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RBC analyst Walter Spracklin downgraded his rating on Canadian National Railway Co. (CNR-T) to “sector perform” from “outperform” while cutting his price target to C$165 from C$172.

The move came after RBC’s review of the latest quarterly results from the major North American railways, and reflected an expectation that investor funds are going to move into Union Pacific Corp.

“Since providing guidance two months ago, CN has been affected by macro and an expected decline in the Canadian grain crop, in addition to the negative impact of wildfires and the port strike,” Mr. Spracklin said in a note to clients. “While we see only macro and Canadian Grain as impacting forward estimates, we nevertheless expect CN shares to remain range bound until its growth prospects become better understood (i.e. until macro conditions inflect, and CN begins executing on its growth strategy).”

CN shares have traded at a significant premium versus U.S. peers since its operational turnaround that has improved margins and the railway’s growth trajectory. But going forward, Mr. Spracklin expects Union Pacific to see better earnings per share growth and margin improvement, and that should prompt funds to move out of CN and into Union Pacific, which last week appointing industry veteran Jim Vena as its new CEO.

He expects CN shares will be range bound “until the company’s growth profile is better understood.”

Mr. Spracklin noted his is keeping earnings estimates unchanged for CN. “Our 2025 EPS estimate remains at $9.68, above consensus $9.37 reflecting a favourable growth outlook highlighted at the company’s investor day,” the RBC analyst said.

CN shares are trading at 20 times the next 12 month’s consensus price to earnings estimates, roughly in line with the five-year average “However, we expect near-term headwinds to weigh on the company’s current relative valuation,” he said.

RBC’s new target is still a little above the average on the Street of C$163.38.

For Canadian Pacific Kansas City Ltd. (CP-T), he kept his rating “outperform” but bumped up his price target to C$133 from C$124. “While Q2 results were particularly weak, management’s move to maintain their guidance implies quite a significant inflection in H2 - a move we consider to be very bullish. Key is that management commentary from the call suggests to us that the guidance is predicated on yet to be announced contracts, and is therefore less dependent on macro headwinds affecting peers,” he said.

For CSX Corp. (CSX-Q), he downgraded his rating to “sector perform” from “outperform” and kept a US$35 price target. “CSX had the best Q2 report in our view, with EPS that came in ahead of expectations and an industry best operating ratio. However, looking ahead, we expect the hiring of Jim Vena at UNP to drive fund flows out of CSX and into UNP. We also believe meaningful coal headwinds will negatively affect growth and result in downward earnings revisions, and therefore weigh on sentiment.”

His rating on Norfolk Southern Corp. (NSC-N) was kept at “sector perform” with his price target falling to US$225 from $227. NSC had a weak second-quarter report - below expectations and reported the worst operating ratio, he noted.

He maintained an “outperform” rating on Union Pacific Corp. (UNP-N) and kept a US$282 price target. “UNP had a very poor Q2 report in our view. However, focus is now on the announcement that the company has appointed Jim Vena as CEO. We expect his strong operating philosophy will result in a marked turnaround in operating performance,” he said.


RBC analyst Robert Kwan thinks the selloff in shares of TC Energy Corp. (TRP-T) has been overdone and value-oriented investors will now be gravitating to the stock. While he cut his price target to C$54 from $65, he is maintaining an “outperform” rating given that the stock - according to his estimates - is inexpensive and trading at its lowest level in almost 20 years.

TC Energy is coming of a very busy week. It announced quarterly results that were close to the Street expectations. It also announced the sale of a 40% stake in various Columbia assets for US$3.9 billion, updated its often delayed $14.5 billion Coastal GasLink pipeline project, and announced a proposed spin-off of its liquids infrastructure assets.

“Hard to ignore the value; we believe some investors will gravitate to what is close to becoming a single digit P/E,” Mr. Kwan said in a note to clients issued on Sunday. “While we recognize the shift in investor sentiment given the lacklustre valuation received for the company’s 40% stake in Columbia, an asset that many viewed as a premium business, as well as uncertainty with respect to the proposed spin-off of the liquids pipelines assets, we point to the shares trading at roughly 10.5x our 2024E EPS. This level represents a new low since 2005,” he said.

“We believe the stock setting new P/E valuation lows is unwarranted, and that it is not unreasonable for the stock to recover to the P/E valuation low of 12.5x that was reached several times over the past five years. Our new price target is primarily driven by a reduction in our target P/E to 12.5x (down from 15x) applied to our revised 2024 EPS estimate,” he said.

The average analyst target on TC Energy is C$55.74, according to Refinitiv Eikon data.

Read more on analysts’ latest views on TC Energy in Friday’s report here.


Even though he believes the fertilizer company will soon reduce its 2023 earnings guidance, TD Cowen analyst Michael Tupholme upgraded Nutrien Ltd. (NTR-N, NTR-T) to a “buy” from “hold” while hiking his price target to U$83 from US$72.

He said his decision, which comes before Nutrien reports earnings on Wednesday, reflects several considerations:

-Crop prices have exhibited strength in recent weeks, and appear likely to remain well-supported over the foreseeable future.

-Fertilizer prices, which overall remained under pressure during the second quarter of this year, have generally begun to move higher in recent weeks. “Global urea price gains have been particularly notable of late, but other key nutrient prices, including potash (Brazil), ammonia, and DAP/MAP, have also recently turned higher. We are encouraged by evidence of an upturn in fertilizer prices given the historically strong positive correlation between fertilizer prices and NTR’s stock,” he said.

-While he expects Nutrien to cut its 2023 earnings guidance, “we believe consensus expectations (consistently lower since late-2022) likely have relatively limited downside at this point (particularly 2024 estimates).”

-He sees Nutrien’s valuation as relatively attractive, particularly when viewed against a backdrop of potentially stronger crop and fertilizer prices. Nutrien trades at 7.6 times his 2024 adjusted EBITDA vs. its historical average forward 12 month EBITDA multiple of 7.8 times.

In a note to clients, the analyst added: “We have lowered our estimates, primarily reflecting lower fertilizer prices, along with lower sales volumes and higher costs in the Potash segment (for 2023). We forecast Q2/23 adj. EBITDA of $2.537bln, in line with consensus of $2.558bln. For 2023, we now forecast adj. EBITDA of $6.539bln, slightly below consensus at $6.717bln, and at the low-end of NTR’s $6.5bln-$8.0bln guidance range. We believe the potential for a downward revision to 2023 guidance is appreciated by the market and already reflected in NTR’s share price. Further, we believe the market is increasingly turning its focus to 2024 results.”

The average analyst price target is US$75.25.


Several analysts raised their price targets on Real Matters Inc (REAL-T) after the mortgage lending and insurance software services company reported better-than-expected quarterly results.

Atb Capital Markets raised its target price to C$9.50 from C$9; Canaccord Genuity raised its target to C$6.25 from C$4.50; TD Securities raised its target price to C$7 from C$6; Raymond James increased its target to C$8 from C$6; and CIBC raised its target to C$6.

The average analyst target is now C$7.25.

Real Matters has been facing challenging conditions in the real estate market, especially in the U.S., where home resales have been sluggish. But analysts expect a turnaround once interest rates and bond yields stabilize and turn lower, which will lead to more business in the real estate services sector.

“How can Real Matters create shareholder value in the near term? We believe refinancing as an alternative source of credit will drive volumes once mortgage rates stabilize,” commented Atb Capital Markets analyst Martin Toner. “Real Matters’ stock is highly inversely correlated to the 10-year Treasury yield, thus a sustained reversal in yields would help volumes and the stock price. The spread between the 10-year and 30-year US mortgage rates are at all-time highs. A decline in that spread, driven by a decline in interest rate volatility, would provide another tailwind. Finally, improved market share once volumes return and newfound leverage discovered during the company’s cost cutting, could produce mid-cycle EBITDA above investor’s expectations. We continue to like Real Matters’ shares.”

Raymond James analyst Steven Li said that Real Matters “continues to turn the corner” and has now seen its first sequential growth in revenues in seven quarters.

Mr. Li praised the company’s solid cost management, and is looking for efficiency gains once the housing market starts to see more volume again

“REAL continues to find efficiency gains (whether its digitizing or automating workflows within both Appraisal and Title segment). Management noted they can probably add 30% more volume in Appraisal without any additional expenses and add 200-300% more volume in Title without any additional expenses,” he said.

Mr. Li has an “outperform” rating on the stock.

Thanos Moschopoulos, who has a “market perform” rating on the stock as well as one of the lowest price targets, was urging more caution on the name. “While we believe that REAL is executing very well from a cost and market share perspective, we don’t view the stock’s current risk/reward as compelling—given ongoing macro uncertainty, and the fact that the stock (in our view) is already pricing in a sharp volume recovery next year,” he said.


Precision Drilling Corp.’s (PD-T) valuation is difficult to ignore at current levels, said CIBC analyst Jamie Kubik, who raised his price target on the stock to C$110 from C$95 while reiterating an “outperformer” rating.

He expects strong second half year earnings and drilling rig activity.

“Our EBITDA expectations increase slightly after incorporating PD’s Q2/23 earnings disclosures,” he said in a note to clients. “We are modelling weakening margins through 2H/23 and into 2024, but even with conservatism in our estimates, we have the shares trading at less than 3.0x EV/EBITDA in 2024 and 2025, which remains well below the historical range for PD of 4.0x to 6.0x. We expect the shares to carry a discounted multiple due to concerns of a recession resulting in leaner activity, although we believe our outlook accommodates potential weakness.”

He said valuation is difficult to ignore at current levels. “The stock has performed favorably leading into Q2/23 earnings and we believe PD’s update should provide the market with better optimism for 2H/23 performance. Using PD’s historical trading range of 4.0x to 6.0x forward EV/EBITDA, we believe the current share price is implying a greater than15% reduction in North American activity in 2024. We believe our estimates are conservative for 2024 at the current juncture and still see the stock offering good value (trading at 2.8x EV/EBITDA in 2024).”

He added “we would not be surprised” if Precision Drilling increases cash returns to shareholders in 2024, which would be a further tailwind for the shares.

The average price target is C$122.83.


In other analyst actions:

Airboss of America Corp (BOS-T): Cormark Securities cuts target to C$5.25 from C$12

Eldorado Gold Corp (ELD-T): Haywood Securities raises target price to C$18.5 from C$16.5; National Bank of Canada raises target to C$17.50 from C$17; BofA Global Research cuts price objective to C$12.20 from C$13.10

TMX Group (X-T): Barclays raises target price to C$33 from C$30

Adobe Inc (ADBE-Q): Morgan Stanley raises to “overweight” from “equal weight” and raises target price to US$660.00 from US$510.00 Inc (AMZN-Q): Credit Suisse raises target price to US$176 from US$142

AMC Networks Inc (AMCX-Q): Wells Fargo cuts target price to US$10 from US$15

Apple Inc (AAPL-Q): Piper Sandler raises target price to US$220 from US$180

Chevron Corp (CVX-N): Goldman Sachs raises target price to US$187 from US$166 and upgraded its rating to “buy” from “neutral”

Ford Motor Co (F-N): Jefferies cuts target price to US$15 from US$17 and downgrades rating to “hold” from “buy”

Salesforce Inc (CRM-N): Morgan Stanley cuts to “equal weight” from “overweight” but raises target price to US$278 from US$251

Southwest Airlines Co (LUV-N): Bernstein cuts target price to US$32 from US$41 and downgrades rating to “market-perform” from “outperform”; Citigroup cuts price target to $36 from $39

UPS (UPS-N): Credit Suisse cuts rating to “neutral” from “outperform” but raises target price to US$204 from US$200

Wayfair Inc (W-N): Piper Sandler raises to “overweight” from “neutral” and raises target price to US$60 from US$42

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 24/05/24 4:00pm EDT.

SymbolName% changeLast
Canadian National Railway Co.
Canadian Pacific Kansas City Ltd
CSX Corp
Norfolk Southern Corp
Union Pacific Corp
TC Energy Corp
Eldorado Gold
Precision Drilling Corp
Real Matters Inc
AMC Networks Cl A
Apple Inc
Chevron Corp
Ford Motor Company
Nutrien Ltd
Nutrien Ltd
Adobe Systems Inc
Salesforce Inc
Southwest Airlines Company
United Parcel Service
Wayfair Inc
Airboss America J
TMX Group Ltd

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