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

Following Wednesday’s after-market release of fourth-quarter 2021 financial results that fell short of his expectations, National Bank Financial analyst Gabriel Dechaine downgraded Sun Life Financial Inc. (SLF-T) to “sector perform” from “outperform,” citing near-term growth concerns, particularly in its Group lines.

Canada’s second-largest life insurer reported underlying earnings per share for the quarter of $1.53, missing Mr. Dechaine’s projection by 5 cents while exceeding the consensus forecast on the Street by a penny. Excluding roughly a 20-cent benefit from a low tax rate, he estimates the result came in at $1.32 “due in large part to negative claims experience.”

“SLF reported $87-million of mortality losses, tied primarily to COVID-19 related claims in the U.S. Group business,” he said. “It also reported $45-million of morbidity losses in the U.S. and Canadian Group businesses. We note this quarter marked the second consecutive quarter of combined mortality & morbidity losses. While we have previously argued these losses are transient, they have proven larger than expected and emerging issues (e.g., medical cost inflation, mental health claims, etc.) lead us to a more cautious outlook.”

The analyst said earnings growth at its MFS asset management firm, which he calls it most valuable segment, was “impressive,” however he called sales a “mixed story.”

After lowering his estimates to “primarily to reflect higher claims experience,” Mr. Dechaine lowered his target for Sun Life shares to $77 from $79. The average on the Street is $78.54.


In response to “solid” second-quarter results, Canaccord Genuity analyst Aravinda Galappatthige raised WildBrain Ltd. (WILD-T) to “buy” from “hold,” seeing its outlook beyond 2022 remaining “positive.”

“WILD has retraced notably over the past three months – down nearly 25 per cent,” he said. “Given the traction discussed above with their high-profile brands, solid CP trends, and notable upside to the financial outlook post F2022, we have opted to upgrade the stock from Hold to BUY. We have also noted solid consistency in financial performance over the past several quarters, which increases our confidence in the trajectory of the company. Additionally, our call is supported by renewed demand for independent content creators from both strategic and financial players, evidenced by the recent acquisitions of Moonbug, Endeavor Content, MGM and Hello Sunshine for exorbitant valuation multiples (all above 30 times EBITDA).”

After the bell on Tuesday, the Halifax-based media company reported revenue of $153.1-million, up 7.7 per cent year-over-year and well above both Mr. Galappatthige’s $128.4-million estimate and $129-million forecast on the Street. The beat was “sharp” jumps in Consumer Products (35 per cent) and Content Production and Distribution.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $27.3-million slid 6.2 per cent from the same period a year ago, but beat estimates ($25.3-million and $24.5-million, respectively).

“As management continues to reinvigorate its legacy IP with high-profile partners, most recently with respect to Degrassi on HBO Max, the outlook for F2023/24 is further strengthened,” the analyst said. “Recall during its most recent investor day, management alluded to 15-20% revenue growth and 12-17-per-cent EBITDA growth (2022-2024). As the productions of the new seasons for these shows (Yo Gabba for Apple TV+; Strawberry Shortcake, Sonic the Hedgehog, Johnny Test, etc., for Netflix) flow through, we expect to see robust growth in the content side of the business. Perhaps more materially, over time, these reintroductions of high-quality brands are expected to trigger stronger CP revenues. The Q2 result yet again saw a material uptick in consumer products led by Peanuts and highlighted the potential benefits of the new production/distribution deals being struck. Many of the aforementioned brands were major hits historically, and the strategy of the company is to use its full expertise and levers to revive the IP.

“With respect to H2/22, given the strong momentum in CP, tailwind from library licensing on Degrassi (expected to hit Q3/22) and management indications of double-digit growth in Spark, we have projected sharper EBITDA growth, taking us just past the high end of management guidance ($87-93-million).”

Mr. Galappatthige trimmed his target for WildBrain shares to $3.90 from $4.10 due to “modest” adjustments to his free cash flow expectations. The average on the Street is $4.44.

Elsewhere, Scotia’s Jeff Fan trimmed his target to $4.40 from $4.60 with a “sector perform” rating.

“We think the strategy is playing out, but it will take time (likely another year or two) before it translates to sustained strong earnings and FCF,” he said. “Looking immediately ahead, we see strong evidence of a healthy production pipeline building in live action, accompanied by healthy library deals. In Q2, for example, despite tougher year-over-year comp due to the Peanuts library deal a year ago that saw production/distribution revenue double year-over-year last year, production/distribution revenue was down only 11 per cent driven by strong licensing revenue. Consumer products led by Peanuts and Spark are expected to continue to shift towards WILD-owned brands, resulting higher return.”


Echelon Capital analyst Stefan Quenneville initiated coverage of Sernova Corp. (SVA-X) with a “speculative buy” rating, touting its Cell Pouch System (CPS) as a “potential ‘functional cure’ for diabetes and other chronic diseases.”

“In Type 1 Diabetes (T1D), its most advanced indication, the CPS has demonstrated that it is a safe, organ-like environment for implanted pancreatic islet cells to produce healthy levels of insulin and reduce/eliminate insulin dependence, positioning it as a potential functional cure for the most difficult to manage diabetes patients,” he said.

Mr. Quenneville said recent trials by the London, Ont.-based early clinical-stage biotechnology company have shown “very promising safety and efficacy results to date.”

“The CPS appears to be safer than competing clinical-stage devices while better controlling T1D symptoms and pathology, according to recent updates from key competitors, ViaCyte and Beta-O2 (both private),” he said.

“While the CPS technology will first target only the highest-risk T1D patients, the potential transformative impact of reducing or eliminating the need for insulin injections or pumps will garner pricing in the US$100-200K range per course of treatment per patient, resulting in a multi-billion-dollar market opportunity in the context of a US$50-billion-plus global diabetes drug market. Analogous blockbuster opportunities could follow with thyroid disorders and hemophilia A.”

Seeing recent clinical and business milestones as potential catalysts for the stock, he set a target of $3.25 per share. The average is $2.75.

“Sernova will provide preclinical and clinical updates on its technology including on its ongoing T1D trial and the initiation of a Phase I/II trial for its hypothyroidism product,” said Mr. Quenneville. “In the coming year, we expect the Company to announce formal med-tech/pharma partnerships for Cell Pouch distribution and scalable supply of stem cell-derived therapeutic cells to address supply constraints of donor cells for diabetic patients.”


After its fourth-quarter results blew past expectations, National Bank Financial analyst Jaeme Gloyn says Intact Financial Corp.’s (IFC-T) execution is “on point” and sees a re-rating as “imminent.”

The Toronto-based firm reported operating earnings per share of $3.78, topping the consensus forecast on the Street of $2.58 by 47 per cent as well as Mr. Gloyn’s $2.37 estimate.

“IFC’s strong execution continued with another massive operating EPS beat following outperformance of 64 per cent, 37 per cent and 11 per cent in Q3, Q2 and Q1 2021, respectively,” he said. “Strong underwriting profit of $600-million that beat the street at $398-million (NBF $339-million) and investment income of $220-million (street at $192-million) drove the EPS strength. [Last 12 month] operating ROE [return on equity] of 17.8 per cent exceeded our 15.4-per-cent forecast (street 15.5 per cent) and clearly well above our mid-teens OROE expectations. BVPS of $82.34 increased 2 per cent quarter-over-quarter (NBF $80.68 and street $80.90). IFC increased the quarterly dividend $0.09 per share (or 10 per cent) to $1.00 per share (34-per-cent payout ratio on our revised 2022 EPS).”

Mr. Gloyn said the integration of RSA Insurance Group PLC is “unfolding nicely,” pointing to earnings per share accretion and “solid” performance in the U&K and Ireland.

With every segment exceeding his expectations, he raised his target for Intact shares to $225 from $219, keeping an “outperform” recommendation. The average target is $205.92.

“We believe the P&C insurance industry is well-positioned for 2022,” he said. “As it relates to IFC, we believe the next leg of share price appreciation is contingent on proof of execution. Q4-21 results continue to demonstrate management’s strong execution overall (with outperformance in all lines), and in particular, i) the integration of the RSA acquisition (16-per-cent operating EPS accretion in Q4-21), and ii) strong Personal Auto results (helped by frequency still below pre-pandemic levels and stable claims severity).

“We reiterate our view IFC merits a premium valuation as we expect the company will i) successfully integrate and operate RSA’s Canada and UK&I operations (delivering on synergy upside; see details in our December 3, 2020 note); and ii) produce roughly mid-teens OROE through 2023 and beyond. While risk to Personal Auto profitability has risen given inflationary forces seen in the United States, we believe rate increases will continue to outpace loss cost trends over time.”

Others making target adjustments include:

* CIBC’s Paul Holden to $210 from $200 with an “outperformer” rating.

“Exceptionally strong Q4 results and management’s outlook support our positive investment thesis,” he said.

* Raymond James’ Stephen Boland to $217 from $199 with a “strong buy” rating.

“With RSA also delivering 12-per-cent NOIPS [net operating income per share] accretion in the seven months since closing, we continue to highlight IFC as our top pick. We believe the stock should be a core holding for any investor seeking exposure to the North American P&C industry,” he said.

* Desjardins Securities’ Doug Young to $205 from $195 with a “buy” rating.

“We like IFC’s high-quality management, the RSA acquisition and near-term market outlook. That said, as conditions normalize it faces a tough comp in 2022 and 2023,” he said.

* Scotia’s Phil Hardie to $201 from $198 with a “sector outperform” rating.

“The stock is off to a solid start in 2022, and we remain bullish on the outlook. Despite the recent rally, the stock trades in the lower end of the 2.2-2.4-times range we believe is justified. Key catalysts to watch include: (1) stronger-than-expected operational performance once conditions further normalize; (2) upward revisions to accretion targets; and, over the mid- to longer term, (3) demonstrated value creation and performance enhancement from the RSA UK & International platform,” said Mr. Hardie.

* BMO Nesbitt Burns’ Tom MacKinnon to $215 from $205 with an “outperform” rating.


Cameco Corp. (CCO-T) is “well-positioned to benefit from positive trends in uranium,” according to RBC Dominion Securities analyst Andrew Wong

On Wednesday, TSX-listed shares of the Saskatoon-based producer soared 14.3 per cent following the premarket release of better-than-anticipated fourth-quarter 2021 financial results and a 50-per-cent increase to its annual dividend (to 12 cents per share).

“We think recent high contract activity, for both Cameco and the market, likely signals that a renewed contract cycle is gaining momentum,” said Mr. Wong. “Overall, we believe stronger contracting activity and a gradually tightening uranium S&D should support continued improvement in uranium prices over time.”

“We think utilities are starting to focus more on the projected long-term market deficit in the late-2020s/early-2030s. Global renewed interest in and government support for nuclear has likely given utilities more confidence to plan long term. Contract coverage for utilities remains relatively high for the next several years, but contract discussions are turning to longer durations that stretch into the next decade.”

Mr. Wong thinks Cameco’s decision to focus market-related long-duration contracting should prove smart in the long term as it gains leverage to a uranium market, which is set to move into a deficit later this decade.

With this positive view, he remains neutral on its shares, maintaining a “sector perform” recommendation viewing its shares as “fairly valued.”

His target rose to $30 from $29. The average is $36.37.

Elsewhere, Elsewhere, Eight Capital’s Ralph Profiti upgraded Cameco to “buy” from “neutral” with a $38 target, up from $35.

Others making changes include:

* Canaccord’s Katie Lachapelle to $37 from $34 with a “buy” rating.

“Cameco, in our view, remains a go-to stock for investors seeking exposure to improving fundamentals and rising uranium prices as the only large capitalization, pure-play uranium producer listed in North America,” said Ms. Lachapelle.

* CIBC’s Bryce Adams to $39 from $37 with an “outperformer” rating.

“Overall, we view the earnings update as a strong positive. Fundamental strength in the uranium market is transitioning into the long-term contracting market from the spot market. We view management’s continued supply discipline positively, as we expect demand increases to be evident in the latter half of the decade and into the next,” he said.


Finning International Inc. (FTT-T) enters 2022 on a “solid footing,” said Canaccord Genuity’s Yuri Lynk following better-than-expected fourth-quarter results.

He was one of several equity analysts on the Street to raise their price target for shares of the Vancouver-based Caterpillar dealer.

“Having exceeded mid-cycle targets for EPS and ROIC two quarters ahead of schedule, management expects upcycle demand in 2022,” said Mr. Lynk. “Management continues to target mid-teens and above EPS growth during a sustained upcycle, which at the low end implies $2.51 EPS in 2022 from the 2021 base of $2.18. Upcycle demand conditions are supported by ongoing economic growth and commodity prices strength, which in the current constrained supply environment should continue to drive strong demand for used equipment, rentals, and rebuilds.”

Mr. Lynk bumped his target to $46 from $44 with a “buy” rating. The average is $44.67.

Others making changes include:

* Scotia’s Michael Doumet to $45 from $43 with a “sector outperform” rating.

“Finning performed well ahead of expectations; for a third consecutive quarter, it reported record earnings. As expected, inflationary pressures (higher SG&A) and supply constraints (lower sales, but higher gross margins) impacted results. But, at its core, Finning’s higher earnings power is being primarily driven by its enhanced cost leverage and prospects for stronger product support growth,” said Mr. Doumet.

* CIBC’s Jacob Bout to $47 from $45 with an “outperformer” rating.

“FTT reported solid Q4/21 results and is exiting 2021 on a strong note, with 2021 adj. EPS the highest in a decade and two quarters ahead of FTT’s midcycle guidance. Despite supply challenges, the combination of higher revenue (robust backlog levels and continued product support growth momentum) on a lower cost base should continue to lead to double-digit EPS growth in 2022 and 2023 (and we expect FTT to generate strong earnings/FCF as a result of this operating leverage),” he said.

* RBC’s Sabahat Khan to $47 from $43 with an “outperform” rating.

* TD Securities’ Cherilyn Radbourne to $46 from $45 with a “buy” rating.

* BMO’s Devin Dodge to $38 from $35 with a “market perform” rating.


In other analyst actions:

* With the release of updated mineral reserve and resource estimates on Wednesday, National Bank Financial analyst Mike Parkin raised his Yamana Gold Inc. (YRI-T, AUY-N) target to $6.75 from $6.50 with an “outperform” rating. The average is $7.25.

“We feel a modestly higher target valuation multiple is warranted given Yamana’s recent strong track record with respect to guidance, exploration upside and now reserve growth at all of its key assets,” he said.

* Desjardins Securities analyst Benoit Poirier trimmed his target for Héroux-Devtek Inc. (HRX-T) to $25 from $26 with a “top pick” rating, while Scotia’s Konark Gupra cut his target to $24 from $25 with a “sector outperform” rating. Conversely, TD Securities’ Tim James raised his target by $1 to $24 with a “buy” rating. The average is $24.08.

“We are quite pleased that investors were willing to look past the adverse impact of Omicron on HRX’s 3Q results and focus on its long-term potential,” said Mr. Poirier. “While these issues are expected to persist in the mid-term (recovery expected by 2Q FY23), management’s impressive operational track record gives us confidence in its ability to navigate through this challenging environment while unlocking value for shareholders. We reiterate our Top Pick rating for HRX, the only stock rated as such in our coverage.”

* Citi analyst Ryan Levine bumped up his target for Brookfield Infrastructure Partners LP (BIP-N, BIP.UN-T) to US$65 from US$57 with a “neutral” rating. The average is $66.75.

“BIP management has a long term inflationary view, 70 per cent of their contracts are indexed for inflation and is working to put BIP in a position to benefit from inflation. This quarter, BIP has sold a port in Australia and acquired two utilities but is focusing more on towers/fiber & transport deals in near term,” he said.

* Wells Fargo analyst Jonathan Reeder cut his target for Brookfield Renewable Corp. (BEPC-N, BEPC-T) to US$43 from US$50 with an “overweight” rating and Brookfield Renewable Partners LP (BEP-N, BEP.UN-T) to US$40 from US$46 also with an “overweight” recommendation. The averages are US$45 and US$40.96, respectively.

“We reiterate our Overweight ratings on units of BEP and shares of BEPC following a thorough scrub of our model assumptions following BEP’s YE’21 report,” he said. “While our modifications resulted in some near-term upside to our FFO estimates, our outer-year estimates did not change. We continue to be attracted to Brookfield Renewable’s long-term global decarbonization-levered growth prospects and view recent underperformance as providing an attractive entry point for longer-term investors, particularly those with ESG mandates. That said, in the nearer-term, BEP unit and BEPC share price performance many be driven more by macro factors, namely interest rate concerns. We lower our 12-18 month DDM-based price targets down to $40/unit from $46 for BEP and $43/share from $50 for BEPC. Key changes to our DDM assumptions include (1) extending 5-per-cent annual distribution growth assumption out through ‘25 and (2) increasing our discount rate to 8 per cent vs. 7 per cent previously.”

* Canaccord’s Matt Bottomley lowered his target for Canopy Growth Corp. (WEED-T) to $10 from $12 with a “sell” rating, while Cowen and Co.’s Vivien Azer cut her target to $12.50 from $16 with a “market perform” rating. The current average is $11.38.

“Canopy Growth Corp. reported FQ3/22 financial results (ended December 2021) that came in above our expectations on the top line and generally in line with anticipated operating losses for the period,” said Mr. Bottomley. “However, we believe segment performance highlights several areas of concern, most notably in what is now a fourth consecutive quarter of sequentially lower Canadian cannabis sales.”

* BMO Nesbitt Burns analyst Devin Dodge raised his target for Toromont Industries Ltd. (TIH-T) to $126 from $124, keeping an “outperform” rating. The average is $122.22.

* JP Morgan analyst Tyler Langton cut his Wheaton Precious Metals Corp. (WPM-T) target to $64 from $68 with an “overweight” rating. The average is $69.60.

* TD Securities analyst Greg Barnes cut his Agnico Eagle Mines Ltd. (AEM-N, AEM-T) to US$65 from US$80, keeping a “buy” rating. The average is US$75.30.

* Eight Capital analyst Adhir Kadve lowered his target for Bragg Gaming Corp. (BRAG-T) to $16, below the $18.75 average, from $22 with a “buy” rating.

* Acumen Capital analyst Nick Corcoran raised his Boston Pizza Royalties Income Fund (BPF.UN-T) target to $18, exceeding the average by $1, from $17 with a “buy” rating.

“With pandemic restrictions being lifted in various parts of the country, we believe the network is well positioned to benefit from an improved operating environment,” he said.

* Raymond James analyst Brad Sturges raised his BSR Real Estate Investment Trust (HOM.U-T) target to US$23.50 from US$21 with a “strong buy” rating. The average is US$20.65.

“Despite its robust AFFO growth profile this year, BSR still trades below its NAV estimate and lower than the P/AFFO multiple average for its U.S. multifamily peers, providing a compelling investment blend of value and growth,” he said.

* Raymond James’ Farooq Hamed trimmed his Oceanagold Corp. (OGC-T) target to $3, which is 1 cent below the consensus, from $3.50 with an “outperform” rating, , while Scotia’s Ovasis Habib cut his target to $3.25 from $3.75 with a “sector outperform” recommendation.

“OGC provided an overview of new LOM assumptions at its Haile mine following the technical review it conducted in 2021, " he said. “Overall, we view the new LOM plan as a ‘turning of the page’ at Haile as the new mine plan seems to acknowledge previous unrealistic assumptions related to productivity and costs and envisions a smaller operation (in terms of mining rate and throughput). Given the disappointing operating track record of Haile, we are encouraged to see a different approach being proposed however, with significant development work in the near term and remaining LOM sustaining capital increasing by $340-million (80 per cent higher than previous assumptions), we expect it will take some time for this course correction to translate into incremental value at Haile.”


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