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

With its shares dropping by 5.8 per cent on Friday in response to the release of weaker-than-expected fourth-quarter financial results, iA Capital Markets analyst Elias Foscolos said Badger Daylighting Ltd.’s (BAD-T) valuation now sits more in line with his projection.

Though he remains “cautious on the long-term growth story,” Mr. Foscolos raised his rating for the Calgary-based company to “hold” from “sell.”

“BAD’s quarterly revenue of $131-million was below estimates and 20 per cent below the comparable quarter last year,” he said. “Margins were weaker than expected, which we believe is largely attributable to BAD pre-emptively staffing up during the quarter in anticipation of activity levels increasing into spring and the summer construction season. This led to lower-than-expected Adj. EBITDA of $22-million, which included minimal CEWS. While BAD noted that 2021 started off slow impacted by extreme winter weather and extended holiday shutdowns at job sites, the Company is encouraged by a pickup in bidding activity as the quarter has progressed,”

Mr. Foscolos reduced his 2021 forecast for Badger based on revised assumptions for revenue per truck and average fleet count as well as assumed margins.

“We are expecting activity to remain suppressed in Q1/21,” he said. “Due to uncontrollable events in the quarter combined with regular seasonal weakness in Q1, we are moving our valuation forward to exclude the quarter, instead choosing to capture the four quarters ending Q1/22.”

He kept a $39 target for Badger shares. The average on the Street is $42.56, according to Refinitiv data.

“Although we are lowering our 2021 forecasts based on commentary, we are opting to roll our valuation forward by one quarter to avoid pricing in too much short-term weakness as we believe the market will be looking beyond Q1 results,” he said. “As such, we are maintaining our $39.00 target price. However, by Q2/21, Badger will have to perform.”

Elsewhere, BMO Nesbitt Burns analyst Jonathan Lamers increased his target to $46 from $43 with an “outperform” rating.


In a separate research report released Monday reviewing fourth-quarter earnings season for TSX-listed energy infrastructure companies, Mr. Foscolos downgraded a trio of stocks based on recent share price performance.

“Heading into Q4/20 earnings, our coverage universe had begun to rebound as commodity prices started to reach pre-pandemic levels,” he said. “Overall, we classify the Q4 results reported over the last month as mostly in line. Post reporting, our coverage for the most part mirrored the TSX apart from a few company-specific events causing those stocks to diverge from their peers.

“Thus far in 2021, with vaccines continuing to be distributed internationally, investors are clearly factoring in an economic recovery in the near future barring any setbacks. As a result of the anticipated economic recovery, interest rates have seen a recent spike with fiscal and monetary policies used throughout the pandemic leading to increasing inflation risk, but markets have advanced. WTI closed last week at $65.61, slightly down from last week.”

Mr. Foscolos lowered both Pembina Pipeline Corp. (PPL-T) and Gibson Energy Inc. (GEI-T) to “hold” recommendations from “buy” previously.

His target for Pembina shares rose to $39 from $37. The average on the Street is $38.33.

“Pipelines posted mainly in line results with PPL being the only stock that outperformed the TSX post reporting,” he said.

The analyst maintained a $23.50 target for Gibson, which falls just short of the $24.06 average.

He downgraded AltaGas Ltd. (ALA-T) to “buy” from “strong buy” with a $24.50 target, up from $24 and above the $22.59 average.

“Overall, this [midstream] sector had differing returns compared with the TSX during Q4/20, with IPL and GEI posting negative returns while KEY and ALA outperformed,” said Mr. Foscolos. “Q4/20 financial results were overall in line with consensus with GEI posting a slight miss. YTD, this sector has performed very strongly with all stocks outperforming the TSX.”

Mr. Foscolos also made these target adjustments:

  • Enbridge Inc. (ENB-T, “buy”) to $54 from $52. Average: $51.39.
  • TC Energy Corp. (TRP-T, “strong buy”) to $72 from $70. Average: $68.50.
  • Keyera Corp. (KEY-T, “buy”) to $29 from $28. Average: $28.22.
  • Parkland Corp. (PKI-T, “buy”) to $49 from $48. Average: $48.54.

“Q4/20 results in our Energy Infrastructure coverage universe were generally in line with expectations with the occasional variation,” said Mr. Foscolos. “Midstream stocks had bifurcated reactions with GEI and IPL outperforming the TSX post reporting, but ALA and KEY performed in line. KEY’s underperformance post reporting Q4 results is mathematically correct but misleading as one of its peer stocks, IPL, surged post the announcement of the BIP Offer. Pipelines posted mainly in line results with PPL being the only stock that outperformed the TSX post reporting. Utilities generally performed in line with the TSX post reporting. CU was the worst performer post-results as the stock retraced some of its gains after having a strong start to the year. SPB has continued to outperform in Fuels Distribution, with results coming in line with estimates for Q4.”


A resurgence in commodity prices has placed Crew Energy Inc. (CR-T) “in position to capitalize on asset base potential,” according to Canaccord Genuity analyst Anthony Petrucci

“We believe Crew is in position to be one of the biggest beneficiaries of the rebound in commodity prices,” he said. “In our view, Crew holds one of the more enviable Montney land positions in BC, with over 413 sections in perfect position to capitalize on the LNG Canada project. With partners in the LNG facility short required gas for the project, we believe Crew is likely to attract many deep pocketed suitors/partners over the next two years.

“Following the crash in commodity prices early in 2020, Crew’s debt level put the company in a challenging position as reflected in the share price performance through H1/20. At current prices, however, Crew has signaled a return to growth through an aggressive capital program over the next two years. The expected increase in production levels combined with the improved outlook in commodity prices has Crew within reach of reasonable relative debt levels, in our view.”

After its fourth-quarter results topped his expectations, driven by higher-than-expected realized, and seeing its 2022 outlook as “attractive,” Mr. Petrucci raised his rating for Crew shares to “speculative buy” from “hold” with a $2 target, rising from 70 cents. The average on the Street is $1.23.

Elsewhere, Desjardins Securities’ Chris MacCulloch increased his target to $1.25 from 75 cents with a “hold” rating.

“We are increasing our target on Crew ... following encouraging initial progress of the company’s ambitious two-year growth plan, as demonstrated by stronger than originally expected 4Q20 volumes and promising early results from recently drilled wells,” he said. “Although we remain cautious on the story in the face of elevated debt levels, strengthening oil prices have helped shore up balance sheet metrics and the company is now poised to begin generating meaningful free cash flow next year.”


After its quarterly results blew past expectations, a group of equity analysts on the Street raised their targets for shares of Intertape Polymer Group Inc. (ITP-T).

“Intertape reported Q4/20 results that were better than expected. Increasing demand for e-commerce packaging solutions, combined with the Company’s years of investment in capacity expansion and low-cost manufacturing, all came together in Q3 and Q4 to deliver impressive results and a positive outlook,” said iA Capital Markets analyst Neil Linsdell.

He raised his target to $35 from $26, keeping a “buy” rating. The average is $32.31.

Others making changes include:

* RBC Dominion Securities analyst Walter Spracklin to $32 from $25 with an “outperform” rating.

* CIBC World Markets’ Scott Fromson to $35.50 from $30 with an “outperformer” rating.

* National Bank Financial’s Zachary Evershed to $34 from $30 with an “outperform” rating.

* BMO Nesbitt Burns to $35 from $29 with an “outperform” rating.


In a research note titled Many Hurdles To Jump – And They Can’t Miss Any Of Them, Citi analyst Stephen Trent said Bombardier Inc.’s (BBD.B-T) 2025 targets “seem ambitious.”

“On a long-term basis, customer recognition of the greater operational and cost efficiencies, associated with video calls vs. business travel seem to point to a slower recovery for high-end travel, vs. the recovery in broad economic activity,” he said. “Still, even though this company has many hurdles to jump in attaining its 2025 targets, we give ... Bombardier the benefit of the doubt.”

Mr. Trent thinks Bombardier’s focus on the growth of its after-market services segment is logical, noting it brings higher margins than jet manufacturing.

“Although it might not be too big a stretch to assume that Bombardier can meet its margin targets in this area, revenue targets in this segment appear to at least somewhat depend on a strong recovery in overall business jet activity in the coming years,” he said.

“Bombardier business jet manufacturing margins should improve, as production levels gradually recover, the company cuts costs and management moves up the ultra-long-range Global 7500 business jet learning curve. However, the company’s 2025 targets, including an adjusted EBITDA margin of 20 per cent, seem like a stretch, considering Bombardier’s recent market share losses and at least some trade-in activity appearing to accompany its jet deliveries.”

Although his 2021 and 2022 financial projections “decline materially,” he raised his target to 73 cents from 57 cents with a “neutral” rating. The average is currently 69 cents.

“On the back of successive, significant corporate re-shufflings and production adjustments, the company’s business model is more simplified – but with lower EBITDA generation and a debt load that still remains high in absolute terms. Going forwards, we believe investors are likely to wait and see whether a relatively new executive team can improve the company’s free cash flow generation,” said Mr. Trent.


“Surprise” execution issues cloud the outlook for Xebec Adsorption Inc. (XBC-T), said Canaccord Genuity’s Yuri Lynk, leading him to lower his rating to “hold” from “speculative buy.”

On Friday, the Montreal-based clean energy company reduced his 2020 revenue guidance to $57-million from $70-80-million, citing “extraordinary items in its Cleantech business segment and due to the impact of the Covid-19 pandemic.”

“The company surprised us by disclosing major losses at its renewable natural gas (RNG) business,” he said. “Despite the shares cratering 31 per cent in reaction, we don’t see a compelling risk/reward. Firstly, it’s highly likely, in our view, more writedowns are taken on the 10-12 unprofitable RNG projects (it’s very hard to capture all unknown costs on the first pass). Secondly, management expects flat RNG revenue in 2021 while the rest of the industry posts double-digit growth, auguring for a lower valuation. Thirdly, 2020 featured multiple guidance reductions from management, and it will now take time to reestablish creditability with investors, in our view. The company’s saving grace is $100-million of net cash.”

After cutting his 2021 and 2022 financial projections, Mr. Lynk dropped his target for Xebec shares to $6 from $10. The average is $8.66.

Elsewhere, Raymond James’ David Quezada lowered the stock to “outperform” from “strong buy” with a $7.50 target, down from $14.50.

“While the news is clearly disappointing, the forward-looking impact is mitigated by increased diversification in the business from recent acquisitions. We believe the share price reaction is overdone,” he said.

TD Securities analyst Aaron MacNeil cut his target to $10 from $17.50 with a “buy” rating, while National Bank Financial’s Rupert Merer lowered his target to $6 from $7 with a “sector perform” recommendation.

In a separate report, Mr. Lynk raised his target for CanWel Building Materials Group Ltd. (CWX-T) to $9 from $7.50 with a “hold” rating after a “monster” quarter, while Raymond James’ Steve Hansen increased his target to $10.50 from $9 with an “outperform” rating. The average is $9.64.

“Results surprised to the upside as CanWel continues to benefit from the booming housing market, strong renovation activity, and record building materials prices,” Mr. Lynk said. “Furthermore, management is executing extremely well, as evidenced by the gross margin improvements observed in 2020. Looking ahead, we expect volumes to increase in 2021 on the back of strong housing market fundamentals. In addition, we believe solid wood prices will remain elevated through H1/2021. However, we believe these positives are largely reflected in CanWel’s share price and remain neutral.”


A pair of equity analysts downgraded Spark Power Group Inc. (SPG-T) in the wake of last week’s disclosure of a classification error related to its treatment of its non-revolving term loan and revolving acquisition line, totaling approximately $38.3 million and $24.4 million, respectively.

Desjardins Securities analyst David Newman lowered the stock to “hold” from “buy” with a $1.75 target, down from $2.50 and below the $3 average.

“We are moving to a Hold–Above-average Risk (from Buy–Above-average Risk) on SPG given: (1) a balance sheet classification error (debt of $62.7-million categorized as longterm liabilities, although due within a year; subsequently extended to June 30, 2022 by BMO) and refiling of its 3Q20 statements; and (2) a requirement to include a note in the restated financials that there is a level of uncertainty that may cast doubt on SPG’s ability to continue as a going concern,” he said.

Raymond James analyst David Quezada dropped his rating by two levels to “market perform” from “strong buy’” with a $2.25 target, down from $2.75.

“We continue to believe that there is much to like about Spark Power including the resilient performance the company displayed during the pandemic and solid forecasted organic growth with an 10-per-cent year-over-year estimated two-year EBITDA CAGR [compound annual growth rate],” said Mr. Quezada. “Further, we see continued momentum in the company’s renewable O&M business and longer term upside in the Bullfrog Power Sustainability consulting segment. Despite these solid underlying fundamentals, the fact remains that a long-term funding solution will remain an overhang until it is resolved. Further, with the termination of the $20-million convertible debenture financing, we believe the potential for Spark to pursue its M&A roll up strategy is limited in the near term.”


In other analyst actions:

* iA Capital Markets analyst Elias Foscolos raised his CES Energy Solutions Corp. (CEU-T) target to $2.60 from $1.90 with a “buy” rating. The average is $2.33.

“Despite the neutral reaction on Friday, CEU’s Q4/20 beat speaks positively to the Company’s outlook. Based on information on Friday’s call, we believe that CEU is continuing to sequentially gain market share in the US, which contributes to our increased estimates for 2021. In the context of improving industry conditions, we believe CEU’s fundamentals support continued delivery of excess free cash flow to shareholders through either share or bond repurchases,” he said.

* Canaccord Genuity analyst Robert Young cut his target for Docebo Inc. (DCBO-Q, DCBO-T) to US$65 from US$72 with a “buy” rating. The average is US$73.60.

“Docebo reported a solid Q4 with results ahead of our estimates, capping a strong 2020 and underscoring strong enterprise demand for its platform,” he said. “ARR [annual recurring revenue] grew organically by 57 per cent year-over-year to $74-million, marking the sixth straight quarter of 50 per cent-plus ARR growth while the company reported 154 net new logo wins, which is a high watermark. An increasingly blue chip roster saw the addition of NBC Universal Media and Ubisoft. Underscoring investments in support, Docebo reported a year-over-year improvement in Net Dollar Retention from 105 per cent to 108 per cent while highlighting expansions with Cisco, Heart & Stroke and an unnamed large QSR which falls in Q1. In our view, Docebo is firing on all cylinders while laying the groundwork to gain market share with rapidly expanding sales and support, a busy product roadmap in 2021 and OEM efforts. The recent US IPO bolstered the balance sheet to support growth and acquisitions.”

* * BMO Nesbitt Burns analyst Tom MacKinnon raised his Power Corporation of Canada (POW-T) target to $34 from $33 with a “market perform” rating. The current average is $34.86.

* Scotia Capital analyst Konark Gupta trimmed his Transat AT Inc. (TRZ-T) target to $5.50 from $6, maintaining a “sector perform” recommendation. The average is $5.90.

* Scotia’s Mario Saric raised his Minto Apartment REIT (MI.UN-T) target to $22.75 from $22 with a “sector perform” rating, while CIBC World Markets’ Dean Wilkinson increased his target to $23 from $22 with an “outperformer” rating. RBC Dominion Securities’ Matt Logan to $25 from $24 with an “outperform” recommendation and National Bank Financial’s Matt Kornack raised his target to $22 from $21 with a “sector perform” rating. The average is currently $23.33.

* Scotia’s Paul Steep increased his target for shares of Altus Group Ltd. (AIF-T) by a loonie to $57 with a “sector perform” rating. The average is $60.39.

* CIBC World Markets analyst Mark Jarvi cut his Northland Power Inc. (NPI-T) to $47 from $51 with a “neutral” rating. The average is $52.79.

* Mr. Jarvi also reduced his target for Innergex Renewable Energy Inc. (INE-T) to $25 from $27 with a “neutral” recommendation and Boralex Inc. (BLX-T) to $47 from $48 with an “outperformer” rating. The averages are $28.10 and $53.20, respectively.

* CIBC’s Stephanie Price reduced her target for Enghouse Systems Ltd. (ENGH-T) to $80 from $84 with an “outperformer” rating, while Scotia Capital’s Paul Steep lowered his target to $69 from $71 with a “sector perform” rating. TD Securities’s Danial Chan dropped his target to $70 from $83 with a “buy” rating. The average is $75.40.

* CIBC’s Jacob Bout raised his Cervus Equipment Corp. (CERV-T) to $16.50 from $14 with a “neutral” rating while TD Securities’ Cheryilyn Radbourne raised her target to $19.50 from $17.50 with a “buy” recommendation. The average is $16.50.

* CIBC’s Hamir Patel slashed his Ballard Power Systems Inc. (BLDP-Q, BLDP-T) target to US$31 from US$38 with a “neutral” recommendation. The average is US$34.

* National Bank analyst Maxim Sytchev increased his IBI Group Inc. (IBG-T) target to $12.50 from $12 with an “outperform” rating, while TD Securities’ Michael Tupholme raised his target to $12 from $10 with a “buy” recommendation. The average is $11.21.

* ATB Capital Markets analyst William Lacey raised his Imperial Oil Ltd. (IMO-T) target to $32 from $30.75 with a “sector perform” rating. The average is $29.33.

* ATB’s Chris Murray increased his PFB Corp. (PFB-T) to $31 from $26, keeping an “outperform” rating. The average is $29.25.

* National Bank Financial analyst Tal Woolley raised his American Hotel Income Properties REIT (HOT.UN-T) to $4.25 from $3.50 with a “sector perform” rating. The average is $2.98.

* National Bank’s Zachary Evershed raised his Hardwoods Distribution Inc. (HDI-T) target to $40 from $39 with an “outperform” rating, while Canaccord Genuity’s Yuri Lynk raised his target to $37 from $33 with a “hold” rating. The average is $35.60.

* JP Morgan analyst Tyler Langton raised his Wheaton Precious Metals Corp. (WPM-T) target to $75 from $73 with an “overweight” rating, while Raymond James’ Brian MacArthur lowered his target to US$61 from US$64 with an “outperform” recommendation. The current average is $77.24.

* Mr. Langton increased his Franco-Nevada Corp. (FNV-T) target to $205 from $198 with a “neutral” rating. The average is $202.41.

* Canaccord Genuity analyst John Bereznicki raised his target for shares of Mullen Group Ltd. (MTL-T) to $13.50 from $11.50 with a “hold” rating, while BMO Nesbitt Burns’ John Gibson increased his target to $15 from $13 with an “outperform” rating. The average is $12.71.

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