another year of strong capital returns, with inorganic growth a possibility.”

* National Bank’s Maxim Sytchev to $49 from $51 with a “sector perform” rating.

“Despite near term HRC strength and an expected moderation in coal and natural gas pricing, it remains difficult to reconcile still-elevated HRC pricing with a barrage of middling to weak macro headlines, especially for interest rate sensitive sectors,” he said. “As such, we prefer to remain on the sidelines for the time being.”

* RBC’s James McGarragle lowered his target to $48 from $52 with a “sector perform” rating.

“STLC reported Q1 results below consensus; however, recent strength in steel prices and decreasing costs are expected to drive a meaningful ramp in profitability in the near term. Key is that STLC has a significant cash balance, and we therefore view a special dividend or SIB as likely in the near term. While the stock is off recent highs, we continue to see risk to pricing in the medium term due to macro,” he said.

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Despite a “tough” first-quarter miss, Raymond James analyst Steve Hansen raised his recommendation for Nutrien Ltd. (NTR-N, NTR-T) to “outperform” from “market perform,” pointing to signs of increased farmer demand and touting an enticing valuation for investors.

“We are upgrading our rating on Nutrien Ltd. .... based upon increased signs of: 1) farmer engagement/procurement after a lengthy period of dormancy; 2) depleting NPK inventories across key channels; 3) gradual stabilization in key price benchmarks; and 4) most recently, a widespread flush of Street/investor expectations following NTRs 1Q23 print,” he said. “While still too early to ‘call the bottom’ on this geopolitically-entangled, weather-amplified cycle, we feel that the recent pullback in NTR shares provides an attractive entry point for long-term investors.”

Mr. Hansen maintained a target of US$85 per share. The average is US$90.20.

Elsewhere, RBC’s Andrew Wong cut his target to US$95 from US$100 with an “outperform” rating.

“We remain long-term constructive on Nutrien as ag fundamentals remain supportive for an eventual recovery in fertilizer demand while supply-side restrictions persist,” said Mr. Wong. “We also see valuation attractive at current levels (approximately 6 times normalized EBITDA vs. 8-9 times historical average) and solid financials (1 times net debt/EBITDA, 10-11-per-cent normalized FCF yield). However, we think investors can be patient given near-term downside in fertilizer prices as demand may not gain traction until late-2023/early-2024.”

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Seeing “sustained tailwinds on the horizon,” Raymond James analyst Steve Hansen upgraded Chemtrade Logistics Income Fund (CHE.UN-T) to “outperform” from “market perform.” on Friday.

“We are increasing our target price on Chemtrade to $13.00 (vs. $11.00 prior) and upgrading our rating back to Outperform (vs. MP prior) based upon: 1) the company’s outsized ‘Beat & Raise’ print; 2) increased confidence in the 2023/24 outlook; and 3) the stock’s compelling valuation & total return prospects following its recent correction,” he said.

Mr. Hansen’s revised target exceeds the average on the Street of $11.36.

Others making changes include:

* CIBC’s Jacob Bout raised his target to $12 from $11 with an “outperformer” rating.

* Desjardins Securities’ Gary Ho to $13 from $12.50 with a “hold” rating.

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Despite a “good start to 2023 (and more runway for growth),” Raymond James analyst Frederic Bastien lowered his recommendation for Stantec Inc. (STN-T) to “outperform” from “strong buy” on Friday.

“We are lowering our rating on Stantec down a notch after a 43-per-cent run in the share price over the past twelve months swung its valuation from a discount to a premium relative to its engineering peers,” he said. “This outperformance aligns with our view the market could no longer ignore STN’s improving and more consistent performance, impressive ESG attributes, and bright future. 1Q23 results were a case in point. They showcased a company that is punching above its weight in organic revenue and backlog growth, and capitalizing on strong secular trends around deglobalization and decarbonization. For these reasons, we believe our Best Pick for 2023 has lots left in the tank.”

Calling it “an increasingly defensive and sustainable stock,” Mr. Bastien maintained his $90 target after the Edmonton-based firm’s quarterly results fell in line with his expectations. The average is $89.10.

“Stantec’s backlog is underweight the two sectors we view as most vulnerable to rising interest rates,” he said. “Urban land and commercial together make up 12 per cent of revenue, leaving us far removed from the 2008 GFC, when they combined for well over a third of fees. This leaves us confident no sector can veer it off course anymore.”

Elsewhere, ATB Capital Markets analyst Chris Murray also downgraded Stantec on valuation concerns, moving his recommendation to “sector perform” from “outperform” after also calling its results “a good start” to the year.

“While we remain constructive on STN, the stock’s recent performance has reduced our return to target to 7.5 per cent, and we are therefore downgrading to Sector Perform and maintaining our $85.00 price target,” he said.

Others making changes include:

* National Bank’s Maxim Sytchev to $92 from $89 with an “outperform” rating.

“We believe STN’s 52-per-cent exposure to the U.S., the most active and robust market globally, gives the company a slight edge when it comes to short-term performance (hence, showing strong organic growth numbers),” said Mr. Sytchev. “A more balanced redistribution between geographies/end-markets also does not exhibit any chinks in STN’s armour vs. prior resi/oil/MWH iterations. We continue to view STN as a high conviction double over the next five years in our coverage universe.”

* Desjardins Securities’ Benoit Poirier to $89 from $87 with a “buy” rating.

“STN reported strong 1Q results, supported by the solid slate of organic growth opportunities from the green transition and stimulus funding in the US. STN has the highest exposure to the U.S. in our E&C coverage,” said Mr. Poirier. “The environment is ripe for further industry consolidation and we view STN as ideally positioned to deploy capital given its healthy balance sheet. We have increased our target ... and see the unjustified negative stock reaction as a buying opportunity.”

* RBC’s Sabahat Khan to $89 from $84 with an “outperform” rating.

“We believe Stantec is well positioned for the remainder of 2023, supported by its sizeable backlog and a favorable infrastructure demand environment across its major markets. The balance sheet is also in good shape, and the company has ample financial and management capacity to pursue M&A,” said Mr. Khan.

* BMO’s Devin Dodge to $90 from $88 with an “outperform” rating.

“In our view, there is resiliency to the strong demand tailwinds in STN’s markets underpinned by secular trends in infrastructure development, energy transition & security, climate change and reshoring of certain manufacturing capacity,” said Mr. Dodge. “The companyappears to be executing well, and we believe financial results are tracking to the upper end (or higher) of its F2023 guidance. In addition, M&A is a key potential catalyst and dialogue with potential sellers remains elevated.”

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BMO Nesbitt Burns analyst Tom MacKinnon thinks CI Financial Corp.’s (CIX-T) deal to sell a 20-per-cent stake in its U.S. wealth management business for $1.34-billion to a group of institutional investors introduces a significant dilution risk for shareholders based on the liquidation preference associated with the deal.

That led him to lower his recommendation for the investment giant’s shares to “market perform” from “outperform” previously.

“While the $1.34-billion price translates into what appears to be a high 26 times Q1/23 annualized adjusted EBITDA (more than double Focus Financial Partners [FOCS-Q] estimated 12 times takeout multiple), we believe investors should be cognizant of the liquidity preference these institutional investor are entitled to,” he said. “This, at a minimum, is 1.5 times the original purchase price or $2-billion (i.e., 1.5 times $1.34-billion) in the event of liquidation (IPO, sale, liquidation) over the next three years from the expected May-end 2023 close, with that increasing to $3.1-billion in 2027, and $3.4-billion in 2029 onwards (2.25 times the original $1.3-billiom purchase price). We believe that in order for CIX shareholders to maintain their 80-per-cent ownership in US CI, and thus not get diluted by this liquidation preference arrangement, CI US needs to grow its adjusted EBITDA at a 14.5-per-cent CAGR [compound annual growth rate] for at least the next 5-6 years. Our assumption includes a 12 times exit multiple, similar to FOCS’s, through IPO or sale in either the next 5 years, or beyond (after 5 years and 9 months, the institutional investors have certain rights to initiate a liquidity event).

“While we see 33-per-cent growth in US CI EBITDA in 2023 (helped by significant acquisitions in late 2022), we forecast 10-per-cent growth in 2024, and 9-per-cent growth going froward from there, largely organic (perhaps some tuck-ins) with little debt used to finance growth. As such, we believe CIX shareholders will be diluted from this arrangement, down from their ownership to 55-60 per cent, assuming our 12 times EV/EBITDA exit multiple.”

Mr. MacKinnon lowered his target for CI Financial shares to $17 from $19. The current average is $19.38.

Elsewhere, Barclays’ John Aiken downgraded his recommendation to “equal-weight” from “overweight” with a $19 target, down from $21.

“CI’s announced deal, in conjunction with its Q1 Earnings (which missed), eliminates the immediate crunch on its leverage but gives up some of the eventual upside and provides incremental downside risk, if an appropriate valuation on a liquidity event cannot be achieved,” said Mr. Aiken.

Others making changes include:

* Canaccord Genuity’s Scott Chan to $23 from $22.50 with a “buy” rating.

* KBW’s Rob Lee to $22 from $18.50 with an “outperform” rating.

* TD Securities’ Graham Ryding to $20 from $17 with a “buy” rating.

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“In a market allergic to uncertainty,” National Bank Financial analyst Matt Kornack thinks H&R Real Estate Investment Trust’s (HR.UN-T) leadership change creates a “credibility deficit,” prompting him to lower his recommendation to “sector perform” from “outperform.”

“The departure of Philippe Lapointe, the REIT’s recently promoted President and head of the Lantower Residential platform is a major blow to the rebranding effort and investor outreach H&R has conducted since he was appointed,” he said. “In many ways he was the face of this effort and a charismatic symbol of the repositioning plus a strong voice on the capital allocation front. We believe this move may lead to additional and more intensive shareholder activism and at the very least will put pressure on trading activity.”

Mr. Kornack thinks the late Wednesday announcement of Mr. Lapointe’s departure and the appointment of Emily Watson to lead Lantower Residential was “not well telegraphed and came on the back of a recent property tour and investor day hosted by Philippe and the team.” He called the departure “a big hit to credibility.”

“The Lantower platform is a critical part of the future H&R REIT, which is destined to be 75-per-cent residential and 25-per-cent industrial,” he said.

“H&R’s plan to reposition into a multifamily/industrial REIT requires the disposition of $4.4-billion in office and retail assets (IFRS values $2.7-billion and $1.7-billion, respectively). Under more challenging disposition markets transaction activity has slowed as rising borrowing costs and availability of financing have impacted asset values. While we continue to view H&R’s portfolio as attractive on a sum of the parts basis, the success of the REIT will boil down to capital allocation as it continues to transition away from its diversified status and the announced changes remove an important voice from this discussion.”

Mr. Kornack reduced his target for H&R units to $13 from $15.75. The average is $15.83.

“Our prior target price was based on optimism around the capital allocation and rebranding strategy of the REIT. In our view this has taken a substantial hit with the announced management changes,” he said.

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Scotia Capital analyst Himanshu Gupta thinks there’s “tremendous value” in European Residential REIT (ERE.UN-T), touting its “compelling” valuation and seeing its leadership “well-positioned to navigate any regulatory uncertainties in the Netherlands.”

However, he lowered his recommendation for its units to “sector perform” from “sector outperform” after its first-quarter results fell short of his estimates, calling it “a difficult decision.”

“A few reasons for a change in rating: (1) Lack of FFO [funds from operations] per unit growth (and higher leverage) – we expect negative FFOPU growth (down 3.2 per cent year-over-year in 2023 and a negative 0.2-per-cent CAGR [compound annual growth rate] in 2022-24)... Per unit growth is key to outperformance. (2) European residential names are trading at larger discounts to NAV as they face double-impact of spike in debt financing costs and regulatory uncertainties. Vonovia (VNA-ETR) is trading at 61-per-cent discount to consensus EPRA NAV.

“With recent management changes we think the current valuation discount can be fully resolved only in an M&A environment. While M&A cannot be ruled out in the next 0 to 24 months, our rating cannot be based on an event which may or may not be realized.”

Mr. Gupta lowered his target for the REIT’s units by $1 to $4. The average is $4.15.

Other analysts making changes include:

* RBC’s Jimmy Shan to $4.25 from $4 with an “outperform” rating.

‘European Residential REIT reported a largely in line quarter with NOI growth of 5.2 per cent offset by higher interest expense,” said Mr. Shan. “While CAP REIT &ERES have not indicated a formal strategic review, CEO Mark Kenney was clear that ‘everything is on the table.’ Discussion of the possibility of selling individually-titled units into the end-occupier market dominated the call. Given limited transactions, NAV estimates are subject to heightened risk for error. However, the possibility of a value surfacing event keeps us at OP.”

* TD’s Jonathan Kelcher to $4.75 from $5 with a “buy” rating.

* CIBC’s Dean Wilkinson to $4.25 from $4.50 with an “outperformer” rating.

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Despite seeing Canadian Tire Corp. Ltd.’s (CTC.A-T) performance in the first quarter as “tepid,” National Bank Financial analyst Vishal Shreedhar now thinks its is poised to benefit from “positive” April sales.

Shares of the retailer slid 2.5 per cent on Thursday after it reported adjusted earnings per share of $1, falling short of the estimates of both the analyst ($1.42) and the Street ($1.31) and a significant drop from $3.06 a year ago. He attributed the miss to a 4.8-per-cent drop in same-store sales at its flagship Canadian Tire stores (versus his expectation of a flat performance) and a rise in expenses.

Krashinsky Robertson: Canadian Tire results show consumer shift from discretionary purchases

“CTC saw the first slowdown in consumer spending (flat year-over-year) since 2020,” said Mr. Shreedhar. “Pressure was observed across all income groups. By category, growth was observed in essentials offset by a decline in non-essentials. CTC also noted that unfavourable weather impacted sales.

“CTC noted improving trends in Q2 to-date (April sssg of 3 per cent) and balanced dealer inventory in core nonseasonal categories. We believe that negative CTR sssg in Q1 does not reflect underlying trends. Looking through 2023, we anticipate improving performance given easier y/y comparisons in H2/2023, lower logistics costs (as inventory normalizes), and lower product costs. Management expects $150- $200-million in DC fire-related disruption costs for Q2/23 to be largely recovered through the year.”

Trimming his earnings expectations for both 2023 and 2024, Mr. Shreedhar lowered his target for Canadian Tire shares to $195 from $201, keeping an “outperform” recommendation. The average is $197.50.

Elsewhere, others making changes include:

* Desjardins Securities’ Chris Li to $200 from $205 with a “buy” rating.

“1Q results reflected challenges from softening consumer spending, elevated SG&A expenses and the DC fire,” he said. “We continue to expect some recovery in 2H, supported by easing freight and transportation cost pressures, easing product cost inflation and easier year-ago comps for CTR. We believe the current valuation (9.7 times consensus 2023 EPS vs 12–13 times average) largely reflects the near-term challenges. While further share price volatility is possible, we maintain our positive long-term view.”

* Scotia Capital’s George Doumet to $196 from $200 with a “sector outperform” rating.

“We were expecting weakness in both the top line (higher inventory levels at dealers, softened consumer demand, and a milder winter) and margins in Q1,” said Mr. Doumet. “While results did come in weaker than expected, gross margin performance (excluding MSA accounting change) was healthy. SG&A came in elevated and is expected to remain high as CTC continues to invest in growth/efficiency initiatives.

“While there could be some risk to revisions (especially if the macro deteriorates), we believe this is reflected in the shares- with CTC trading at 9.2 times p/e on 2024 estimates (similar to 2008/09 levels).”

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Desjardins Securities’ analyst Benoit Poirier reiterated his bullish stance on WSP Global Inc. (WSP-T) following “impressive” first-quarter results that displayed positive organic growth across all regions and seeing the negative reaction from investors as a “buying opportunity.”

While the Montreal-based firm reported “strong” first-quarter results that topped earnings expectations, its shares slid 3.1 per cent on Thursday over concerns about the reaffirmation of its 2023 guidance, which Mr. Poirier acknowledged “could be viewed as a negative.”

“We are pleased with the reiteration of the guidance and believe that investors should not view the lack of upward revision following the strong 1Q as a negative because WSP has historically not raised its guidance in 1Q,” he said. “Also, given WSP’s success with its previous outlooks, we are confident in management’s ability to potentially raise and meet its targets for 2023. On the call, management restated that many margin expansion levers are underutilized at the moment (more upside still possible); we believe management’s target of a 20-per-cent adjusted EBITDA margin in the long term is achievable given the many levers at its disposal (eg reputation, size, barriers to entry, pricing power, client selection, project mix, workforce utilization, real estate divestures, ERP improvements and software efficiency improvements), and its disciplined and proven ability to generate shareholder value. For 2023, we now forecast net revenue of $10.6-billion with an adjusted EBITDA margin of 17.5 per cent.”

Raising his earnings expectations for 2023 and 2024, Mr. Poirier moved his target for WSP shares to $203 from $201 with a “buy” recommendation. The average is $193.15.

“WSP is our preferred name in engineering & construction for many reasons: (1) a disciplined approach toward M&A and ability to take advantage of opportunities that could arise from a potential slowdown; (2) solid organic growth opportunities; (3) push toward a 20-per-cent EBITDA margin in the long term; and (4) ESG tailwinds,” he said.

Elsewhere, others making changes include:

* BMO’s Devin Dodge to $200 from $196 with an “outperform” rating.

“We believe WSP is an attractive option for investors in the current environment,” said Mr. Dodge. “WSP is well-positioned to benefit from multiple secular growth drivers, demand should be resilient even if economic conditions soften, management is targeting significant margin expansion over the intermediate-term and M&A activity is expected to be elevated in a market that likely favours strategic acquirers.”

* Stifel’s Ian Gillies to $183 from $181 with a “buy” rating.

“WSP reported a very healthy 1Q23 with EBITDA beating consensus by 3.1 per cent and EPS beating by 4.7 per cent,” he said. “Moreover, the company reiterated its guidance, and we expect it to be revised higher at 2Q23E or 3Q23E. We are not entirely surprised by the pullback given the stock’s strength into 1Q23 results, and the pullback provides a more constructive entry point.”

* National Bank Financial’s Maxim Sytchev to $200 from $195 with an “outperform” rating.

“Management’s confidence in government spending, materially reduced exposure to CRE work (replaced with healthcare, mission critical work), robust transport market (globally) and enhancements / benefits on the back of ERP implementation are all structurally constructive for the core business to compound and potentially achieve 20-per-cent EBITDA margin ambition (over unspecified time). M&A could be opportunistic as is typically the case with an added twist of perhaps PE firms looking for exits as the rest of their portfolio are coming under duress in a high interest rate environment. We therefore see no reason to rethink our ‘long engineering’ thematic.”

* RBC’s Sabahat Khan to $199 from $197 with an “outperform” rating.

“Commentary on the earnings call indicated that demand trends across the company’s markets remain supportive, and we expect an uptick in backlog growth in Q2. Looking ahead, we reaffirm our positive view on WSP, which reflects the company’s long and consistent track record, favorable top-line and margin outlook, and potential for further M&A (which would drive upside to our estimates),” he said.

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In other analyst actions:

* “Moving to the sidelines amidst strategy change and rising risks,” BMO’s Deepak Kaushal lowered Converge Technology Solutions Corp. (CTS-T) to “market perform” from “outperform” and lowered his target to $4.50 from $7.50. The average is $5.79.

“Despite potential upside from current low valuation and accretive share buybacks, we downgrade to Market Perform following conclusion of the strategic review and the strategy change focusing on organic growth vs M&A,” he said. “Given macro-uncertainty and higher investments, we believe it will take time to demonstrate consistent attractive organic growth and margin expansion, and re-expand valuation multiple. Consequently, we cut our forecasts and target multiple.”

* RBC Dominion Securities analyst Drew McReynolds upgraded Illumin (ILLM-T), formerly AcuityAds Inc., to “outperform” from “sector perform” with an unchanged $3.50 target, while TD Securities’ Vince Valentini cut his target to $2.50 from $3 with a “hold” rating. The average is $3.45.

“AcuityAds stock has not been immune to industry headwinds that have included concern around the potential impacts of evolving privacy controls, a choppy digital ad market, macro uncertainty, greater competitive intensity within ad tech and higher bond yields,” said Mr. McReynolds. “At 0.6 times FTM [forward 12-month] EV/net revenue (versus an average of 1.9 times for select DSP and SSP peers excluding The Trade Desk), we believe the stock is more fully pricing in these headwinds. With improving illumin execution and visibility along with a recalibration of expectations, we believe the continued pullback in the stock represents both an attractive and timely entry point with a focus on potential catalysts in H2/23 and 2024.”

* Needham’s Scott Berg downgraded Absolute Software Corp. (ABST-Q, ABST-T) to “hold” from “buy” previously.

* TD Securities’ Tim James cut his AirBoss of America Corp. (BOS-T) target to $10.50 from $11.50, maintaining a “speculative buy” rating. The average is $12.58.

* CIBC’s Krista Friesen hiked her Boyd Group Services Inc. (BYD-T) target to $247 from $221 with a “neutral” rating. The average is $256.92

* RBC’s Geoffrey Kwan raised his target for Brookfield Corp. (BN-N, BN-T) to US$51, above the US$49.82 average, from US$50 with an “outperform” rating, while BMO’s Sohrab Movahedi cut his target to US$45 from US$49 with an “outperform” rating.

“Despite continued positive momentum fundraising + a strong investment track record, investor focus instead seems solely on BN’s Real Estate investments,” said Mr. Kwan. “We recognize investors believe BN’s Real Estate investments are worth less than BN’s IFRS fair value. That said, we don’t think it’s worth zero either, but that is what the share price is telling us. BN’s share price implies: (1) ZERO value for Real Estate; and (2) a 52-per-cent discount for BN’s non-Real Estate private investments (e.g., Insurance). While it’s unclear when sentiment towards Real Estate improves, we see the share price as attractive (37-per-cent discount to NAV which includes our 30-per-cent haircut applied to BN’s Real Estate valuation) and that there are potential catalysts (e.g., additional positive fundraising news, potential monetizations, substantial issuer bid, etc.).”

* RBC’s Luke Davis lowered his Cardinal Energy Ltd. (CJ-T) target to $8.50 from $9, reiterating a “sector perform” rating, while Stifel’s Cody Wong cut his target to $9.75 from $11 with a “buy” rating. The average is $9.29.

“Cardinal’s Q1/23 results were generally in-line with the company continuing to focus on debt repayment and asset optimization. Management highlighted strong Clearwater results at Nipisi, which continues to perform above expectations. Looking forward, the company plans to build on success in the Clearwater and Rex formations with the team working to expand inventory,” said Mr. Davis.

* After a “solid” first-quarter beat, National Bank Financial’s Zachary Evershed raised his Cascades Inc. (CAS-T) target to $13 from $11 with a “sector perform” rating. Other changes include: Desjardins Securities’ Frederic Tremblay to $14 from $10.50 with a “hold” rating and Scotia’s Benoit Laprade to $15.50 from $12 with a “sector outperform” rating. The average is $11.33.

“With profitability improving in all three segments and greater clarity on the Bear Island ramp-up curve, our target moves to $13 (was $11) on higher estimates and an unchanged sum-of-parts valuation,” he said. “Given hard work remains ahead, and a history of volatile operating results, we elect to undershoot 2024 guidance and reiterate our Sector Perform rating.”

* PI Financial’s Ben Jekic raised his CCL Industries Inc. (CCL.B-T) target to $81 from $79 with a “buy” rating. Others making changes include: BMO’s Stephen MacLeod to $79 from $78 with an “outperform” rating and RBC’s Walter Spracklin to $75 from $71 with an “outperform” rating. The average is $75.50.

“Recall CCL’s positive share price reaction back with the Q4/22 report was mainly a function of the M&A commentary, as results were notably below,” said Mr. Spracklin. “This quarter, results were much better - and the stock’s share price performance Thursday (approximately up 5 per cent) is reflecting this. That said, we detected a more mixed view on the outlook and as a result, we believe the near-term price gains may moderate here. Nevertheless, from a longerterm perspective, we like the company’s product mix, geographic footprint and potential upside from M&A.”

* RBC’s Keith MacKey cut his target for CES Energy Solutions Corp. (CEU-T) to $3.50, below the $4.24 average, from $4 with an “outperform” rating, while Stifel’s Cole Pereira cut his target to $3.75 from $4 with a “buy” rating.

* ATB Capital Markets’ Chris Murray raised his Dexterra Group Inc. (DXT-T) target to $8.40 from $8.15 with an “outperform” rating. The average is $7.60.

* Scotia’s Kevin Krishnaratne trimmed his Docebo Inc. (DCBO-T) target to US$44 from US$49 with a “sector outperform” rating. Other changes include: National Bank’s Richard Tse to US$50 from US$60 with an “outperform” rating. ATB Capital Markets’ Martin Toner to $85 from $90 with an “outperform” rating, Stifel’s Suthan Sukumar to US$50 from US$60 with a “buy” rating and CIBC’s Stephanie Price to $68 from $69.50 with an “outperformer” rating. The average is $69.80.

“While the results were solid, FQ2 revenue guidance was shy of our and consensus estimates with the Company citing a slowing economic backdrop in enterprise from macro headwinds; consistent with increasingly more names across the group,” said Mr. Tse. “Even so, that guidance implies solid revenue growth of 23 per cent year-over-year at the midpoint with margins expanding by 70 bps quarter-over-quarter/ We’d also note Management reiterated it expects to exit FQ4′23 with Adj EBITDA margins in the low double digits. Bottom line, our investment thesis remains unchanged – we continue to like Docebo for its outsized organic growth (relative to peers) – market share gains, large (and expanding) recurring revenue base, and growing operating leverage with option value coming from potential M&A. That said, the softening economic backdrop is lowering valuations across tech and as such, we need to reflect that into our DCF assumptions (growth and discount rate) as well.”

* BMO’s Tom MacKinnon raised his Intact Financial Corp. (IFC-T) target to $225 from $220 with an “outperform” rating, while Raymond James’ Stephen Boland cut his target to $224 from $233 with an “outperform” rating. The average is $216.38.

* CIBC’s Krista Friesen moved her Linamar Corp. (LNR-T) target to $89, exceeding the $87.80 average, from $86 with an “outperformer” rating.

* RBC’s Darko Mihelic increased his Manulife Financial Corp. (MFC-T) target to $30 from $28 with a “sector perform” rating, while Scotia’s Meny Grauman trimmed his target to $32 from $34 with a “sector outperform” rating. The average is $29.20.

“MFC’s Q1/23 results came in line with our overall forecast, while our segment forecasts naturally had significant error being based on IFRS 4,” said Mr. Mihelic. “Caveat aside, Asia seemed ‘light’ and sales continue to look a little challenged for that segment. We model Asia for more sales into next year and beyond, though under IFRS 17 this is not as impactful as before. We think core investment results may also be a touch under long-term expectations this year as markets are volatile and credit losses are likely.”

* CIBC’s Mark Petrie raised his Maple Leaf Foods Inc. (MFI-T) target to $33, matching the average, from $32 with an “outperformer” rating.

* Raymond James’ Brad Sturges bumped his Minto Apartmemt REIT (MI.UN-T) target to $19 from $18.75 with an “outperform” rating. The average is $19.27.

* CIBC’s Cosmos Chiu raised his Osisko Gold Royalties Ltd. (OR-T) target to $28 from $27 with an “outperformer” rating. The average is $26.04.

* Raymond James’ Stephen Boland hiked his target for Pollard Banknote Ltd. (PBL-T) to $29, above the $28.50 average, from $24 with an “outperform” rating.

* Scotia’s Maher Yaghi raised his target for Quebecor Inc. (QBR.B-T) to $38 from $37 with a “sector perform” rating. Other changes include: RBC’s Drew McReynolds to $36 from $35 with a “sector perform” rating and CIBC’s Stephanie Price to $39 from $38 with an “outperformer” rating. The average is $37.54.

“Most of the questions on [Thursday’s] conference call, and for good reason, were related to the strategy and outlook regarding the Freedom business,” said Mr. Yaghi. “Management has been very methodical over the last few years in pursuing a profit first strategy while at the same time offering differentiated services in Quebec. The stakes for BCE, T and especially RCI are much higher now vs. 2010 when QBR entered the Quebec wireless market. Last week and this week, we saw a very public price war erupting in Ontario between Rogers and BCE (anyone recalls the couch wars?) but in this case the prize is not home phone but the bundle. Both companies have a cost advantage against QBR on the bundle, and they don’t seem to be afraid to use it... to the benefit of the consumer. Without regulatory intervention by the CRTC in the coming HSIA proceedings this fall, we think it will be hard for Quebecor to effectively compete within this pricing environment on the bundle while at the same time generate the strong margins that the company has been known to deliver.”

* CIBC’s Dean Wilkinson moved his RioCan REIT (REI.UN-T) target to $25.50 from $25, reaffirming an “outperformer” rating. The average is $25.11.

* Mr. Wilkinson cut his SmartCentres REIT (SRU.UN-T) target to $33.50 from $34 with an “outperformer” rating. The average is $30.38.

* TD Securities’ Derek Lessard bumped his Savaria Corp. (SIS-T) target to $21, below the $21.50 average, from $20 with a “buy” rating, while Scotia’s Michael Doumet bumped his target to $20.50 from $20 with a “sector outperform” rating.

“1Q EBITDA was 5per cent ahead of the Street, with sales strength (healthy demand, easing supply chains, higher prices, and execution of synergies) driving the beat,” said Mr. Doumet. “Patient Care EBITDA margins climbed more than 700bp – shedding light on the margin potential for the segment (i.e. 20 per cent), but were offset by softer Accessibility margins. Overall, we liked the quarter and believe it provides positive read-throughs (i.e. the unchanged 2023 EBITDA guide and the Norwegian auto divestiture implies 2-per-cent to 3-per-cent increase).

“SIS is viewed as a solid organic grower. Given the recent trends, we think margin story is as good. Supply chain bottlenecks, inflationary pressures, and lagging price increases pressured margins for 12 to18 months. Consolidated margins appear to be moving upward now. Demand weakness in housing and/or Europe did not materialize to the extent investors feared. Backlog remains firm (up 8 per cent quarter-over-quarter) and execution is solid. With margins in Patient Care outperforming and Accessibility likely to rise through 2023, we believe the roadmap/evidence to management’s 20-per-cent EBITDA margin target by 2025 will become clearer through the balance of 2023.”

* CIBC’s Hamir Patel increased his target for Stella-Jones Inc. (SJ-T) to $69, above the $67.57 average, from $62 with an “outperformer” rating.

* RBC’s Robert Kwan cut his targets for Tidewater Midstream and Infrastructure Ltd. (TWM-T) to $1.25 from $1.50 and Tidewater Renewables Ltd. (LCFS-T) to $15 from $18 with “outperform” recommendations for both. The averages are $1.32 and $15.93, respectively.

* Raymond James’ Steven Li cut his VerticalScope Holdings Inc. (FORA-T) target to $7 from $10.50 with an “outperform” rating. The average is $10.36.

* CIBC’s Allison Carson lowered his Victoria Gold Corp. (VGCX-T) target to $11 from $11.50 with a “neutral” rating. The average is $16.31.

* National Bank’s Adam Shine, currently the lone analyst covering Yellow Pages Ltd. (Y-T), trimmed his target to $14 from $15.50 with a “sector perform” rating.