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

Ahead of third-quarter earnings season in the precious metals sector, equity analysts at National Bank Financial Markets remain constructive on spot gold prices over the next year, however they warn of near-term volatility.

“In our opinion, over the coming months, we could continue to see the spot gold price swing wildly (+/- one or more percent) around key U.S. economic data points with the U.S. Fed’s latest dot plot calling for one additional rate hike before the end of the year as inflation remains above the target level and the labour market remains robust,” they said. “Generally, we believe that in this gold price scenario, the best gold companies to invest in continue to be those with near-term production growth that is well funded and relatively lower-risk, companies with a strong balance sheet and a good catalyst calendar as well as a strong operational track record.”

In a research report released Monday, the firm updated its price deck for all metals and foreign exchanges rates to incorporate third-quarter average, while it maintained his expectations for the fourth quarter and beyond.

“For concentrate producers, provisional pricing adjustments are generally expected to be modestly net negative for 3Q23 earnings with gold, silver, copper finishing lower quarter-over-quarter while lead was higher,” the analysts said. “A number of producers have guided to a back-half-weighted production year, and thus, we expect several companies to have increased production quarter-over-quarter. Several currencies including the BRL and MXN gained strength against the USD and could prove to be headwinds for cost guidance, while the TRY continued to depreciate providing a potential tailwind.”

“At the time of writing, we have conviction in Pan American Silver and Torex Gold missing Bloomberg consensus Adj. EPS estimates, while we expect Agnico Eagle, Kinross and Lundin Gold to beat. Details behind our conviction calls are laid out later in this report.”

With their price deck changes, the analysts adjusted their target prices for stocks in their coverage universe. Eleven companies saw reductions of 10 per cent or more. They are:

  • Torex Gold Resources Inc. (TXG-T, “sector perform”) by 24 per cent to $19 from $25. The average on the Street is $25.
  • Aris Mining Corp. (ARIS-T, “outperform”) by 16 per cent to $5.25 from $6.25. Average: $8.04.
  • Fortuna Silver Mines Inc. (FVI-T, “sector perform”) by 15.4 per cent to $5.50 from $6.50. Average: $6.
  • Marathon Gold Corp. (MOZ-T, “outperform”) by 14.3 per cent to $1.50 from $1.75. Average: $1.93.
  • Pan American Silver Corp. (PAAS-T, “outperform”) by 13.2 per cent to $29.50 from $34. Average: $25.42.
  • K92 Mining Inc. (KNT-T, “outperform”) by 13 per cent to $10 from $11.50. Average: $11.23.
  • Aya Gold & Silver Corp. (AYA-T, “outperform”) by 12.7 per cent to $12 from $13.75. Average: $14.14.
  • Osisko Development Corp. (ODV-X, “outperform”) by 12.2 per cent to $9 from $10.25. Average: $10.88.
  • Endeavour Mining Corp. (EDV-T, “outperform”) by 12.1 per cent to $47 from $53.50.
  • Newmont Corp. (NGT-T, “outperform”) by 12 per cent to $81 from $92. Average: $41.89.
  • B2Gold Corp. (BTO-T, “outperform”) by 10 per cent to $7 from $7.75. Average: $7.33.

Changes for other senior producers were:

  • Agnico Eagle Mines Ltd. (AEM-T, “outperform”) to $86 from $90. Average: $89.98.
  • Kinross Gold Corp. (K-T, “outperform”) to $10 from $9.75. Average: $8.91.

The analysts also revealed their top picks heading into earnings season: “Seniors: Endeavour Mining (EDV, OP, $47.00, DeMarco), Kinross Gold (K, OP, $10.00, Parkin), Newmont (NGT, OP, $81.00, Parkin). Intermediates/Juniors: Aya Gold & Silver (AYA, OP, $12.00, DeMarco) and OceanaGold (OGC, OP, $4.25, Parkin). Royalty Companies: Sandstorm Gold (OP, $8.50, Nagle).”

Elsewhere, with CIBC’s precious metals analysts expecting a “choppy” quarterly earnings season, Cosmos Chiu reduced his targets for Endeavour Silver Corp. (EDR-T) target to $6 from $7 with a “neutral” rating and Osisko Gold Royalties Ltd. (OR-T) to $27 from $28 with an “outperformer” rating. The averages are $6.86 and $25.11, respectively.

“We expect Q3 to be a varied quarter with some companies delivering well, others just slightly below but near enough to expectations, and others well below prior expectations,” the firm said. “This quarter delivered commodity prices, continued costs pressures, and, in some cases,  operational hiccups leading to the back-half-weighted nature of production profiles not materializing. We are focusing on company commentary regarding their outlook for Q4 performance as well as any potential guidance revisions.”

“Our longer-term top picks include companies with high-quality assets with the ability to deliver on guidance, such as Agnico Eagle, Franco-Nevada, Kinross Gold, Lundin Gold, Pan American Silver, Eldorado Gold, and Triple Flag Precious Metals.”


Scotia Capital analyst Maher Yaghi suggests wireless performance could be the “home run that turns things around” for Canadian telecommunications companies, expecting loading results to be “strong due to continuous support from robust immigration and population growth.”

“What a turnaround moment that home run was 30 years ago! Canadian telcos need to put up a similar Joe Carter performance to get their shares moving again against a backdrop of rising rates,” he said in a Monday report. “We think wireless results were very strong in Q3 as a surge in subscribers lifted all boats but will it be enough to get investors bullish again? We often get asked if the valuation for Canadian telcos is now low enough to warrant an overweight position. Given long-term interest rates, the most we can advocate for is a market weight position. We estimate fair valuation for the sector given expected EBITDA growth and interest rates at 7.1 times EV/EBITDA vs the current average of 7.0 times. Given the unrelenting increase in 10 year bond rates, we moved our risk free rate implied in our DCF/WACC valuations to 4.1 per cent and lowered our NAV EBITDA multiples across the board leading to a reduction in target prices.”

Mr. Yaghi predicts third-quarter results across the sector provide more upside than downside estimate revisions, however he thinks stabilization in long-term rates are needed to “put a definitive bottom on valuations.”

He made these target price reductions:

* BCE Inc. (BCE-T, “sector perform”) to $57.25 from $61. The average on the Street is $59.20.

“We expect BCE’s 3Q results to show a slowing trend in revenue growth however, and unlike recent quarters, margins are finally expected to grow y/y lending a hand to improved EBITDA and FCF generation,” he said “Recall that in the first six months of the year the company generated only $1.1-billion in FCF vs a yearly guidance of $3.1-3.4-billion. While we still expect the company to hit the low end of its FCF guidance, all eyes will be focused on this important metric. We expect wireline revenues to show a slight decline year-over-year owning to weakness in enterprise and equipment sales. Wireless on the other hand should continue to enjoy healthy growth supported by strong subscriber growth while we expect ARPU to be flat year-over-year.”

* Cogeco Communications Inc. (CCA-T, “sector perform”) to $75.50 from $83. Average: $76.57.

“CCA continues to slowly ramp up operations to launch wireless services in Canada,” he said. “We see Cogeco trying to follow the same playbook as Comcast by using wireless as a retention tool rather than a profit generating service. Bundling wireline and wireless has the potential to reduce churn by around 0.3-0.5 per cent, a meaningful reduction as long as you can run wireless operations to be at least breakeven. The shares are trading at a sizable discount to fair value, but we await more details on its wireless playbook.”

* Quebecor Inc. (QBR.B-T, “sector perform”) to $35.50 from $38. Average: $38.42.

“While we don’t believe that Freedom has grown market share vs incumbents since re-launch, the growth in the underlying wireless market and recent increased activity specifically in Quebec are likely to lead to a positive surprise print on wireless loading at QBR,” he said. “Another stock that is showing much improved valuations since our last update. We continue to view current capex spending levels as unsustainable long term. ... Valuations are starting to be low enough to offset the expected increase in capex longer term.”

* Rogers Communications Inc. (RCI.B-T, “sector outperform”) to $68 from $73.50. Average: $72.10.

“RCI likely continued to outgrow peers in Q3 supported by wireless,” he said. “Most industry participants we spoke with indicated that Rogers put up a very strong showing in wireless. While cable revenues are likely to have been pressured by a more intense competitive positioning in Western Canada, wireless and synergy delivery should more than offset those pressures. We continue to see the company on the right path to quickly de-lever the balance sheet over the next 2 years and the stock as offering the highest upside potential vs Canadian peers.”

* Telus Corp. (T-T, “sector outperform”) to $27 from $28. Average: $27.75.

“Telus’s 3Q results are unlikely to change the narrative around the stock,” he said. “We expect strong results in wireless, yet again, however consolidated EBITDA growth is likely to be still pressured by TIXT’s results. Directionally we see upside in the shares however they will likely perform better as we get closer to 2024 and the inflection point in FCF generation and deleveraging.”


Canacol Energy Ltd. (CNE-T) “hits the reset button” with its decision to cancel its Jobo to Medellin pipeline Project and strategic entrance into Bolivia, according to Eight Capital analyst Christopher True, prompting him to downgrade his recommendation for its shares to “neutral” from “buy” previously.

The Calgary-based company announced the decision on Oct. 19, citing: “1) the legal, social and security circumstances, 2) dynamics within the Colombian gas market, and 3) the Corporation´s decision to invest in its natural gas exploration programs in the Middle Magdalena Basin and in Bolivia.”

“We think this is a prudent decision in the long run as it 1) removes the pressure of the exploration program to fulfill reserves requirements for the pipeline, 2) allows the company to focus on development and take advantage of higher rate of return projects in a better SPOT market, and 3) will permit CNE to focus on generating FCF and paying down debt, which will be accretive to shareholders,” said Mr. True.

“However, in the near term, we expect the stock to be volatile until the development outlook and the size of the FCF yield which can be delivered are better defined. Because of this, we believe it is better to sit on the sidelines until more color is provided, which is the reason for our NEUTRAL rating.”

With the cancellation of the pipeline, Mr. True thinks Canacol “loses a significant growth catalyst,” and he now sees three “critical” area it needs to address: its free cash flow profile over the coming years; a decision on its dividend and “better colour” on growth opportunities moving forward.

He dropped his target for Canacol shares to $9 from $30. The average is $18.31.

Elsewhere, JP Morgan’s Milene Carvalho lowered Cancol to “neutral” from “overweight” with a $9 target, falling from $17.50.


While Stifel analyst Martin Landry thinks Gildan Activewear Inc. (GIL-N, GIL-T) has a “good set-up for 2024 with lower cotton costs, which could results in a potential mid-teen earnings per share growth rate,” he reduced his 2024 EPS estimate by 11 per cent, warning it’s “increasingly clear” that the Montreal-based company will be impacted by the implementation of the Organization for Economic Co-operation and Developments’ global minimum tax rules starting in the first quarter.

“In October 2021, the OECD released a two-pillar solution to the tax challenge resulting from multinational enterprises (MNEs) exploiting gaps between different countries’ tax systems,” he said. “As part of the proposed initiative, Pillar Two introduces a global minimum effective tax rate of 15 per cent for MNEs with consolidated revenue over €750-million. As of June 2023, approximately 140 countries have agreed to implement this new tax regime, including Canada, Honduras, Barbados and the Dominican Republic.

“On August 4th, 2023, the Department of Finance of Canada released a draft legislation (the Global Minimum Tax Act ‘GMTA’) to implement Pillar Two. Based on the draft legislation, these rules would apply to qualifying companies beginning after December 31st, 2023, in-line with the proposed timing by the OECD. While there might be a ‘grace’ period for companies to adjust to this change and actual timing of implementation could differ, the process appears well underway and could impact Gildan beginning in 2024.”

While Mr. Landry thinks low tax jurisdictions where Gildan is present “may implement mitigating measures to continue to attract investments,” he cautioned that this “visibility on the extent of these measures and timing of implementation is limited.” That prompted him to raise his 2024 tax rate assumption to 15 per cent from 4 per cent previously, leading him to drop his 2024 EPS estimate to $2.92 from $3.30, below the Street’s estimate of $3.10.

“In our view, sellside consensus estimates do not appear to properly reflect the upcoming global minimum tax change and 2024 EPS estimates could be revised downward in the coming months,” he said.

Mr. Landry made the changes despite see Gildan shares remaining “attractively priced at 10 times forward earnings” ahead of the Nov. 2 release of its third-quarter 2023 results.” Despite the tax obstacles, he also expects “a good set-up for 2024 with lower cotton costs, which could results in a potential mid-teen EPS growth rate.”

For the quarter, Mr. Landry is projecting EPS of 71 US cents, down 16 per cent year-over-year and below the current consensus on the Street of 73 US cents.

“We expect Gildan’s Q3/23 revenues to decline by 2 per cent year-over-year, to $833-million, driven by a 5-per-cent decline year-over-year in activewear sales as trade down patterns continue,” he said. “We model an increase of 22 per cent year-over-year in hosiery/underwear sales on new program wins in underwear and to reflect an easy comparable period. The unfavorable product mix is expected to weight on gross margins and to reflect that we model an erosion of 200 basis points year-over-year. Cotton costs are expected to be neutral on a year-over-year basis.”

“Conversations with industry participants indicate that the experiences channel (i.e. music concerts, travel) is seeing strong demand driven by a backlog of events posts the COVID pandemic. However, the digital printing channel, (creator economy) appears to be slowing down. None of our discussion pointed to a major deterioration this summer for the Q3/23 period to be reported by Gildan. However, some industry participants do not anticipate much growth in 2024. While we believe our 2024 forecasts capture these takeaways with a low single-digit growth expectation, there may be further downside risk.”

Maintaining a “buy” recommendation for Gildan shares, Mr. Landry lowered his target to US$34 from US$37. The average on the Street is US$36.62.


RBC Dominion Securities analyst Douglas Miehm warns deteriorating foreign exchange headwinds will weigh on the third-quarter financial expectations for Bausch +Lomb Corp. (BLCO-N, BLCO-T).

Ahead of the Nov. 1 quarterly release, he’s forecasting revenue of US$984-million, down 4.9 per cent from the third quarter (US$1.035-billion) and narrowly below the consensus forecast of US$992-billion. He’s projecting adjusted EBITDA will fall 4.5 per cent to US$171-million, also below the Street’s expectation (US$184-million).

“We believe the strength of the USD vs. the base quarter (Q3/22) will continue to act as a negative influence on reported segmental performance in Q3/23, although to different degrees,” he said. “At the overall level for BLCO, ex-US revenues accounted for approximately 55 per cent of 2022 revenues (down from 57 per cent in 2021 due to weaker FX; FX headwinds were $184-million in FY22 or 5 per cent of revenues). Within the segments, ex-U.S. revenues are the highest for Surgical (approximately 71 per cent), followed by Contact Lenses (64 per cent), Consumer (54 per cent), and Rx (40 per cent).

“On the Q2/23 earnings call, management reiterated expectations of $50-million in FX headwinds for FY23, almost all of which were realized in H1/23 ($31-million in Q1/23 and $18-million in Q2/23). Since the Q2/23 earnings call, FX headwinds have worsened. We expect $12-million of FX headwinds for Q3/23 and $16-million of FX headwinds in Q4/23 (vs. our prior expectation of a small FX tailwind in Q4/23). As such, we expect the company to increase the FX headwind guidance from $50-million in FY23 to $75–80-million. Based on current FX rates, we expect FX headwinds to impact reported performance in FY24 ($65-million of FX headwinds).”

Mr. Miehm also expects investor focus on n the momentum in the underlying business.

“Peer company Cooper (COO; not rated) noted at a recent conference that pricing growth in the contact lens segment this year has been around 2–3 per cent (vs. 0–1 per cent prior to the pandemic),” he said. “We will look for any commentary on the sustainability of strong pricing over time. We will also look for updates on the supply chain challenges that impacted the surgical and contact lens portfolios in Q2/23.

“We expect updated commentary on BLCO’s Rx dry-eye disease (DED) portfolio. Specifically, we will look for commentary on the recently closed Xiidra acquisition and management’s expectations for the product. Xiidra revenues declined 21 per cent year-over-year in H1/23, even as Xiidra TRx were up 4.8 per cent year-over-year in H1/23. Our prior discussions with BLCO management indicated that Novartis (NVS; not rated) was investing in developing a wider market to gain access to more lives, specifically under Medicare, and that resulted in a short-term negative impact on revenue even as volumes were up.”

Maintaining an “outperform” recommendation for its shares, Mr. Miehm lowered his target to US$20 from US$21. The average on the Street is US$21.05.

Concurrently, he also trimmed his target for parent company Bausch Health Companies Inc. (BHC-N, BHC-T) to US$8 from US$9 with a “sector perform” rating. The average is US$8.75.

“We estimate Q3/23 revenue of $2.15-billion (vs. FactSet cons. $2.15-billion) and adj. EBITDA of $773-million (vs. FactSet cons. $811-million),” he said. “We expect the focus to be on: Xifaxan growth, where TRx growth moderated in Q3 (up 0.3 per cent year-over-year for the important 550mg formulation) vs. 2.7-per-cent year-over-year growth in H1/23; updates on the CFO search; and any info on the timelines for a potential distribution of BLCO shares to BHC shareholders under tax-free reduction of capital.”


In reaction to weaker-than-expected third-quarter results, Bear Creek Mining Corp. (BCM-X) was downgraded by Stifel analyst Stephen Soock to “speculative buy” from “buy” previously.

“Gold production came at 9.1koz, 7 per cent below our estimated 9.8koz,” he said. “While the grades came in line, lower processed tons of 125kt vs estimated 133kt, drove the miss to our estimates. BCM has lowered its production guidance to 39-45koz annually (vs 45-55koz previous revised guidance) which was expected as we modeled BCM to achieve 42koz at lower end of guidance. [Friday’s] production results further demonstrate the mine’s slow progress towards operational improvements and continues to struggle.”

Mr. Soock also emphasized Bear Creek’s recent financing arrangements are “showing the dire cash position in which the company has found itself.”

“Though the debt consolidation has pushed ahead near term liabilities, the company has to “show” cash flow generation to continue its operations and this requires a dramatic uptick in head grade,” he said.

The analyst cut his target for its shares to 85 cents from $1.10. The average is 83 cents.

“The stock currently trades at a spot P/NAV of 0.13 times, vs the junior producer average of 0.30 times and explorco average of 0.21 times,” he said. “At this point, we see the stock largely as a cheap option on the large Corani silver project in Peru should a funding package finally materialize.”


In other analyst actions:

* Following Friday’s announcement of “a series of actions to improve its balance sheet flexibility and reduce its convertible debt,” CIBC’s Scott Fletcher lowered his target for Dye & Durham Ltd. (DND-T) to $26 from $28, maintaining an “outperformer” rating, while Scotia’s Kevin Krishnaratne cut his target to $25 from $30 with a “sector outperform” recommendation. The average is $25.29.

“Management’s announced balance sheet moves on Friday, which see DND reduce its 2026 convertible debt maturities by $95-million to $250-million (mainly via issuance of $85-million converts due 2028), are a step in the right direction to help address leverage concerns,” said Mr. Krishnaratne. “We also view commentary that Q1/24 results will be in line with expectations (i.e., similar to Q4) as positive. Shares of DND are down nearly 50% since Q4 mid-September on what we believe are multiple factors including the company’s high leverage (we model 5.0 times total debt to LTM Adj. EBITDA in Q1/24 moving below 3.8 times by FY25), its exposure to real estate transactions, and broader weakness in small-cap tech. While we appreciate these concerns, we view the big sell off as presenting a compelling opportunity, with the stock now trading at CY24 estimated FCF yield ex-restructuring 19 per cent or 15.5 per cent including restructuring expenses vs. high leverage/high margin SW peers 7.5 per cent.”

* Raymond James’ Farooq Hamed lowered his Ero Copper Corp. (ERO-T) target to $26 from $28 with a “market perform” rating. The average is $28.59.

“Overall we expect a mixed quarter with sequentially weaker production and higher costs from Caraiba partially offset by a strong quarter from Xavantina,” he said. “Through the year the BRL has strengthened versus ERO’s fx assumption of 5.3 BRL:USD and as such we have increased our capex estimates for the existing operations as well as for the build at Tucuma.”

* Jeffries’ Stephanie Moore cut her GFL Environmental Inc. (GFL-N, GFL-T) target to US$43 from US$44 with a “buy” rating. The average is $42.79.

* After a tour of its recently built industrial facility development projects south of the border, Raymond James’ Brad Sturges lowered his Granite REIT (GRT.UN-T) target to $90 from $94, keeping a “strong buy” rating. The average is $93.40.

“While Granite may carry greater transitional vacancy in 2H23, we believe the successful lease-up of Granite’s U.S. vacancies may act as a near-term positive unit price catalyst,” he said. “Granite remains positioned to generate above-average AFFO/unit growth year-over-year, in our view, based on embedded contractual rent bumps, and strong rent spreads realized in Granite’s new and renewal leasing.”

* Scotia Capital’s George Doumet lowered his Premium Brands Holdings Corp. (PBH-T) target by $1 to $129, reiterating a “sector outperform” rating. The average is $122.78.

“Premium Brands has generated the highest year-to-date return (up 12 per cent) among the three [food] processors, but has seen its shares come off 18 per cent since reporting Q2 results on the back of: (i) concerns around Clearwater, (ii) a marked slowdown at PFD driven by deflation in certain products and (iii) a significant increase in rates that disproportionately impacted more levered/M&A focused names,” said Mr. Doumet. “While we expect some transitory impact from weaker lobster sales (the reason we are below consensus for the quarter), we expect an acceleration in the top line (as new capacity comes online) and meaningful gains in margins (operating leverage, improved utilization and lower input costs). In our view, PBH’s five-year plan of generating 10-per-cent annual organic top-line growth is achievable, and we view the company’s adj. EBITDA margin target of 10 per cent as overly conservative (we think it can get closer to 12 per cent plus).”

* Jefferies’ Lloyd Byrne increased his Suncor Energy Inc. (SU-T) target to $50 from $47 with a “hold” rating. The average is $54.

* Reinstating coverage following its convertible debenture bought deal financing, Stifel’s Michael Dunn raised his Surge Energy Inc. (SGY-T) target to $12.50 from $11.75, keeping a “buy” rating. The average is $12.73.

“We rate the shares a BUY. Surge offers significant exposure to very attractive rate of return oil plays in the Sparky in Eastern Alberta and the Frobisher and Midale in SE Saskatchewan, from which it now derives three-quarters of its production following the recent acquisition of Enerplus assets, and offers a high-torque vehicle for investing in higher oil prices,” said Mr. Dunn. “We would not be surprised to see Surge continue to transition its asset base from here, while it looks to trim debt following the recent acquisition.”

* RBC’s Luke Davis raised his target for Tamarack Valley Energy Ltd. (TVE-T) to $5.50 from $5 with an “outperform” rating. The average is $6.06.

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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 26/01/24 11:59pm EST.

SymbolName% changeLast
Agnico Eagle Mines Ltd
Aris Gold Corporation
Aya Gold and Silver Inc
Bausch Health Companies Inc
Bausch Lomb Corporation
Bear Creek Mining Corp
B2Gold Corp
Canacol Energy Ltd
Cogeco Communications Inc
Dye & Durham Ltd
Endeavour Silver Corp
Endeavour Mining Corp
Ero Copper Corp
Fortuna Silver Mines Inc
Gfl Environmental Inc
Gildan Activewear Inc
Granite Real Estate Investment Trust
Kinross Gold Corp
K92 Mining Inc
Marathon Gold Corp
Newmont Corp
Osisko Development Corp
Osisko Gold Royalties Ltd
Pan American Silver Corp
Premium Brands Holdings Corp
Quebecor Inc Cl B Sv
Rogers Communications Inc Cl B NV
Suncor Energy Inc
Surge Energy Inc
Tamarack Valley Energy Ltd
Telus Corp
Torex Gold Resources Inc

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