Inside the Market’s roundup of some of today’s key analyst actions
Desjardins Securities’ Jerome Dubreuil thinks the Street’s harsh reaction to Cogeco Communications Inc.’s (CCA-T) “decent” first-quarter financial results was “overdone.”
Shares of the Montreal-based telecom dropped 10.7 per cent on Friday in response to a reduction in guidance and concerns over lingering uncertainty in its wireless business, which the analyst think is “leaving short-term catalysts lacking for the stock.”
However, Mr. Dubreuil also pointed out “the market’s expectations for CCA’s wireless plans are very modest” and “the mid-point of the updated FY23 guidance (assuming constant FX rates) is higher than pre-earnings consensus.”
“At current FX rates, we estimate the reduced FY23 adjusted EBITDA guidance range is $1.439–1.460-billion, which compares positively with pre-earnings consensus of $1.439-billion,” he said. “Nonetheless, we acknowledge that this update aligns with concerns U.S. cable bears have voiced over the last year and a half.”
“Wireless still uncertain. Management is still waiting for all the details on the company’s eligibility for the MVNO [mobile virtual network operator] regime. CCA sounded confident on the call that it would meet all CRTC requirements, implying it will be operating a commercial mobile network in the near term. It remains unclear to us if rolling out a commercial mobile network is fully included in its capex forecast, which it reduced. We expect further delays in the launch of wireless services as we only expect MVNO rate negotiations to accelerate once CCA is fully eligible. On the positive side, CCA does not have material exposure to the increased competition we expect in the Canadian wireless industry in coming quarters, unlike its Canadian peers.”
After reducing his financial forecast, largely based on lower U.S. subscriber estimates to “better reflect management comments pertaining to transition challenges in Ohio, a more uncertain economic backdrop and expected competitive headwinds,” Mr. Dubreuil trimmed his target for Cogeco Communications shares to $96 from $101, maintaining a “buy” rating. The average is $89.97.
“CCA has a management team of solid operators, as evidenced by the company’s industry-leading margins,” he said. “We believe CCA’s strong FCF generation enables it to redistribute significant capital to shareholders while operating a stable business, an attractive feature in this uncertain economic environment.”
Elsewhere, Veritas Investment Research analyst Desmond Lau cut Cogeco Communications to “sell” from “buy” with a $70 target, down from $100.
Other analysts making target changes include:
* National Bank’s Adam Shine to $83 from $88 with a “sector perform” rating.
* RBC’s Drew McReynolds to $97 from $103 with a “sector perform” rating.
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Seeing its risk profile “heightened” in near term,” Canaccord Genuity analyst Aravinda Galappatthige lowered his recommendation for Corus Entertainment Inc. (CJR.B-T) to “hold” from “speculative buy” previously, emphasizing “uncertainty around ad trends, balance sheet, and dividend.”
Corus shares plummeted 15.5 per cent on Friday following the premarket release of weaker-than-anticipated first-quarter results. Consolidated revenues fell 7 per cent year-over-year to $431.2-million, missing both Mr. Galppatthige’s $433.7-million estimate and the consensus projecting of $432-million Consolidated adjusted EBITDA dropped 26 per cent to $131.7-million, also below expectations ($135.8-million and $134-million, respectively).
“Corus reported Q1/23 results [Friday] morning, reflecting notable declines in revenue and EBITDA, led by the TV segment,” the analyst said. “We note that TV expenses were up 5.4 per cent year-over-year as programming costs rose 7.4 per cent year-over-year alongside a 7.6-per-cent revenue decline. Declining EBITDA pushed up leverage to 3.38 times from 3.02 times in Q4/22. With near-term visibility around ad trends low and little flexibility in terms of programming cost management at this point, much depends on the results of the company’s G&A reduction measures as well as working capital management. Notably, the uptick in leverage ratios led to a decision by the Board to not renew its NCIB and defer the March dividend declaration. We also took note of management comments on the call that we interpret as an increased openness to consider a divestiture of the radio assets, especially in the backdrop of recent regulatory changes by the CRTC essentially easing ownership restrictions.”
“On the call, management indicated an expectation of sequential improvement in TV ad trends in the quarters ahead, as they see signs of some stabilization following recent double-digit decline rates. We note, however, that the comps ease considerably for H2/23 given the steep declines in ads in the prior year period. Advertising remains under pressure, particularly in categories like DTC (e.g., food delivery), Auto (due to supply chain issues), Food and beverage and retail. With that said, there are some areas of growth in sectors like gaming and certain packaged goods providers. However, visibility remains low and there is notable uncertainty on this front, further exacerbated by developments like the launch of ad-supported offerings by SVOD platforms”
Mr. Galppatthige warned investors of a potential dividend cut, noting: “Despite the deferral of the March dividend declaration by the Board of Directors (outside date is March 15th), comments on the call from management suggest a commitment to the ‘long term’ dividend policy. With the payout ratio below 40 per cent (below 30 per cent on F2024), even on our more onerous definition of FCF, we believe there is still a strong case to maintain the dividend. With that said, we are keeping our eyes on leverage which is now heading towards 3.5 times net debt/LTM EBITDA by Q3/23, against a bank covenant of 4.25 times. As such, much depends on ad trends and changes to outlook over the next two months.”
Lowering his revenue and earnings estimates through the end of fiscal 2023, the analyst cut his target to $2 from $2.60. The average target on the Street is $2.88.
“With the incremental downward adjustments to our estimates, our target falls ... largely due to the exaggerated impact of the leverage,” he said. “We continue to use 4 times EV/EBITDA 2024 to value the stock and do not see a compelling case at this point to raise the target multiple, given balance sheet concerns and some uncertainty around the dividend. This, in turn, drives a downgrade to our recommendation to HOLD (from Spec Buy), as the rising risk profile offsets the upside scenarios.”
Others making target changes include:
* RBC’s Drew McReynolds to $3 from $3.50 with a “sector perform” rating.
* National Bank Financial’s Adam Shine to $2.75 from $3.25 with a “sector perform” rating.
* TD Securities’ Vince Valentini to $4.75 from $4.50 with a “buy” rating.
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Colliers International Group Inc. (CIGI-Q, CIGI-T) is “attractively valued on trough expectations,” according to Scotia Capital analyst Michael Doumet, raising his rating to “sector outperform” from “sector perform” on Monday.
“We do not have a near-term catalyst to point to,” he said. “But, as is the calculus for upgrading a cyclical name – one with a proven track record for compounding earnings – we believe sufficient pessimism has been priced-in. ... We made further cuts to our estimates, particularly in Capital Markets (CM), where we assume a reset to below pre-pandemic levels (from 45 per cent above as at 2Q22 TTM [trailing 12 months]) – cutting our segment EBITDA by roughly half from its peak. Together with negative revisions in Leasing/IM, our 2023E EBITDA reflects an 10-per-cent year-over-year organic decline, on a consolidated basis. Having factored in such cuts, our conclusion is that CIGI appears attractively valued on (our view of) trough earnings; in the meantime, stabilizing rate expectations, an enhanced business mix, and a high-single-digit FCF yield should provide better footing for an earnings re-acceleration.”
Mr. Doumet raised his target to US$123 from US$115. The current average is US$134.86.
“CIGI shares declined 33 per cent in 2022 (compared with 20 per cent in the S&P),” he said. “Despite incorporating what we view as trough earnings expectation in 2023E, CIGI would have grown EBITDA at a 16-per-cent CAGR from 2019 through 2023. Leverage will have risen through the period, from 0.8 times net debt to 1.8 times, but on our 2023/24 estimated FCF yield amounts to 7 per cent to 9 per cent. With CIGI trading at 10.6 times on our (conservative) 2023E – or an implied 9 times EV/EBITDA for real estate services and 13.0x for IM – we believe sufficient pessimism has been priced-in. Our 2023 EBITDA implies a near-50-per-cent cut in CM EBITDA from 2Q22 TTM peak – this has two positive implications for valuation: (i) we view our 2023E CM as a ‘new base’ to grow from and (ii) the revenue/EBITDA mix of the real estate services in 2023E will be skewed towards O&A, which is a secular growth story with strong organic prospects. CIGI maintains favorable L-T prospects due to the institutionalization of CRE and secular outsourcing trends. While M&A activity should slow following a record year in 2022, we expect CIGI to continue to pursue accretive growth, given its track record and strong FCF metrics.”
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Viewing its three-year guidance as underwhelming, Canaccord Genuity analyst Dalton Baretto downgraded Lundin Mining Corp. (LUN-T) to a “hold” recommendation from “buy” previously.
On Friday, shares of the Toronto-based miner fell almost 6 per cent following the premarket release of its fourth-quarter 2022 production results and production guidance for the 2023-2025, including cost and capex guidance for the current fiscal year.
Mr. Baretto called the release “negative across the board.”
“LUN’s production guidance is lower than we had anticipated across all metals for each year of the guidance period and below the company’s own previous guidance for 2023 and 2024,” he said. “The primary driver behind the lower copper and gold production guidance over the period is a new approach at Chapada (more on this below), while the lower zinc production guidance is due to even longer ramp-up expectations at the ZEP project at Neves Corvo. 2023 cost expectations for all the assets except Candelaria are also above our forecasts; LUN attributes this to conservative assumptions around input costs, labour, F/X and byproduct metal pricing in addition to the lower production expectations. The 2023 capex budget of $1.1 billion is in line with our forecast.
“LUN’s Q4/22 production was also weaker than we had anticipated, with copper production 17 per cent below our estimate and gold production 14 per cent below our forecast. We note that every asset recorded a double-digit miss in percentage terms vs. our estimates for both copper and gold, and that copper.”
Cutting his forecast through 2024, Mr. Baretto lowered his target for Lundin shares to $9.50 from $11.50. The average is $9.37.
Elsewhere, National Bank’s Shane Nagle lowered Lundin to “underperform” from “sector perform” and reduced his target to $8.75 from $9.25.
“Delays in completion of the Neves-Corvo Zinc Expansion Project (ZEP), elevated capital spending and softer production outlook all impacted our previous estimates,” he said. “Our Underperform rating stems from a deteriorated nearterm FCF outlook and risks associated with advancing Josemaria in the current inflationary environment, as precedent projects have all seen capital cost increases of 20-30 per cent throughout development. Where our cautious outlook could be wrong is continued support from elevated copper prices throughout 2023, and/or a significant transaction/partnership agreement at Josemaria; however, we wouldn’t anticipate any transaction ahead of the updated technical report in H2/23.”
Other analysts making target adjustments include:
* Raymond James’ Farooq Hamed to $8 from $9.50 with a “market perform” rating.
“Overall, the results and guidance show stagnating copper and gold and declining nickel production with zinc growth, albeit at a lower rate than previously expected, with costs and capex rising,” he said. “Operationally, we believe the guidance reflects continuing issues with mill optimization at Candelaria, ongoing costs and delays related to ZEP and a negative change in the production and cost outlook at Chapada. Based on the updated outlook, we expect limited FCF in 2023 at current copper prices (negative FCF at RJL 2023 forecast of $3.75 per pound).”
* TD Securities’ Greg Barnes to $8.50 from $9 with a “hold” rating.
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Seeing “heightened risk for further negative construction project cost revisions in the near term within its LSTK Projects division,” CIBC World Markets’ Jacob Bout downgraded SNC-Lavalin Group Inc. (SNC-T) to “neutral” from “outperformer.”
He also cited “strong” recent share price performance (up 20 per cent year-to-date).
“We believe SNC’s core Services business will be resilient in a moderate recession scenario in 2023 (70-per-cent-plus exposure to public end-markets), with Nuclear set to see several new awards that could significantly add to backlog in 2023,” he said. “That said, we have lowered our Q4/22 and H1/23 LSTK Projects estimates to reflect a heightened near-term risk of further material negative construction cost reforecasts. Until the LSTK backlog is worked down or until we start to see evidence of recoveries from these projects (i.e., FCF improving), SNC will continue to trade at a significant discount to its peers.”
Mr. Bout maintained a $30 target. The average target on the Street is $35.75.
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Stifel analyst Martin Landry believes Pet Valu Holdings Ltd. (PET-T) is “well positioned to benefit from the continued strength of the industry.”
“Following a decade of rapid industry growth, what’s next for the Canadian Pet Industry? Rarely can an industry grow 2-3 times faster than GDP for an extended period of time,” he said. “Could we see the industry plateau, slowdown or even decline in coming years? It is difficult to say, but the experts who participated in our webinar on the pet industry where upbeat for 2023. Our survey suggests industry growth rates of mid-single digits to high-single digits for 2023 for pet food sales while slightly slower growth rates for accessories. The humanization of the pet industry is a strong underlying trend which should continue for the foreseeable future, according to our experts.”
After hosting a webinar on the industry on Friday, Mr. Landry acknowledged there are trends to monitor that could provide headwinds to an acceleration in growth for the Markham, Ont.-based company, including veterinary clinics encroaching into pet food sales and continued shift to e-commerce. However, he called the expectations for 2023 “promising.”
“According to our survey results, pet food revenues are expected to grow in 2023, albeit at a slower rate compared to the last 3 years,” he said. “83 per cent of respondents expects growth in volumes in 2023 compared to 2022, while 87 per cent expects prices to increase. These numbers are encouraging given the growth over the last 3 years with industry growing at 15 per cent in 2020, 7 per cent in 2021 and 12 per cent for the first 3 quarters of 2022.”
“Opportunity appears widespread in 2023. Our survey shows a wide array of opportunities in 2023 for the Canadian pet industry, including the continuation of the premiumization and humanization trends, the increase penetration of private label brands and online sales. Additional opportunities mentioned for 2023 include (1) incremental sales for special occasion products, (2) innovation within pet food with alternative source of proteins (i.e. insects and yeast proteins) and (3) increased innovation within non-consumable products, creating more opportunities for industry growth.”
Reiterating a “buy” recommendation for Pet Valu shares, Mr. Landry raised his target to $45 from $42, touting “appealing industry characteristics” as well as its “strong growth prospects” and “solid business economics and competitive positioning.” The average on the Street is $45.17.
“Pet Valu is a growth story with a significant growth runway,” he concluded. “We believe that the company can double its store count over time to 1,200-plus, an increase of 70 per cent from current levels. According to our analysis, PET has the potential to grow its EPS sustainably at a CAGR [compound annual growth rate] of mid-to-high teens. Pet Valu’s balance sheet is healthy with leverage expected to decrease to 1.5x in Q1/23, providing the company with good flexibility to allocate capital.”
“Pet Valu has several positive attributes, which include: (1) more than 2 million members in its loyalty program, generating more than 70 per cent of all system sales in Q1/22, (2) high performing private label brands, generating more than 30 per cent of sales and margins 1,200 basis points higher than similarly priced national brands, (3) a rapid payback of three years on new corporate stores, (4) flexible store formats which enable increased penetration in rural areas, a significant differentiation vs PetSmart and (5) a healthy network with 99 per cent of corporate stores profitable after 24 months of operations.”
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With its turnaround “showing traction,” National Bank Financial analyst Vishal Shreedhar expects Saputo Inc. (SAP-T) to display signs of “solid” growth when it reports its third-quarter results on Feb. 9.
“Saputo’s investment thesis is differentiated by heightened growth potential over the next several years,” he said. “We model over 40-per-cent EPS [earnings per share] growth in F2023 and a three-year EPS CAGR [compound annual growth rate] of over 20 per cent by F2025 (even as our expectations are below management’s F2025 aspirations). If management achieves its F2025 EBITDA target, we estimate a three-year EPS CAGR of over 30 per cent.”
For the quarter, Mr. Shreedhar is projecting EPS of 44 cents, a penny below the consensus estimate on the Street but up 11 cents year-over-year. He said that 32-per-cent increase reflects “continued strength in Canada, continued improvement in the U.S. (pricing, improving order fill rates and efficiencies), and favourable year-over-year comparisons in International, partially offset by anticipated challenges in Europe (elevated energy costs and challenging consumer backdrop).”
“Last quarter, management suggested that SAP would see continued strength in H2/F23, driven by pricing and progress on operating efficiencies,” he said. “We understand that the USA Sector has seen improving labour attraction and retention; our review of peers’ labour conditions suggests that the labour market is broadly constructive. Benefits from capacity optimization are expected to gradually manifest beginning in Q4/F23 (Australia) and F2024 (USA Sector).”
While warning of “heightened uncertainty” given the company’s restructuring activities, he raised his target for Saputo shares by $1 to $42, reiterating an “outperform” rating. The average target is currently $40.13.
“The higher price target reflects an advancement of our valuation period,” said Mr. Shreedhar. “We value Saputo at 19.0 times our F24/F25 EPS estimate. We believe that Saputo’s growth over the next several years will be supported by pricing, manufacturing efficiency initiatives, improvement in order fill rates, and other drivers.”
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National Bank Financial analyst Lola Aganga predicts lithium price volatility will persist in 2023 “even as market tightness [is] expected to ease.”
“Over the course of 2022, battery-grade lithium carbonate and hydroxide prices appreciated approximately 91 per cent and 125 per cent, after a near tripling of prices in 2021, and have remained strong through the start of 2023 given strong demand, tight supply, and despite COVID-related disruptions out of China,” she said. “Several projects are scheduled to be commissioned through the first half of 2023, ramping up through the rest of the year and we expect incoming supply to ease market tightness, potentially resulting in cooling prices in 2023 and addressing some lingering concerns of rising material costs impeding electric vehicle (EV) cost parity - the point at which an automaker can theoretically build and sell an EV with the same margin as a comparable combustion vehicle, without the cushioning effect of green subsidies.
“Some risks to our outlook this year include a somewhat more hawkish approach from federal governments in Latin America and Africa towards controlling lithium resources, environmental regulatory hurdles in Latin America as well as inflationary pressures on consumables and a tight labour market hampering greenfield project builds. At the same time, accelerating zero emissions targets, the loosening of Chinese COVID restrictions, as well as variable preference for lower-cost LFP battery chemistries over NMC battery chemistries, are features we expect to influence the demand landscape in 2023. Long-term fundamentals remain favourable. Overall, prices are expected to be volatile through the balance of 2023 with a notable supply deficit expected to begin showing from 2025.”
In a research report released Monday, Ms. Aganga raised her commodity price assumptions for the fourth quarter of 2022 through 2025. She also adjusted her target prices for her top picks in the sector. They are:
Sigma Lithium Corp. (SGML-X) to $60 from $55.50 with an “outperform” rating. The average target is $59.48.
“We highlight Sigma Lithium as a Top Pick in 2023,” she said. “Low-cost spodumene developer, expected to achieve initial production at its flagship Grota do Cirilo project in Brazil by Q2 2023, with a potential tripling of production capacity by year-end 2024 at our estimates. Our positive outlook on the company is partially offset by its tightly restricted share liquidity as well as our modestly delayed production timeline given significant torrential rainfall in Minas Gerais, Brazil in the past month impeding mining and construction operations in the region according to local reports.”
Lithium Americas Corp. (LAC-N, LAC-T) to US$38.50 from US$42.50 with an “outperform” rating. The average is $36.44.
“Catalyst-driven LAC also remains our top pick as a fully financed, near-term producer advancing the largest new brine operation in the last decade on track for initial production in H1/23,” she said. “Other catalysts include completion of the Arena Minerals acquisition in Q3/23, and the completion of the separation of the company’s Latin and North American business units by year-end 2023. The BLM appeals case ruling remains the outstanding primary catalyst before construction activities can begin at Thacker Pass. Although there remains some headline risk pending a federal BLM ruling on its Thacker Pass project in Q1/23, we see a limited impact to the overall development timeline of the project which is currently on track for construction to begin in 2022.”
Ms. Aganga maintained an “outperform” rating and $6.25 target for American Lithium Corp. (LI-X). The average is $9.
“Advanced lithium developer pushing ahead the Falchani exploration project in Puno, Peru, and the Tonopah Lithium Claims (TLC) exploration project located in Nye County, Nevada,” she said. “The company’s project portfolio also includes the Macusani Uranium project which the company aims to spin out into a standalone uranium vehicle in H1 2023.”
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As freight activity “continues to normalize,” Desjardins Securities analyst Benoit Poirier thinks catalysts “remain in place” for Canadian railway companies in 2023.
“Key economic indicators that we follow have deteriorated, but management’s comments on demand and our discussions with market participants continue to suggest activity is more likely to normalize from pandemic highs rather than fully collapse,” said Mr. Poirier in a note released on Monday.
While lowering his fourth-quarter 2022 estimates to account for weaker-than-expected revenue ton mile volumes, the analyst thinks foreign exchange and fuel costs will act as “shock absorbers” while warning the trend isn’t likely to last this year.
“The strong surge in the US$ provided a big lift to EPS for both Canadian railroads in 2022 (up 8.3 per cent vs 2021 average), but this is likely unsustainable in 2023,” he said. “We estimate a full-year yield of 1.0 per cent for CN and 1.1 per cent for CP, considering the drop in container surcharges and slight pricing mix headwind for Canadian grain.”
Mr. Poirier said he favours Canadian Pacific Railway Ltd. (CP-T) entering 2023, maintaining a “buy” rating and $118 target. The average is $114.80.
He cut his Canadian National Railway Co. (CNR-T) target by $1 to $180, above the $161.54 average, with a “hold” rating.
“CP’s shares offer a higher risk-adjusted potential return than CN’s given our view on the CP-KCS transaction and the fact that future OR improvements at CN are already largely reflected in the current share price,” the analyst said.
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Equity analysts at Acumen Capital introduced their “Dark Horse picks” for 2023 on Thursday.
The five stocks are “have either lost a surprising amount of investor conviction or remain under the radar” and “could surprise to the upside” this year.
They are:
* Badger Infrastructure Solutions Ltd. (BDGI-T) with a $39.25 target and “speculative buy” rating. The average target is $34.04.
Analyst Trevor Reynolds: “After three years of weak and highly inconsistent results driven by COVID restrictions, business restructuring, and inconsistent levels of demand, we believe BDGI is positioned for a bounce back in 2023. Our optimism is driven by favourable comps, a more normalized operating environment with pent up infrastructure activity, the addition of a commission-based salesforce, and a national accounts strategy.”
* Firan Technology Group Corp. (FTG-T) with a $3.50 target and “buy” rating. Average: $3.50.
Analyst Nick Corcoran: “FTG is well positioned to benefit from: (1) an improving macro backdrop that is expected to drive strong demand in both the commercial aerospace and defense markets; and, (2) the pending acquisitions of Holaday and IMI.”
* Gamehost Inc. (GH-T) with a $11.50 target and “buy” rating. Average: $11.50.
Mr. Reynolds: “2022 presented a new set of challenges as high levels of inflation and supply chain issues took hold following almost two years of adjusting for strict operating restrictions (REP ended early March) and mandated closures due to COVID. GH enters 2023 well positioned with price increases in place, updated rooms and facilities, and strength in the Alberta economy”
* MTY Food Group Inc. (MTY-T) with an $80 target and “buy” rating. Analyst: $67.
Mr. Corcoran: “MTY continued to demonstrate the strength of its business model in 2022. The Company posted solid financial results and completed two large acquisitions that are expected to drive strong growth in 2023.”
* Park Lawn Corp. (PLC-T) with a $36 target and “buy” rating. Average: $35.06.
Analyst Jim Byrne: “PLC continues to deliver on its acquisition strategy, and the company’s appetite for deals remains strong. We believe organic growth and expansion opportunities will play a big role in 2023 and have faith that management will continue to deliver on its strategy for years to come. 2022 was a challenging year for PLC and the death-care industry given the volatility in death rates following the pandemic. We believe a return to normal will see investors return to PLC given the fundamental support and long-term drivers for the industry.”
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Laurentian Bank Securities analyst Jonathan Lamers assumed coverage of a pair of construction industry stocks on Monday.
He gave Bird Construction Inc. (BDT-T) a “buy” rating and $11.50 target, calling its third-quarter 2022 results an “inflection point.” The average target on the Street is $10.28.
“Operating results have turned the corner,” he said. “Q3 Adjusted EBITDA was well above consensus. Issues obtaining permits to start new projects that constrained revenue growth over the first half of 2022 appear to be behind, with Q3 revenue up 7.6 per cent year-over-year. Bird has also fully lapped the CEWS benefits to the prior-year 2021 results, and EBITDA margin began to improve in Q3.”
“Organic revenue growth accelerated into Q4. The company expects full-year 2022 revenue growth to be in-line with, or better than, the 6.0 per cent achieved year-to-date, implying organic revenue growth accelerated in Q4. Year-to-date results included contribution from the Dagmar acquisition in September 2021, now fully lapped.”
Mr. Lamers set a “hold” rating and $11.50 target for shares of Aecon Group Inc. (ARE-T), seeing “continued risks to margins.” The average is $12.42.
“In 2023, Aecon is expected to close out two of the four major fixed-price projects the company has identified as being materially behind schedule and over-budget (due largely to industry factors out of the company’s control),” he said. “We are concerned there could be further cost re-forecasts or provisions recorded as the projects approach completion. The Street seems to expect recovery for operating margins toward the 2019 level by 2024, however, there is no visibility to this yet.”
“Recession risk appears low. Of Aecon’s overall business, we estimate 2/3 to be public customer and 1/3 private. Public infrastructure spending typically rises during recessions, supporting backlog growth. Aecon’s private sector clients are also typically larger, well-capitalized companies. We expect 8-per-cent growth in Construction revenue over 2023, underpinned by the long-duration nature of the projects in the backlog.”
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After lowering his oil and natural gas price projections for 2023, Raymond James analyst Jeremy McCrea downgraded a group of intermediate companies on Monday.
His changes were:
- Advantage Energy Ltd. (AAV-T) to “outperform” from “strong buy” with a $12 target from $14. The average on the Street is $14.60.
- Kelt Exploration Ltd. (KEL-T) to “market perform” from “outperform” with a $6 target from $7. Average: $9.40.
- NuVista Energy Ltd. (NVA-T) to “outperform” from “strong buy” with a $16.50 target from $17. Average: $16.85.
- Peyto Exploration & Development Corp. (PEY-T) to “market perform” from “outperform” with a $17 target. Average: $18.02.
Conversely, Mr. McCrea upgraded Bonterra Energy Corp. (BNE-T) to “outperform” from “market perform” with a $10 target, down from $12 and below the $11.38 average.
For senior producers, he made these target changes:
- Canadian Natural Resources Ltd. (CNQ-T, “outperform”) to $85 from $87. Average: $92.29.
- Cenovus Energy Inc. (CVE-T, “outperform”) to $32 from $33. Average: $33.44.
- Imperial Oil Ltd. (IMO-T, “market perform”) to $70 from $75. Average: $79.17.
- Suncor Energy Inc. (SU-T, “market perform”) to $50 from $53. Average: $53.75.
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In other analyst actions:
* Echelon Capital’s Rob Goff moved VSBLTY Groupe Technologies Corp. (VSBY-CN), a Vancouver-based provider of technology for security services, to his “watchlist” coverage from a “speculative buy” rating and removed an 85-cent target, looking for “key milestones to provide greater confidence around any reintroduction of forecasts upon which to base valuation parameters.”
“We remain very bullish towards VSBLTY’s broader strategy of deploying its suite of advanced SaaS technology, leveraging artificial intelligence and computer vision, into physical retail store and security environments with funding and delivery backed by multi-billion-dollar partners,” he said. “We continue to see the significant value and potential of strong partnerships that bring market profile, deployment capabilities, and the ability to provide capital-efficient models for both target customers and VSBLTY. Unfortunately, the deployment challenges associated with the Company’s flagship joint venture (JV) Winkel (involving AB Inbev (ABI-ENXTBR, NR)), which saw its marquee project receive backing by special purpose vehicle (SPV) Austin GIS (AGIS) (includes Intel (INTC-NASDAQ, not rated), along with VSBLTY and others), highlight how the Company’s large, powerful partners have represented both a strength and a weakness as project delays beyond the contributing factors of supply chain headwinds and deployment learning curves can be attributed to ‘partnership politics’.”
* ATB Capital Markets’ Patrick O’Rourke cut his Tourmaline Oil Corp. (TOU-T) target to $95, below the $95.95 average, from $100 with an “outperform” rating.
David Leeder