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

While he viewed first-quarter earnings season for Canadian banks as “great,” National Bank Financial analyst Gabriel Dechaine is now taking “a more cautious stance” in the near term, reducing his financial expectations for the sector.

“Every bank beat expectations (both on EPS and PTPP), Capital Markets segments smashed the ‘tough comps’ concerns and organic growth trends continued,” he said. “Nonetheless, we are reducing our 2022 (Q2/22-Q4/22) & 2023 estimates by approximately 5 per cent and 2 per cent, respectively. Some revised assumptions may be difficult to rationalize (e.g., lower rate hike expectations). Our overriding goal, though, is to simply make our estimates more conservative.”

In a research report released Monday, Mr. Dechaine downgraded his recommendations for both Bank of Montreal (BMO-T) and Toronto-Dominion Bank (TD-T) to “sector perform” from “outperform” previously, seeing them as the most rate sensitive in the group and having a “variety of specific earnings headwinds” that have been reflected in his revised estimates.”

Canadian banks see growth in lending after long pandemic slump

“Clearly, the world has changed in a very short timeframe. And it could easily revert to a more positive backdrop in short order,” he said. “However, the balance of factors in the near-term are more negative than positive, in our view. The sector is trading at 11 times our revised 2023 EPS, a level which we do not view as opportunistic, considering downside risks facing the overall economy (and, hence, the banks). We have also entered what has historically been the weakest performance period for banks stocks, with the group underperforming the S&P/TSX in 5 of the past 6 years (by an average of 120bps). In turn, we believe it makes sense to trim bank positions.”

For TD, Mr. Dechaine expects its acquisition of US$13.4-billion takeover of Memphis-based First Horizon Corp. to close in the second quarter of 2023, later than the first-quarter timeline set out, noting: “The difference reflects regulatory approval uncertainty and has the effect of reducing our 2023 EPS by the estimated contribution of the acquisition.”

He also emphasized the impact of changes to its overdraft fee lineup, estimated to have a negative revenue impact of US$250-million, adding: “We note this adjustment represents roughly a third of our 2023 estimate revision. Although overdraft fees represent only about 1 per cent of TD’s consolidated revenue, the earnings impact is larger since there are no operating costs attached to them (at least in a material way).”

Mr. Dechaine’s target for TD shares slid to $100 from $110. The average target on the Street is $110.31, according to Refinitiv data.

Similarly, Mr. Dechaine is pushing back his expecting closing period for BMO’s $20.9-billion deal for San Francisco-based Bank of the West to the second quarter of 2023, citing regulatory approval uncertainty and leading to reduced earnings projections.

He also expects reduced gains from securities, particularly on Private Equity holdings, noting: “In our view, favourable market conditions that have boosted these gains (i.e., narrow credit spreads, frothy equity markets) have turned. As a result, we are adjusting our other income forecasts lower, bringing our level of securities gains forecasts closer to pre-COVID levels.”

Mr. Dechaine’s target for BMO shares slid to $151 from $163. The average is $165.48.

Mr. Dechaine also lowered his target for Bank of Nova Scotia (BNS-T) by $1 to $90 with a “sector perform” rating (unchanged). The average is $98.07.

He maintained his ratings and targets for these stocks:

* Canadian Imperial Bank of Commerce (CM-T, “outperform”) at $167. Average: $174.92.

* Royal Bank of Canada (RY-T, “outperform”) at $147. Average: $151.22.

* Canadian Western Bank (CWB-T, “sector perform”) at $44. Average: $44.13.

* Laurentian Bank of Canada (LB-T, “sector perform”) at $49. Average: $48.09.

Elsewhere, Scotia Capital’s Meny Grauman thinks “order was restored to the universe in Q1.”

“Every bank we cover reported strong (and better than expected) financial results,” he said in a research report. “Yes, trading helped drive these beats, but that is not the whole story as we saw broad-based strength across a number of other key revenue lines along with moderate expense growth despite the inflationary environment. Beyond the numbers themselves, Management guidance remains very constructive despite tragic geopolitical developments. The most recent U.S. bank earnings season was weighed down by elevated expense guidance, but not in Canada, where banks continued to guide to modest year-over-year expense growth and positive operating leverage. Although dividends remained unchanged as expected after across-the-board hikes the previous quarter, capital deployment was top of mind as TD announced its US$13.4-billion acquisition of First Horizon. This follows BMO’s announced acquisition of Bank of the West for US$16.3-billion, and for us highlights the fact that despite the impressive domestic growth that we are now seeing across the group, most of the banks we cover continue to bet that future growth will increasingly be found outside of Canada.”

Maintaining his targets and recommendations for banks in his coverage universe, he added: “We leave Q1 reporting season with BMO back on top of our pecking order followed by CIBC, RY, and then NA among the large Canadian banks. We also maintain Sector Outperform ratings on EQB and CWB. Our Sector Perform names remain TD and LB. Although TD has underperformed the peer group by over 800 bps through reporting season, we believe that this bank’s premium to the group can continue to contract given its lagging loan growth on both sides of the border, concerns about integration risk at First Horizon, and moderating expectations for rate hikes.”

Mr. Grauman’s stocks with “sector outperform” ratings are: Bank of Montreal ($169 target); Canadian Imperial Bank of Commerce ($184), Canadian Western Bank ($48) and Equitable Group Inc. (EQB-T, $103), National Bank of Canada ($119) and Royal Bank of Canada ($163). He has “sector perform” rating for: Laurentian Bank of Canada ($50) and Toronto-Dominion Bank ($116).


Even though Sleep Country Canada Holdings Inc. (ZZZ-T) blew past the Street’s expectations for its fourth-quarter 2021 financial results, a group of equity analysts reduced their forecast and target prices for the retailer on Monday, expressing concerns about its current valuation and an uncertain retail climate.

“We see a risk that rising inflation, interest rates and gasoline prices hamper discretionary spending and mattress sales. However, in our view, the current valuation at 9 times forward earnings, 5 multiple points lower than ZZZ’s historical average, adequately reflects an uncertain macro environment and present an appealing entry point for long-term investors,” said Stifel analyst Martin Landry.

Sleep Country shares jumped 5.4 per cent on Friday after reporting revenue of $271-million, up from $249-million during the same period a year ago and above the consensus forecast of $250-million. Adjusted earnings per share of 83 cents rose year-over-year from 74 cents and also topped the Street’s projection of 68 cents.

“Over a two-year period, ZZZ’s Q4/21 EPS almost doubled, an impressive performance which is the result of market share gains, fixed cost leverage, strategic partnerships and clever acquisitions,” said Mr. Landry.

However, he warned Sleep Country enters 2022 facing “difficult” year-over-year comps, noting: “The company generated record volume growth in 2021, some of which may have been pulled forward as Canadians reallocated their travel budgets to home improvement. In addition, the macro-economic environment could create some headwinds with high inflation and increasing interest rates potentially eroding Canadians’ discretionary income which could impact mattress sales. Management indicated that store traffic in recent weeks has been slower due to the Russia/Ukraine conflict and stock market weakness negatively impacting consumer sentiment.”

“We have reduced our sales growth assumption by 270 basis points to 8.8 per cent for 2022 as we believe that rising inflation may curb discretionary spending and mattress sales. We have increased our gross margin assumption by 110 bps to reflect recent trends. We are also assuming a share buyback of $50-million, vs $20-million previously. The two latter positives offset the lower revenue and keep our EPS unchanged.”

Keeping a “buy” rating for Sleep Country shares, Mr. Landry trimmed his target to $46 from $49. The average on the Street is $40.86.

“Except for the market correction in March 2020, ZZZ’s forward P/E of 9 times is reaching lows not seen since going public in 2015. Investors have recently been rotating out of consumer discretionary companies with ZZZ included in this rotation. In our view, the current valuation represent an appealing entry point for long-term investors,” he said.

Others making changes include:

* National Bank Financial’s Vishal Shreedhar to $41 from $46 with a “sector perform” rating.

“The price target decrease largely reflects lower valuation multiple (increased risks associated with heightened inflation, cyclical product mix, and increasingly uncertain backdrop,” he said.

* TD Securities’ Meaghen Annett to $35 from $38 with a “hold” rating.

* BMO’s Stephen MacLeod to $39 from $45 with an “outperform” rating.

* CIBC’s John Zamparo to $39 from $47 with an “outperformer” rating.


Softchoice Corp. (STFC-T) appears “increasingly attractive and undervalued relative to peers,” said ATB Capital Markets analyst Martin Toner, seeing “the benefits of growth, operating leverage and Project Monarch roll into [next 12-month] EBITDA estimates.”

On Friday, shares of the Toronto-based software-focused IT solutions provider jumped 5.6 per cent with the release of better-than-anticipated fourth-quarter results and the announcement of a normal course issuer bid.

“Softchoice continues to execute well, and remains on track to reach the 2022 goals outlined during its IPO,” said Mr. Toner. “The Company continues to benefit from the cyclical tailwind of robust spending on IT services and the secular tailwind of the migration to the cloud. During COVID-19, many customers paused their spending, given the uncertainty, driving a decline in revenue for the Company and the industry in 2020. A component of 2021 growth was a cyclical recovery from those levels, and we would expect that results in 2022 continue to benefit, albeit to a diminishing degree.

“[Friday’s] results and commentary gave us increased confidence in the longterm secular growth from the migration to the cloud. Investments in the technical capabilities to deploy the Google Cloud Platform has improved Softchoice’s capabilities to offer a wholistic offering for public cloud migration, and Softchoice can now offer a complete offering, regardless of which public cloud provider is best for the client. This vendor-agnostic position is core to the Company’s value proposition. Software & Cloud continues to lead the Company’s growth, and at 60.0 per cent of gross profit in Q4/21, could drive double-digit growth for the Company overall, by growing close to 20.0 per cent, a reasonable estimate based on the overall growth of public Clouds. As Software & Cloud becomes a larger part of the Company, its rapid growth pushes the Company’s overall growth higher. Lagging hardware revenues and gross profit did not hurt the other segments, which makes sense given hardware’s lack of importance to Cloud deployments.”

Seeing it “revving the cash flow machine, Mr. Toner raised his target for Softchoice shares to $37 from $35, reiterating an “outperform” recommendation. The average is $33.09.

“Softchoice’s margins are in line with peers, but its revenue growth is higher. With the recent decrease in the stock price, Softchoice’s valuation is lower than peers on an EV/EBITDA basis, when comparing fundamental factors like the growth rate, the Company’s cash flow generation, and the strength of its competitive position. In our estimates, we give Softchoice credit for the secular tailwinds and margin improvement stemming from improved pricing and sales force efficiencies, but we remain conservative due to the Company’s limited history as a public company,” he said.

Elsewhere, calling the results “fairly robust” and exhibiting growth across all of its segments. Scotia’s Divya Goyal upgraded Softchoice to “sector outperform” from “sector perform” with a $32 target, up from $30.

“Overall, we are highly satisfied with the company’s financial performance, management’s detailed business overview and the company’s continued focus on creating additional shareholder value,” she said. “We continue to believe that Softchoice has a strong growth potential accentuated by a solid management team.

Other analysts making target adjustments include:

* TD Securities’ David Kwan to $34 from $37 with a “buy” rating.

“The reduction in our target multiple is due to a decline in peer-group valuations,” said Mr. Kwan. “Softchoice remains our top pick. We believe the valuation gap should narrow as it delivers on the 40-per-cent Adjusted EBITDA growth and margin expansion (30 per cent vs. 24 per cent in 2021) implied by its F2022 outlook, and given the increased focus on returning capital to shareholders (vs. repaying debt).”

* RBC’s Paul Treiber to $27 from $31 with a “sector perform” rating.

“Softchoice reported a fundamentally solid quarter, with Q4 revenue, adj. EBITDA and adj. EPS effectively in line with RBC/consensus,” he said. “Softchoice slightly raised its FY22 gross profit outlook, though this was offset by higher opex investments. Momentum reflects strong software & cloud momentum, and expansion in Softchoice’s sales force and productivity gains. Maintain Sector Perform, price target moves from $30.00 to $27.00, given the pullback in tech valuations.”

* Laurentian Bank Securities’ Nick Agostino to $31 from $30 with a “buy” rating.

“Beyond a strong quarter which included an EBITDA beat, SFTC provided many indications its business outlook remains very attractive, including upped 2022 guidance, an NCIB for which we expect the company to be active given the current share price, and an increased dividend,” he said.


Pointing to increased market volatility and awaiting for “better visibility” on its liquidity, Desjardins Securities analyst Chris Li lowered his recommendation for Freshlocal Solutions Inc. (LOCL-T) to “hold” from “buy” on Monday.

“Since 1Q FY22 results in mid-February, market conditions have worsened with the Russia–Ukraine conflict fuelling another sharp rise in inflation, prolonging supply chain disruptions and throwing the financial markets into further turmoil,” he said in a note.

Mr. Li said the Vancouver-based local and organic online grocery company expects cash burn to improve by 40-50 per cent per quarter, leading him to project cash burn of $7-million in the second quarter of this fiscal year and $4-million in the third quarter.

“At quarter-end, total liquidity stood at $10-million, implying sufficient liquidity for 1–2 more quarters,” he said. “LOCL is seeking additional financing as well as the divesture of its four non-core Blush Lane grocery stores in Alberta (we estimate potential proceeds of $10-million). Encouragingly, management expects the e-grocery business to be FCF-positive in 3Q FY22. While FoodX eGMS will remain cash flow–negative, it should improve as fees from Carrefour start to increase in 2H.”

Citing near-term macro “uncertainties,” Mr. Li cut his target for Freshlocal shares to 70 cents from $2. The current average is 65 cents.

“If LOCL succeeds in securing sufficient liquidity to fund it until it becomes FCF-positive, there should be upside to the share price since we believe it currently reflects the likelihood of financial distress. But failure to do so will result in further downside,” he said.


IA Capital Markets analyst Matthew Weekes expects sustained near-term uncertainty surrounding AltaGas Ltd.’s (ALA-T) Mountain Valley Pipeline (MVP), “which likely moves the deleveraging profile further out.”

However, after “mixed” fourth-quarter 2021 financial results, he said he remains constructive on the medium-to long-term growth fundamentals for the company’s hybrid gas utility/midstream platform, “including Montney gas growth beyond short-term activity delays, rate base growth in gas Utilities, and structural NGL export demand to Asian markets.”

“ALA recorded an impairment charge on its equity investment in the MVP due to ongoing regulatory challenges. The timing of a potential in-service date for the project remains uncertain, but it will likely not be until at least 2023,” said Mr. Weekes.

On Friday, shares of AltaGas slid 1.1 per cent after it reported before the bell normalized earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter of $341-million, missing Mr. Weekes’s projection of $355-million. However, normalized earnings per share of 38 cents topped his estimate by 4 cents.

”The Midstream segment was in line with our forecast, as expected headwinds from hedging losses and the flooding in B.C. offset growth in the platform and increased processing and fractionation volumes,” he said. “Utilities was below our forecast, impacted by warm weather, FX, and lower retail marketing margins.

“Asset sales announced ... The main one of these are certain non-operated gas processing assets for $235-million, which is expected to close in Q2/22. ALA indicated the sales multiple on these assets at 9-10 times. We are taking a neutral stance on this transaction, as, although the multiple is lower than our valuation multiple for the enterprise, it also increases ALA’s weighting to higher-value Utilities.”

While AltaGas maintained its 2022 guidance, Mr. Weekes cut his estimates closer to the low end based on the newly announced asset sales and to “consider other factors such as potential lingering effects of the floods into early Q1/22, delayed activity in NEBC, and tempered ROE for Utilities.”

“This is offset in our valuation due to EPS remaining relatively unchanged and increased comparable multiples,” he added.

Keeping a “buy” rating, Mr. Weekes raised his target for AltaGas shares by $1 to $31. The average target is $31.23.

Other analysts making adjustments include:

* ATB Capital Markets’ Nate Heywood to $32 from $30 with an “outperform” rating.

“Despite some headwinds in the quarter, including warmer weather for Q4/21, the Company is well situated for strong risk-adjusted cash flows moving forward as it continues to invest in the Utilities business. The near immediate returns should also lend support to the Company’s deleveraging priorities as it continues to target a sub 5x multiple. Management continues to find alternative ways to help accelerate the deleveraging process as illustrated by the recent non-core asset sales. Management continues to guide to 2022,” said Mr. Heywood.

* CIBC’s Robert Catellier to $33 from $34 with an “outperformer” rating.


Following in-line quarterly results and an acceleration of its debt reduction, National Bank Financial analyst Travis Wood upgraded MEG Energy Corp. (MEG-T) to “outperform” from “sector perform,” citing its “valuation, deleveraging momentum, unhedged volumes with significant torque to higher oil prices and an improved egress picture that has the option to provide growth when the market should dictate.”

Mr. Wood cut his target for MEG shares by $1 to $24. The average is $19.21.

“MEG trades at a discounted valuation of 3.6 times 2022 estimated EV/DACF [enterprise value to debt-adjusted cash flow] compared to its peer group at 4.3 times and its three-year historical average of 5.4 times,” he said. “We are decreasing our target price to $24.00 (from $25.00) on account of estimate changes; however, our total return of 40 per cent supports our Outperform rating. Our target price remains based on a 2022 EV/DACF multiple of 5.0 times.”


Canadian Natural Resources Ltd. (CNQ-T) “continues to check all the boxes in terms of capital allocation (deleveraging, volume growth) and heightened shareholder returns (growing dividend, share repurchases),” said Stifel analyst Robert Fitzmartyn.

Last week, the Calgary-based company reported fourth-quarter adjusted funds from operations per share of $3.66, exceeding both Mr. Fitzmartyn’s $3.52 estimate and the consensus projection of $3.46. He said the results were “highlighted by strong output across its SCO & Thermal segments and strong revenue capture despite indications of cost inflation surrounding energy costs.”

It also announced a 28-per-cent increase to its quarterly dividend (to 75 cents from 59 cents), which the analyst called “a surprise ... outpacing even our optimistic expectations” and noted it boosts its 22-year dividend growth rate to 22 per cent annually.

“Given the global backdrop, we continue to believe the market will see the equity as offering a strong risk-adjusted return premise long in asset duration which continues to differentiate itself on the global scale,” said Mr. Fitzmartyn.

Maintaining a “buy” rating for Canadian Natural Resources shares, he raised his target to $100 from $80. The average is $74.36.

“Canadian Natural has the platform to maximize returns to shareholders via a well-defined and well executed strategy,” he said While it is positioned for leading free cash flow generation through lower relative sustaining capital requirements exhibiting significant asset duration through a lower decline premise, capital discipline and operational excellence are elements that have enhanced equity shareholder value over the years. This is manifesting itself in real time in the market where CNRL stock is observing positive stock price action consistent with heightening returns to shareholders.”

Elsewhere, Credit Suisse’s Manav Gupta increased his target to $74 from $63 with a “neutral” rating.


In other analyst actions:

* BMO Nesbitt Burns’ John Gibson upgraded Ensign Energy Services Inc. (ESI-T) to “outperform” from “market perform” with a $3.50 target, up from $2, while Stifel analyst Cole Pereira bumped up his target to $2.75 from $2.25 with a “hold” rating. The average is $3.28.

“Despite its elevated leverage, we believe supply/demand fundamentals in the drilling space are too strong to ignore and are upgrading ESI,” said Mr. Gibson.

* Piper Sandler analyst Charles Neivert upgraded Nutrien Ltd. (NTR-N, NTR-T) to “overweight” from “neutral” and hiked his target to US$112, up from US$87 and above the US$91.46 average.

* Following in-line fourth-quarter results, National Bank Financial analyst Rupert Merer increased his target for shares of Algonquin Power & Utilities Corp. (AQN-N, AQN-T) to US$16 from US$15.50 with an “outperform” rating. The average is US$17.

“We are maintaining our OP rating, with potential for earnings growth and asset sell-downs,” said Mr. Merer. “However, dividend growth could slow, with our forecasted payout ratio at 95 per cent for 2022 (assuming 5-per-cent distribution growth).”

* CIBC’s Sumayya Syed raised her Artis Real Estate Investment Trust (AX.UN-T) to $13.50, exceeding the $13.14 average, from $12.50 with a “neutral” rating, while National Bank’s Matt Kornack raised his target to $12.50 from $12 with a “sector perform” rating.

“Focus continues to be on capital allocation to further new strategic objectives, towards which Artis made significant progress in 2021,” said Ms. Syed. “The successful close of the Cominar acquisition provides more clarity around the REIT’s investment criteria, which is centred around undervalued public companies with the potential of closing the NAV discount. The ultimate financial impact of the transaction remains to be seen. A potential $500-million of dispositions places Artis in a favorable capital allocation position with several investment opportunities available.”

* Stifel analyst Andrew Partheniou cut his Curaleaf Holdings Inc. (CURA-CN) target to $25 from $31 with a “buy” rating. The average is $21.48.

“CURA reported good Q4/21 results with absolute EBITDA and margin ahead of expectations,” he said. “However, management provided a sobering outlook with 2022 guidance below expectations driven by cloudy visibility on the impact of inflation, a pressured consumer wallet, and an ongoing competitive environment. We were surprised to learn NJ REC was included in the guidance, with an expected May 1, 2022 start date. However, we attribute this to CURA being the most diversified operator in the country and a limited wholesale market at the onset, potentially resulting in a level of 2022 sales contribution that may not be a step-change function specific to the company. As a result, we lower our forecasts which drive our TP and take a similarly conservative approach while continuing to exclude NJ REC from our estimates, recognizing CURA may be positioned for a beat and raise scenario going forward upon greater outlook visibility.”

* Seeing “better days ahead,” Canaccord Genuity’s Yuri Lynk raised his Doman Building Materials Group Ltd. (DBM-T) target by $1 to $8, below the $10.21 average, with a “hold” rating.

“DBM trades at 7 times our 2022 EPS estimate, which sounds inexpensive in absolute terms,” he said. “However, the North American Building Materials Distribution group trades at just 7 times 2022 estimated EPS. In our view, this reflects investors’ preference to apply a trough multiple on perceived cyclical peak earnings, a typical valuation approach for deep cyclicals. It is so typical that management noted on the call it also uses a mid-cycle approach when valuing potential acquisition targets. With 2023 earnings likely to represent more normalized levels we are comfortable using an 11-times multiple to set our target, down from 11.5 times on sector-wide multiple compression.”

* Stifel analyst Cody Kwong increased his Enerplus Corp. (ERF-T) target to $24 from $21 with a “buy” rating. The average is $18.04.

“Enerplus’ 4Q21 estimates were slightly ahead of expectations with volumes tracking the high end of expectations while cash flow was higher with tight Bakken oil differentials,” he said. “Based on continued strength in commodity prices and growing FCF, the Company has elected to execute the full 10-per-cent NCIB by mid-year which will return an incremental $100-million back to shareholders. Reserve additions performance this year was flattering with, prescient acquisition activity leading to recycle ratios of 2.0-3.0 times. With higher oil prices, commitment to accelerated return of capital plans, and a solid asset foundation, we are increasing our target price.”

* CIBC’s Stephanie Price reduced her target for Enghouse Systems Ltd. (ENGH-T) to $47 from $58 with an “outperformer” rating. Others making changes include: Scotia’s Paul Steep to $51 from $58 with a “sector perform” rating and TD Securities’ Daniel Chan to $50 from $60 with a “buy” rating. The average is $50.75.

“Enghouse’s Q1 results came in below our expectations and consensus on revenues and Adjusted EBITDA, reflecting continued headwinds within the firm’s IMG business (specifically headwinds associated with stronger Vidyo revenues associated with increased demand due to the pandemic),” said Mr. Steep.

“We continue to believe upside in the stock is largely centered on management’s ability to deploy capital toward acquisitions while maintaining at least neutral growth in the core business. The stock continues to see challenges related to weak organic growth and historical variability in deploying capital on a consistent basis.”

* CIBC’s Scott Fromson cut his Park Lawn Corp. (PLC-T) to $43 from $48, below the $47.19 average, with an “outperformer” rating, while National Bank’s Zachary Evershed reduced his target to $45 from $45.50 with an “outperform” rating.

“PLC’s Q4/21 results were in line with consensus on revenues, adjusted EBITDA and margins, and adjusted EPS, though a bit below our estimates on all metrics. If investors have a quibble it would be on organic growth: revenues were up 10 per cent, though organic growth was just 0.7 per cent (ex-FX). Call volumes were down year-over-year due to lapping a Q4/20 that was heavily driven by the pandemic; the offset was a 9-per-cent increase in average funeral home revenue per call, a positive trend that is likely to continue as life normalizes. Management’s acquisition outlook remains robust, though the expected range is below our previous estimates. Combined with a modestly lower margin forecast, reflecting the inflationary outlook, this has led us to reduce our estimates. We also bring down our price target,” said Mr. Fromson.

* CIBC’s Kevin Chiang lowered his target for Parkland Corp. (PKI-T) to $49 from $53, exceeding the $48.77 average, with an “outperformer” rating, while National Bank’s Vishal Shreedhar cut his target to $45 from $48 with an “outperform” rating. Conversely, Scotia’s Ben Isaacson raised his target to $44 from $41 with a “sector perform” rating.

“We remain constructive on PKI given ongoing end-market recovery and attractive valuation. In our view, PKI’s share underperformance is related, in part, to fund flow imbalance (it’s in the energy index and doesn’t benefit from rising commodity prices),” said Mr. Shreedhar. “Following significant acquisition activity, PKI will focus on integration and balance sheet improvement in the nearterm (current net debt-to-EBITDA is 3.3 times vs. PKI’s target of more than 3.0 times; we forecast leverage of 3.0 times by the end of 2022).”

* CIBC’s John Zamparo cut his Recipe Unlimited Corp. (RECP-T) target to $19 from $23 with a “neutral” rating, while Scotia’s George Doumet lowered his target to $30 from $32 with a “sector outperform” rating. The average is $25.

“While RECP results did fall short of Street expectations, we highlight that our estimates could have, to some degree, understated the slowdown in traffic ahead of the government restrictions and underappreciated the termination of the government aid/subsidies,” said Mr. Doumet. “All-in-all, Q4 system sales were only down 5 per cent on a sequential basis despite having 20 per cent less fully operating weeks than Q3.

“We expect the similar dynamics we saw in Q4 to continue into Q1. That said, looking beyond Q1, we believe RECP is well positioned to generate a run-rate adj. EBITDA of $200M+ over the NTM (at close to an impressive 50-per-cent FCF conversion). We highlight that RECP was actually able to pay down a substantial amount of debt during the pandemic and shares are currently trading at 5.7 times EBITDA 2023 estimates (vs. peers north of 10 times). Furthermore, when layering potential M&A into the mix, we see even more upside to the name.”

* In response to the announcement of its expanded position in the Clearwater oil play through a strategic land partnership with the Peavine Metis Settlement, Desjardins Securities analyst Chris MacCulloch raised his target for Tamarack Valley Energy Ltd. (TVE-T) to $7 from $6.25 with a “buy” rating, while Stifel’s Cody Kwong bumped his target to $7.50 from $6.50 also with a “buy” rating. The average is $6.88.

“From our perspective, the agreement validates TVE’s long-standing commitment to Indigenous reconciliation while providing clear visibility to an expanded drilling inventory in one of the top-tier oil plays in North America given successful offsetting competitor wells,” Mr. MacCulloch said.

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