Inside the Market’s roundup of some of today’s key analyst actions
Loblaw Companies Ltd. (L-T) is “well-positioned” to benefit from the reopening of the economy, according to Desjardins Securities’ Chris Li, who expects its “comps will get easier in 2Q.”
Following Wednesday’s release of stronger-than-expected first-quarter results and management acknowledging that its target of 10–15-per-cent earnings per share growth target 2021 is conservative, the equity analyst “significantly” increased his projections for the country’s largest grocer.
“While this was partly expected by the market, evidence of more consistent execution should result in further share price appreciation,” said Mr. Li in a research report
Before the bell, Loblaw reported earnings per share of $1.13, easily exceeding both Mr. Li’s 92-cent estimate and the consensus projection of 87 cents. He attributed 40 per cent of the outperformance to its financial services results and 60 per cent from food and drugs, particularly better-than-anticipated gross margins.
“Judging by the muted share price reaction (up less than 2 per cent), our sense is that the positive 2021 outlook was partly expected and investors are taking a ‘show me’ approach, waiting for more consistent execution,” the analyst said. “Funds flow out of staples could limit near-term upside.”
In response to the results, Mr. Li raised his 2021 EPS projection to $5.05 from $4.58, implying 24-per-cent growth for the year. His 2022 estimate increased to $5.50 from $5.07.
“We believe our $5.05 EPS forecast is conservative considering that non-recurring COVID-19-related costs, share buybacks and improvement in financial services profitability alone should drive $1.00 of EPS growth, getting close to our forecast,” he said. “There is further upside from profitability improvement in the core food and drug business. Partial offsets could come from an increase in competition and slowing food sales as L cycles through improved sales from last year.”
Keeping a “hold” recommendation for Loblaw shares, Mr. Li raised his target to $77 from $75. The average on the Street is $78.91, according to Refinitiv data.
Other analysts making target price adjustments following the release include:
* RBC Dominion Securities’ Irene Nattel to $96 from $94 with an “outperform” rating.
“We have maintained that accelerating top-line growth and conversion are key to narrowing L’s relative valuation gap,” said Ms. Nattel. “Results in Q1 are supportive of our constructive thesis: enhanced focus on operating efficiency despite ongoing investments in growth initiatives should enable Loblaw to deliver at or above targeted EPS growth of low teens in 2021, particularly with shift in senior management taking effect tomorrow. COVID is continuing to disrupt elements of retail, but normalizing footfall in the discount channel, roll-off of certain pandemic costs, and reopening of high-margin departments should sustain momentum.”
* CIBC World Markets’ Mark Petrie to $87 from $78 with an “outperformer” rating
“Loblaw delivered blowout Q1 results that leveraged the strong pandemic demand with substantially improved margin discipline,” he said. “Management held back on increasing its low-double-digit EPS guidance, though we view this as a near certainty. We continue to see attractive value in L shares and believe it is both the best-positioned grocer for re-opening, but should also deliver strong near-term performance lapping 2020 challenges.”
* Scotia Capital’s Patricia Baker to $73 from $72 with a “sector perform” rating.
* ATB Capital Markets’ Kenric Tyghe to $85 from $83 with an “outperform” rating.
* National Bank Financial’s Vishal Shreedhar to $77 from $76 with an “outperform” rating.
Following a “strong” first quarter with sales coming in “well above” expectations, Citi analyst Paul Lejuez thinks Gildan Activewear Inc.’s (GIL-N, GIL-T) path to its target of reaching an operating margin of 18 per cent is “getting more clear.”
Mr. Lejuez said that objective depends on revenue recovering to 2019 levels, which he projects to occur in fiscal 2022, however he did warn there “could be some bumps along the way as comfort around large gatherings (concerts, sporting events) may ebb and flow.”
On Wednesday, the Montreal-based manufacturer reported adjusted earnings per share of 39 US cents, blowing past both Mr. Lejuez’s 21-US-cent projection and the consensus estimate of 19 US cents. Sales rose 28 per cent, topping the Street’s expectation of 6 per cent.
“Activewear performed very well (up 30 per cent) and was slightly below 2019 levels, though benefitted from restocking,” said the analyst. “Hosiery & Underwear also performed well up 21 per cent but remains 20 per cent below 2019 levels. Management commented that POS is trending down 10 per cent, slightly better than 1Q. Adjusted gross margin expanded 340 basis points to 34.1 per cent and is expected to remain near these levels for the rest of the year.”
Citing the “strong” sales results and an improving margin outlook, Mr. Lejuez increased his 2021 and 2022 EPS estimates to US$1.99 and US$2.50, respectively, from US$1.63 and US$2.14.
That led him to raised his target for Gildan shares to US$36 from US$31 with a “neutral” recommendation (unchanged). The average on the Street is US$36.86.
“GIL is a leader in the ‘imprintable’ activewear market and has developed a solid innerwear (underwear and hosiery) business,” said Mr. Lejuez. “Although being a low-cost producer enables the company to pivot and win private label business as mass merchants move away from branded products, this still results in GM pressure. In addition, there is limited visibility in the activewear business in 2020 and 2021 and the macroeconomic environment is very uncertain.”
Other analysts making target changes include:
* RBC Dominion Securities’ Sabahat Khan to US$41 from US$35 with an “outperform” rating.
“Gildan reported strong Q1 results which reflected better-than-expected performance across the Income Statement,” said Mr. Khan. “The outperformance relative to our forecasts was driven by stronger-than-expected contribution from the Activewear segment, where trends have improved well ahead of Street expectations. Management commentary indicated that trends improved sequentially into Q2 (more on this below), and the improved outlook has led the company to reinstate its dividend (following its suspension in Q1 2020). We are encouraged by the strong Q1 print and the supportive commentary regarding demand trends, and have revised our 2021 and 2022 forecasts higher to reflect our improved outlook.”
* BMO Nesbitt Burns’ Stephen MacLeod to US$41 from US$37 with an “outperform” rating.
“We continue to believe Gildan is well-positioned to maintain its pricing leadership position and aggressively pursue market share gains as demand continues to recover in H2/21E and into 2022E,” he said.
* Desjardins Securities’ Chris Li to $51 (Canadian) from $45 with a “buy” rating.
“GIL’s stronger-than-expected 1Q results show that the recovery is on track and ‘Back to Basics’ has rightsized GIL’s cost structure to support its 18-per-cent EBIT margin target once sales return to pre-pandemic levels. While trading will likely remain volatile in the near term, we reiterate our positive long-term view,” said Mr. Li.
* CIBC World Markets’ Mark Petrie to US$41 from US$36 with an “outperformer” rating.
“We continue to believe GIL is well-positioned to benefit from economic recovery and re-opening of large events and tourism. We see 2019 revenue as achievable in 2022, and expect margins to close in on the 18-per-cent operating margin target, and cash flow to remain robust,” said Mr. Petrie.
* Scotia Capital’s Patricia Baker to US$42 from US$37 with a “sector outperform” rating.
* National Bank’s Vishal Shreedhar to $50 (Canadian) from $45 with an “outperform” rating.
After its first-quarter results were “stronger” than expected across almost every metric and seeing its operations in “good shape” to meet or exceed its 2021 guidance, RBC Dominion Securities analyst Michael Harvey reiterated his view of Tourmaline Oil Corp. (TOU-T) as a “best of breed producer” and reaffirmed its place on the firm’s “Global Energy Best Ideas List.”
After the bell on Wednesday, the Calgary-based company reported 411,579 barrels of oil equivalent per day, exceeding both Mr. Harvey’s 403,055 boe/d estimate and the consensus forecast of 402,228 boe/d. That drove cash flow per share of $2.11, also topping projections ($1.99 and $1.96 respectively).
“We now see TOU generating roughly $1.4-billion in FCF [free cash flow] during 2021, corresponding to an approximate 17-per-cent FCF yield at the RBC price deck (16 per cent at strip),” he said. “We forecast continued debt repayment and an additional dividend increase later this year, and note the company’s NCIB which is in place (and yet unused) which allows the company to repurchase and cancel up to 13.5 million TOU shares.”
“In our view, A&D/M&A remains a likely use of free cash.. .. though we anticipate focus and capital to shift towards the Montney Northern Fortress as opposed to the Deep Basin. That said, we do not factor out a possibility of bolt-ons in the Deep Basin in core focus areas such as where the Jupiter transaction was completed.”
Seeing its operations “in good shape” and balance sheet “in great shape,” Mr. Harvey raised his target for Tourmaline shares to $36 from $33 with an “outperform” recommendation (unchanged) after increasing his financial projections for fiscal 2021 and 2022. The average target is currently $34.
Elsewhere, Scotia’s Cameron Bean increased target by $1 to $41 with a “sector outperform” rating, while Canaccord Genuity’s Anthony Petrucci raised his target to $34 from $32.50 with a “buy” rating.
Seeing a “compelling re-rating case,” BMO Nesbitt Burns analyst Étienne Ricard upgraded Equitable Group Inc. (EQB-T) to “outperform” from a “market perform” recommendation, believing its relative valuation discount has “room to narrow.”
“We believe the case for comparing EQB to small-capitalization Canadian banks (e.g., CWB) is becoming increasingly defendable, underpinned by a diversifying portfolio and funding sources as well as a long-term 13-per-cent earnings growth track record,” he said. “In addition, as EQB transitions to AIRB potentially by 2023, we anticipate the bank to be in an enhanced competitive lending position. EQB’s valuation (9.5 times forward P/E) remains at a significant discount to regionals banks (10.7 times forward P/E), despite a stronger EPS growth and ROE outlook.”
“We did miss the first leg of EQB’s re-rating, underestimating the recovery in certain end markets and pace of progress to portfolio and funding diversification. We do recognize risks of a housing slowdown remain although we are becoming increasingly comfortable with the growth outlook given the diversity of EQB’s end markets and resiliency of credit losses to date.”
Following the release of better-than-expected first-quarter results and an increase to its full-year guidance after the bell on Tuesday, Mr. Richard said the Toronto-based firm is executing on its strategy, “providing shareholders with an increasingly diversified bank, both on the asset (prime, commercial mortgages) and liability (EQ Bank, deposit notes, covered bonds) sides of the balance sheet.” He also emphasized “visibility into medium-term objectives of mid-teens ROE and 12-15-per-cent EPS CAGR becoming increasingly clear.”
Touting its diversifying funding sources and accelerating loan portfolio growth, he raised his target for its shares to $170 from $138. The average on the Street is $163.75.
“We believe the risk-reward profile is attractive,” he said.
Meanwhile, Scotia’ Meny Grauman raised his target to $155 from $149 with a “sector perform” rating.
Following “very strong” first-quarter results that were “significantly” ahead of expectations, TD Securities analyst Michael Tupholme sees an “attractive” valuation for Russel Metals Inc. (RUS-T), leading him to raise his rating to “buy” from “hold.”
“Our upgrade largely reflects: 1) our positive views around the benefits related to Russel’s OCTG/line pipe business rationalization (i.e., repatriation of capital, which improves an already healthy balance sheet, at limited cost to earnings); and 2) what we see as an attractive valuation on the stock (even relative to our potentially conservative 2022 estimates), with room for near-term multiple expansion given where key peers are trading,” he said. “Further, we note that RUS’ dividend yield remains healthy at 5 per cent.”
On Wednesday, the Mississauga-based metals distribution and processing company reported adjusted EBITDA of $129-million, exceeding both Mr. Tupholme’s $85.8-million estimate and the consensus projection of $82-million. Consolidated revenue of $885-million was a rise of 32 per cent from the previous quarter and also above expectations ($825-million and $824-million, respectively).
“Steel prices increased substantially in the latter part of 2020 and early-2021 on improved demand and tight availability (US HRC at US$1,481/ton, up 220 per cent year-over-year), which helped Russel realize holding gains and report what appear to be record gross margins in its Service Centers and Steel Distributors segments,” the analyst said. “Looking ahead, although we suspect that it will be difficult for Russel to sustain Q1/21′s incredibly strong margin performance, encouragingly, we see several factors that point to continued steel price strength over at least in the near term, and potentially longer. That said, in an effort to be conservative, we have developed our Russel forecast based on the assumption that steel prices will trend back down to their long-term historical averages by mid-2022.”
After raising his financial estimates to reflect current steel market strength, Mr. Tupholme hiked his target to $37 from $26. The average is $31.18.
Elsewhere, RBC’s Devin Dodge hiked his target to $37 from $31 with an “outperform” rating, while Scotia Capital’s Michael Doumet raised his target to $32 from $28.50 with a “sector perform” rating.
“We have updated our model following Q1 results and revised our margin estimates upwards as the company begins to realize benefits of previous investments. We expect Russel to generate strong earnings in the current steel price environment and benefit going forward from the company’s improving margin profile,” said Mr. Dodge.
Pointing to its “accelerating” debt reduction and an “improving” outlook following better-than-anticipated financial and operational results in the first quarter, CIBC World Markets analyst Jamie Kubik upgraded Paramount Resources Ltd. (POU-T) to “neutral” from “underperformer.”
On Wednesday, Paramount reported quarterly volumes of 80,540 barrels of oil equivalent per day driven by outperformance at its Karr facility, well ahead of the Street’s estimate of 75,654 boe/d. That led to adjusted funds from operations per share of 69 cents, exceeding the Street’s forecast by 5 cents.
“The company’s year-to-date asset sales, along with its improved free cash flow profile, have served to meaningfully reduce Paramount’s expected debt levels beyond what we anticipated coming into 2021,” he said. “In addition, we see good flexibility in the discretionary portion of POU’s 2022 capital program to moderate spending should commodity prices drift lower from here.
“The stock is not cheap on current metrics, trading at 4.6 times 2021 estimated EV/DACF (above peers at 3.9 times), but our revised estimates see valuation improving to 3.0 times in 2022 (peers at 3.3 times). We also see POU’s balance sheet moving to 0.4 times D/CF in 2022E on recent strip pricing, which is below peers at 1.0 times. Although we do expect the company’s hedge book will be a drag on near-term cash flows with WTI swaps at US$47/Bbl through the end of 2021, we have greater comfort over Paramount’s operational execution through H2/21 and into 2022 following multiple strong quarters in a row, and expect the tailwinds on crude pricing should persist into that time frame.”
Mr. Kubik increased his target to $15 target from $11.50 and exceeding the $12.70 average.
“Although we have not given any credit in our near-term estimates, we are also intrigued by the longer-term potential of the company’s carbon-capture initiatives announced [Wednesday] morning, which could carry upside for investors beyond the 2022 time frame,” he added.
Elsewhere, RBC’s Michael Harvey bumped up his target to $15 from $13 with a “sector perform” recommendation and BMO’s Ray Kwan increased his target by $1 to $17 with an “outperform” recommendation.
“Q1/21 results were solid and came in ahead of our forecast on both production and AFFO, continuing a trend of operational outperformance,” said Mr. Harvey. “Our ’21 estimates increase as the company bumps up its guidance outlook and provided 2022 disclosures. Our SP rating remains unchanged with target to $15 on higher estimates, with improving balance sheet metrics aided by well-timed dispositions at accretive metrics.”
After its first quarter was a “bit light” and emphasizing a lack of bookings in sight, Raymond James analyst Andrew Bradford lowered Enerflex Ltd. (EFX-T) to “market perform” from “outperform.”
On Wednesday after the bell, the Calgary-based company reported EBITDA of $30-million, missing Mr. Bradford’s $34-million projection as well as the $35-million consensus estimate. He attirbuted the miss to a lower-than expected conversion of its U.S. Engineered Systems backlog, which led to lower U.S. revenue and lower margin.
“Enerflex stock has outperformed its U.S.-based compression comparative group year-to-date (average and median) and has performed within the range of other Canadian and U.S. OFS stocks,” the analyst said. " At the same time, we’re reducing our near-term EBITDA outlook based on (a) a lack of visibility for increased U.S. bookings expressed in the MD&A, and; (b) our moderated outlook for U.S. margins due to lower pricing within the backlog. As a result, we are reduced rating to Market Perform.
“Notwithstanding Enerflex’s strategic orientation toward investing in assets and projects with recurring revenue outlooks, we believe its near- and mid-term stock performance will be heavily influenced by Engineered Systems bookings and the outlook for these bookings - particularly from its U.S. division. And while its true U.S. bookings did increase sequentially, at US$35-million, U.S. 1Q bookings were still running at roughly one-quarter of what we would consider normalized levels; and with one-third of 2021 in the rearview mirror, there is no visible bookings recovery on the horizon. Our view is that these bookings will necessarily increase, but it increasingly seems this will take longer than our traditional forecasting methods would suggest.”
Mr. Bradford trimmed his target to $9.25 from $9.50. The average on the Street is $10.88.
In other analyst actions:
* In the wake of Wednesday’s release of its quarterly results, a group of analysts raised their targets for Brookfield Business Partners LP (BBU-N, BBU.UN-T). They include: National Bank Financial’s Jaeme Gloyn to US$56 from US$50 with an “outperform” rating; CIBC’s Nik Priebe to US$55 from US$50 with an “outperformer” rating; Scotia Capital’s Phil Hardie to US$55 from US$50 with a “sector outperform” rating and BMO Nesbitt Burns’ Devin Dodge to US$57 from US$48 with an “outperform” rating. The average target on the Street is US$53.29.
“While Q1 results were solid and demonstrated continued momentum in BBU’s profit improvement plans, the potential partial monetization of its two largest investments (Clarios, Westinghouse) are the most meaningful near-term catalysts for the units,” said Mr. Dodge. “We have increased our target multiples for these businesses, but we believe there continues to be upside to the valuations in our NAV. BBU remains one of our preferred ideas in our coverage.”
* A group also raised their Constellation Software Inc. (CSU-T) targets, including: Scotia Capital’s Paul Steep to $2,000 from $1,900 with a “sector outperform” rating; RBC Dominion Securities’ Paul Treiber to $2,100 from $2,000 with an “outperform” rating; CIBC’s Stephanie Price to $2,000 from $1,760 with an “outperformer” rating and BMO’s Thanos Moschopoulos to $2,000 from $18.50 with an “outperform” rating. The average is $1,961.82.
“Constellation reported Q1 revenue, adj. EBITDA and adj. EPS above consensus estimates,” said Mr. Treiber. “Organic growth is picking up, while acquisitions are contributing more than our estimates. While Q1 capital deployed on acquisitions was below our expectations, it may reflect lower purchase prices (and higher returns). FCF per share up 39 per cent year-over-year validates the resiliency and scalability of Constellation’s model.”
* National Bank Financial analyst Rupert Merer downgraded Dirtt Environmental Solutions Ltd. (DRTT-Q, DRT-T) to “sector perform” from “outperform” with a US$3.50 target, up from US$3. The average is US$2.88.
* RBC Dominion Securities analyst Sabahat Khan raised his Toromont Industries Ltd. (TIH-T) target to $117 from $105 with an “outperform” rating, while National Bank Financial’s Maxim Sytchev increased his target by $1 to $108 with an “outperform” rating, Scotia Capital’s Michael Doumet raised his target to $118 from $115 with a “sector outperform” rating and CIBC’s Jacob Bout moved his target to $106 from $100 with a “neutral” rating. The average is $109.22.
“TIH reported a solid quarter driven by growth in equipment sales, and posted a strong uptick in backlog and bookings,” said Mr. Bout. “This is a function of improvement in both base and precious fundamentals, and the solid infrastructure/housing outlook. Clearly, customer confidence is high, despite near-term COVID-19 restrictions weighing down on rental (and, to a lesser extent, product support) demand. The good mix of buying behaviour across industries and product categories (not only large iron equipment, but also smaller compact equipment used in the construction industry) is also encouraging. The company does not believe that the higher bookings is a result of a pullforward impact from potential CAT delivery issues (due to semiconductor shortages), the higher Canadian dollar, or higher steel prices.”
* BMO Nesbitt Burns analyst John Gibson raised his Black Diamond Group Ltd. (BDI-T) target to $5 from $4.25 with an “outperform” rating. The average is $4.35.
“BDI reported another solid quarter, driven by growth in recurring revenue levels and another record from its MSS segment after a full quarter of contribution from Vanguard,” said Mr. Gibson.
* National Bank Financial analyst Gabriel Dechaine raised his Great-West Lifeco Inc. (GWO-T) target to $36 from $33, exceeding the $35.39 average, with a “sector perform” rating.
* Mr. Dechaine also raised his Sun Life Financial Inc. (SLF-T) target to $71 from $69 with an “outperform” rating. The average is $71.15.
“We expect the favourable backdrop for ag and fertilizer markets should support stronger earnings and cash generation across the business and see current 2021 company guidance as conservative,” said Mr. Wong. “We think investors were encouraged to hear new CEO Mayo Schmidt committing to the integrated strategy while highlighting potential opportunities for operational improvements, and we expect that investors can now re-focus on strong underlying fundamentals.”
* RBC’s Paul Quinn increased his target for Acadian Timber Corp. (ADN-T) to $18 from $17 with a “sector perform” rating. The average is currently $18.30.
“Acadian Timber reported Q121 results that were largely in line with our forecast but slightly below consensus expectations as operations were negatively impacted by adverse operating conditions,” said Mr. Quinn While strength in lumber markets is a positive, we’d still rather own lumber producers outright than log suppliers as regional log markets appear mostly balanced. While the start-up of LP’s Houlton siding mill next year should help hardwood pulpwood demand, we think that the ultimate impact will be marginal.”
* RBC’s Pammi Bir raised his RioCan REIT (REI.UN-T) target to $23 from $21 with a “sector perform” rating. The average is $21.97.
“While the outlook for retail fundamentals is certainly not ‘smooth sailing’, the worst of the rough waters appears to have passed,” said Mr. Bir. “We expect traction in fundamentals will continue to build as re-opening plans ramp up, supporting a healthy recovery in SP NOI. The acceleration of capital recycling highlights an appetite for retail and support for underlying asset values. Net-net, we see drivers to support a further valuation recovery.”
* RBC’s Luke Davis raised his target for Athabasca Oil Corp. (ATH-T) to 85 cents from 50 cents, maintaining a “sector perform” rating. The average is 50 cents.
“Athabasca’s continued focus on maintenance activity and improved financial capacity likely enhances the company’s positioning for a debt refinancing,” said Mr. Davis. “As a result, we view a resolution as increasingly likely given supportive commodity pricing and associated cash generation.”
* CIBC World Markets analyst Nik Priebe raised his Trisura Group Ltd. (TSU-T) target to $180 from $140 with an “outperformer” rating, while National Bank Financial’s Jaeme Gloyn increased his target to $218 from $205 with an “outperform” recommendation. The average is $152.75.
“Trisura reported another strong earnings beat in Q1, driven largely by a sharp decline in the Canadian loss ratio. The Canadian segment printed an impressive quarter on several other fronts as well, including premium growth of 74 per cent and a declining expense ratio. The U.S. platform delivered a more modest quarter of premium growth after an abnormally strong Q4, but has maintained an impressive trajectory overall,” said Mr. Priebe.
“We have lowered our near-term growth projections (2022E revenues reduced by 33 per cent), and see increasing risks to the long-term TAM potential for fuel cells in heavy duty motive applications as battery-electric innovations appear to be outpacing developments in the hydrogen economy,” said Mr. Patel. “At the same time, we believe the market will ascribe higher discount rates to growth projections across the entire electric mobility space given the recent wave of short reports/accounting/disclosure issues that have led to greater scrutiny of company order pipelines and technology claims.”
* RBC Dominion Securities’ Sabahat Khan raised his target for Jamieson Wellness Inc. (JWEL-T) by $1 to $43 with an “outperform” rating. The average is $43.86.
“Jamieson delivered Q1 results in line with RBC/Street expectations and reiterated its 2021 guidance across all metrics,” he said. “Recent investor discussions have focused on the outlook for VMS industry demand through 2021 and Jamieson’s ability to deliver in line with its guidance/Street expectations as we (hopefully) move beyond the impact of the pandemic this year. Q1 results should provide investors with increased confidence that the company has provided reasonable guidance, which is achievable and takes the fluid operating backdrop into account.”
* TD Securities analyst Daniel Chan raised his Kinaxis Inc. (KXS-T) target to $175 from $165 with a “buy” rating, while Scotia Capital’s Paul Steep bumped up his target to $180 from $179 with a “sector outperform” rating. The average is $190.
* National Bank’s Adam Shine raised his Spin Master Corp. (TOY-T) target to $53 from $49, topping the average of $43.09, with an “outperform” rating.
* National Bank’s Travis Wood reduced his Parex Resources Inc. (PXT-T) target to $31 from $34, keeping an “outperform” rating. The average is $30.35.
* National Bank’s Maxim Sytchev hiked his target for Stelco Holdings Inc. (STLC-T) to $45 from $36 with an “outperform” recommendation , while Scotia Capital’s Michael Doumet raised his target to $40 from $32 with a “sector outperform” rating and BMO’s David Gagliano bumped up his target to $44 from $37 with an “outperform” rating. The average target on the Street is $39.86.
“Even if investors are unwilling to ‘underwrite’ current EBITDA generation given record-high prices, in our view this FCF generation has meaningful equity valuation uplift implications that remain underappreciated,” said Mr. Gagliano.
* Evercore ISI analyst David Motemaden raised his target for Manulife Financial Corp. (MFC-T) to $31.50 from $30.50, exceeding the $29.36 average, with an “in line” rating.
* Scotia Capital analyst Mark Neville raised his target for shares of Stantec Inc. (STN-T) to $63 from $59 with a “sector outperform” rating. The average is $59.27.
* Scotia’s Orest Wowkodaw increased his Ero Copper Corp. (ERO-T) target to $26 from $25, keeping a “sector perform” rating,, while Canaccord Genuity’s Dalton Baretto bumped up his target to $30 from $27.50 with a “buy” recommendation. The average is $26.59.
“ERO remains our top pick among the Canadian base metals producers (along with CS); we continue to like the company for its ROIC focus, asset operating margins, and exploration potential,” said Mr. Baretto.
* Canaccord Genuity analyst Derek Dley increased his Aritzia Inc. (ATZ-T) to $35, exceeding the $34.69 average, from $31 with a “buy” rating.
“In our view, Aritzia has done a great job of navigating a changing retail landscape by offering an aspirational customer experience within its brick-and-mortar locations and an improved e-commerce platform,” he said. “With over 20 consecutive quarters of same-store sales growth prior to the onset of COVID-19, a robust pipeline of new store openings, healthy balance sheet to support growth and margin enhancement initiatives, and a well aligned management team, we believe Aritzia is deserving of a premium valuation.”
* Mr. Dley cut his target for Maple Leaf Foods Inc. (MFI-T) to $39 from $40, keeping a “buy” rating. The average is $36.07.
“While we recognize investors are unlikely to award Maple Leaf with the full value of its plant-based business given uncertainty surrounding its longer-term potential, the shares appear to be trading at a discount to even the book value of the plant-based segment, which we believe is unwarranted,” he said. “We estimate Maple Leaf’s Meat Protein Group is currently trading at 6.0 times our 2021 EBITDA estimate if we assume the PPG is worth only book value currently, while peers trade at 8.1 times.”
* Desjardins Securities analyst Gary H raised his target for Mosaic Capital Corp. (M-X) to $3.75 from $3.50, matching the consensus, with a “hold” rating.
* Desjardins’ Kevin Krishnaratne raised his target for Photon Control Inc. (PHO-T) to $4 from $3.50, above the $3.75 average, with a “buy” rating.
“Since we initiated coverage over a month ago, PHO shares are up 20 per cent,” he said. “Industry data points have been nothing but positive, with demand for memory and related capex equipment increasing on the back of big tech trends such as 5G, cloud computing and AI. We see PHO benefiting given its sensors are critical inputs for several players in the memory capex industry. Ahead of 1Q results on May 11, we maintain our bullish view.”
* Desjardins’ Chris MacCulloch bumped up his Tamarack Valley Energy Ltd. (TVE-T) target to $4 from $3.75, exceeding the $3.45 average, with a “buy” recommendation, while iA Capital Markets analyst Elias Foscolos moved his target to $3.50 from $3 with a “buy” rating.
“We are increasing our target ... following the company’s strong 1Q21 financial results, reflecting the successful integration of the Clearwater assets,” he said. “The company has significant momentum, both from an operational and M&A perspective, after high grading its asset base and emerging as a bona fide mid-cap producer with a pro forma market capitalization above $1-billion. Longer-term, we still believe that TVE is well-positioned to introduce a dividend in 2022.”
* Mr. Foscolos trimmed his target for Badger Daylighting Ltd. (BAD-T) to $39 from $40 with a “hold” rating. The average is $42.11.
“BAD’s Q1/21 results missed expectations as top line headwinds and seasonal weakness were compounded by operating leverage,” he said. “BAD anticipates a strong recovery in activity, which should in turn drive a positive reversal in operating leverage and more normalized margins. While outlook commentary remains constructive, we believe that the volatility shown in the last two quarterly results warrants a degree of caution.”
* Raymond James analyst Daryl Swetlishoff raised his target for Western Forest Products Inc. (WEF-T) by 15 cents to $2.35 with an “outperform” rating. The average is $2.47.
“Our Outperform rating reflects Western’s attractive valuation, healthy dividend yield, strong balance sheet, and stable Free Cash Flow (FCF) associated with the company’s high margin product offering,” he said.