Thursday’s analyst upgrades and downgrades

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

National Bank Financial analyst Zachary Evershed sees Boyd Group Services Inc. (BYD-T) approaching an “inflection point” as “the industry gradually recovers and price increases accelerate.”

Accordingly, following Wednesday’s release of better-than-expected first-quarter results that displayed accelerated same-store sales growth, he raised his recommendation for the Winnipeg-based company’s shares to “outperform” from “sector perform” previously.

“Management indicates that thus far in Q2, SSSG is on track to exceed Q1′s 14.7 per cent (13.1 per cent on a per-day basis), which would put Boyd above pre-pandemic levels on a same-store basis,” said Mr. Evershed. “We believe this is driven primarily by pricing, as we estimate Boyd secured 6.4 per cent in hikes as at the Q4 call, bringing rates up to par with inflation seen to Q3/21, and management commentary indicates that pricing increases since then are larger in magnitude. This suggests to us that labour reimbursement rates are catching up to wage pressure, as hourly wages increased 2.3 per cent in March 2022 vs. September 2021.”

The analyst thinks Boyd is likely to push its aggressive M&A strategy to a “support role” in the medium term, focusing on same-store growth and improving pricing. He’s lowered his new locations acquired forecast to 40 in 2022 and 80 in 2023, down from 100 and 125 previously.

“We remain confident in Boyd’s ability to meet its 2025 growth goal as we suspect the company can catch up on M&A later,” he said. “As seven of the top eight players in the industry are PE-backed, rising interest rates are likely to hit competitor buying power more directly. Thus, Boyd can afford to be patient on the acquisition front, potentially acquiring more shops at more attractive multiples further down the line, and focus efforts on core challenges in the immediate term.”

Citing compression in both peer multiples and the broader market, Mr. Evershed reduced his target for Boyd shares to $170 from $200. The average on the Street is $190.15, according to Refinitiv data.

“Though price hikes are following a moving target and supply chain issues persist, we upgrade to Outperform as we believe we are closing in on the margin recovery inflection point,” he said. “Visibility on price hikes remains limited in the near term, but we believe they are inevitable in the long term given carrier incentive alignment, and Boyd is proving itself capable of navigating detours with the potential to come out stronger on the M&A front.”

Other analysts making target adjustments include:

* Desjardins Securities’ Gary Ho to $205 from $225 with a “buy” rating.

“BYD reported a 1Q beat, driven by sustained momentum in SSSG and success with price increase negotiations with insurers,” he said. “However, more is needed to repair margins over the near to medium term. Hence, margin pressure will likely persist. While M&A may take a back seat as management focuses on fixing near-term issues impacting margins, it remains committed to doubling the business by 2025.”

* Scotia’s Michael Doumet to $220 from $240 with a “sector outperform” rating.

“Since labour inflation/constraints and supply chain challenges emerged in the 2H21, we (and investors) have been trying to assess when the many moving parts, including higher labour rates from insurers, higher technician capacity, and parts supply chain improvements would be sufficient to move margins in the positive direction,” he said. “Based on what we heard on the call (and the CPI data), we believe margins have now bottomed. For 2Q, we think margins will be flattish (likely up) as rate increases from insurers outpace labour inflation and as opex leverage improves with higher throughput. While the cadence of the margin improvement is still “anybody’s guess”, the fact that demand far outstrips supply, to us, suggests that insurers will continue to raise prices to attract more repair capacity and reduce lead times. Further, and maybe most importantly, we believe slowing economic growth and decelerating inflation plays play into BYD’s favor. We think BYD exiting this period of depressed margins and accelerating its M&A in 2023 (PE-owned operators that carry more leverage are facing higher interest costs) will trigger multiple expansion. We would be buying on weakness.”

* BMO’s Jonathan Lamers to $165 from $188 with a “market perform” rating.

* Stifel’s Maggie MacDougall to $150 from $185 with a “hold” rating.

* Jefferies’ Bret Jordan to $180 from $225 with a “buy” rating.

* TD Securities’ Daryl Young to $200 from $220 with a “buy” rating.

* CIBC’s Krista Friesen to $168 from $175 with a “neutral” rating.

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Following “weaker” first-quarter results and a “disappointing” disclosure of the expected transition to IFRS17, BMO Nesbitt Burns analyst Tom MacKinnon downgraded Manulife Financial Corp. (MFC-T) to “market perform” from “outperform.”

“Our downgrade reflects two items (1) While MFC points to perhaps a larger than expected 20-per-cent decline in BVPS/10-per-cent decline in core EPS upon transition to IFRS17 in 2023, its disclosure provided little detail to assess MFC’s growth/earnings profile under IFRS17, particularly with respect to the all-important CSM [contractual service margin] (2) Q1/22 missed/low quality/with estimates revised 6 per cent downwards,” he said.

“Given this, and the fact that MFC has outperformed peers by 10 per cent plus year-to-date, we believe it’s best to pause and then reassess how MFC’s KPI’s [key performance indicators], including the CSM, actually unfold in 2023 under IFRS17.”

Mr. MacKinnon cut his target for Manulife shares to $27 from $37. The average is $29.82.

Elsewhere, others making changes include:

* TD Securities’ Mario Mendonca to $34 from $37 with an “action list buy” rating.

* National Bank Financial’s Gabriel Dechaine to $26 from $28 with a “sector perform” rating.

Mr. Dechaine also lowered his Sun Life Financial Inc. (SLF-T, “sector perform”) to $72 from $76, below the $74.54 average, while Mr. Mendonca also cut his target to $72 from $76 with a “hold” recommendation.

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Following “respectable” first-quarter results, RBC Dominion Securities analyst Greg Pardy maintained his “bullish stance” on Imperial Oil Ltd. (IMO-T), citing its “capable leadership team, favorable long-term operating outlook, strong balance sheet and commitment to shareholder returns.”

Exiting the quarter, Mr. Pardy emphasized the Calgary-based company now possesses “abundant” free cash flow, projecting $8.5-billion in 2022 (before dividends of $868-million) based on US$100 per barrel WTI and “anchored” by a $1.4-billion capital program.

“Factored into our outlook is a $2.1 billion (pre-tax) downstream cash flow contribution and cash taxes of $210 million during the last three quarters of 2022,” he said. “We understand that Imperial’s current taxes were limited to about $200 million in the first quarter (a $692 million income statement line item was partially off-set in working capital adjustments). In total, the company expects to pay about $400-million of taxes ’out-the-door’ in 2022, which are expected to increase steeply in 2023. Imperial possesses a strong balance sheet, which should move into a net cash position during the second half of 2022.”

With the results and announcement of its substantial issuer bid to purchase up to $2.5-billion of its common shares, Mr. Pardy raised his target for Imperial Oil shares by $1 to $66, reiterating an “outperform” rating. The average is $66.42.

“Imperial is trading at a debt-adjusted cash flow multiple of 3.8 times (in line with our global integrated peer group avg.) in 2022 and a free cash flow yield of 20 per cent (in line with our peer group avg.) under our base outlook,” he said. “In our opinion, Imperial should command an above average multiple given its low-decline long-life upstream portfolio, impressive operational performance, strong balance sheet and rising shareholder returns profile.”

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Canaccord Genuity analyst Mark Rothschild expects Summit Industrial Income REIT (SMU.UN-T) to continue benefitting from rising rental rates for industrial space in its core markets.

Now seeing an “attractive” entry point following in-line first-quarter results, he raised his recommendation to “buy” from “hold.”

“Industrial fundamentals remain exceptionally robust in Summit Industrial Income REIT’s (Summit) core markets of the GTA (50 per cent of gross leasable area) and Montreal (22 per cent of GLA), and there has been additional upward pressure on rental rates” he said. “In the quarter, the REIT achieved leasing spreads of, on average, 51.5 per cent and, with quarterly results, announced a 3-per-cent increase in the monthly distribution.”

“Year-to-date, Summit’s units have returned negative 17.6 per cent, and the implied cap rate has risen 50 bps from 3.6 per cent at the beginning of the year to 4.1 per cent currently. Industrial fundamentals remain extremely strong in Canada at just 1.6-per-cent availability, compared to 4.9 per cent in the U.S., according to CBRE, and given the high demand and low supply of industrial space, the gap between in-place and market rent across Summit’s portfolio is exceptionally high and leasing spreads are wide. Therefore, we believe the REIT is well positioned for strong FFO and NAV growth for several years.”

Reiterating his bullish view, Mr. Rothschild maintained a $22 target for Summit Industrial units. The average is $24.50.

Others making target changes include:

* CIBC’s Sumayya Syed’s to $22.50 from $24 with a “neutral” rating.

* Desjardins Securities’ Michael Markidis to $24 from $25 with a “buy” rating.

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Pan American Silver Corp.’s (PAAS-Q, PAAS-T) weaker-than-expected first-quarter is likely to be its “low point” in 2022, said Canaccord Genuity analyst Dalton Baretto.

“PAAS’s financial results were largely in line with our estimates, but below consensus,” he said. “Management flagged the same factors that have impacted essentially every mining company in Q1 - the OMICRON variant, inflation pressures on fuel and consumables, and supply chain disruptions. Silver sales and costs were actually better than we had forecasted, but financial results were impacted by higher costs in the gold segment. Full-year guidance was maintained, with management acknowledging that the year will be H2-weighted given the challenges in Q1.”

Despite deeming its results “mostly negative,” he upgraded its shares to “buy” from “hold” with an unchanged US$30 target. The average is US$32.16.

“We like PAAS for its scale, leverage to both Au and Ag, strong balance sheet, and organic growth optionality, and we believe the recent pullback in the share price has presented an attractive entry opportunity for the stock,” he said. “In addition, we see positive potential catalysts on the horizon in the form of ongoing progress updates at the worldclass La Colorada Skarn and Escobal projects.”

Elsewhere, BMO’s Ryan Thompson trimmed his target to US$28 from US$30 with an “outperform” rating.

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Following the release of “strong” first-quarter results and better-than-expected full-year guidance, RBC Dominion Securities analyst Paul Treiber emphasized Sierra Wireless Inc.’s (SWIR-Q, SW-T) “newfound ability to meet strong demand for IoT [Internet of Things] modules through solid supply chain and manufacturing execution.”

After the bell on Wednesday, the Vancouver-based firm reported revenue of US$173-million, up 60 per cent year-over-year and well above the Street’s forecast of US$142-million and its guidance of US$135-150-million. Adjusted earnings per share of 23 US cents also beat the consensus estimate (2 US cents) as its IoT Solutions segment more than doubled its expected growth.

Concurrently, the company announced second-quarter revenue guidance of US$160-175-million, topping the consensus estimate of US$145-million.

“The mid-point of revenue guidance implies 26-per-cent year-over-year growth, down from 60 per cent Q1, which reflects a more normal year-over-year comparable,” said Mr. Treiber. “Above historical year-over-year growth (6-per-cent average over 10 years) reflects Sierra’s strong backlog, along with its ability to secure component supply and manufacture without disruptions.”

“Q1 execution is an early validator of Sierra’s re-prioritization of hardware. Q1 is the second consecutive quarter with actual quarterly revenue and guidance for next quarter’s revenue materially above consensus expectations. The improvement reflects solid manufacturing and supply chain execution, as the company is benefitting from its newly diversified manufacturing footprint and proactive component inventory build ahead of anticipated demand. While IoT modules may remain a low gross margin business, management believes it can continue to execute and generate improved free cash flow.”

After raising his full-year revenue and earnings, Mr. Treiber increased his target for Sierra Wireless shares to US$22 from US$20. The average is US$22.28.

However, he kept a “sector perform” recommendation, warning: “Near-term visibility is high, but fear of the cycle may restrain Sierra’s multiple.”

“Demand is strong and backlog is greater than Sierra’s capacity at the moment,” he added. “Lead times are the longest in the company’s history, extending out to 2023 with non-cancellation terms in some cases. However, with macroeconomic concerns weighing on the broader stock market, investors may fear a potential normalization in demand at some point in the future, which may constrain Sierra’s valuation multiple. Sierra is now trading at 0.8 times FTM EV/S [forward 12-month enterprise value-to-sales], which is in line with the mid-point of its 10-year history (avg. 0.8 times EV/S, range 0.2-2.1 times) and below peers at 1.4 times.”

Other analysts making changes include:

* Raymond James’ Steven Li to US$20 from US$18 with a “market perform” rating.

“Successfully navigated supply chain constraints and pandemic impact to deliver a strong 1Q beat after a challenging 2021. Supply chain remains a headwind (expect till F2023) but SWIR is now in a much improved position to mitigate the ongoing impact of the pandemic after adding new manufacturing sites (Mexico) giving the company manufacturing flexibility with multi-factory production,” said Mr. Li.

* Canaccord Genuity’s T. Michael Walkley to US$27 from US$24 with a “buy” rating

* TD’s Daniel Chan to US$22 from US$19 with a “hold” rating.

* CIBC’s Todd Coupland to US$15 from US$14 with an “underperformer” rating.

* BMO’s Thanos Moschopoulos to US$20 from US$18 with a “market perform” rating.

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Calling it “too inexpensive to ignore,” BMO Nesbitt Burns analyst John Gibson raised Total Energy Services Inc. (TOT-T) to “outperform” from “market perform” following its quarterly earnings release.

“The company’s inexpensive valuation (less than 3 times 2023 EV/EBITDA) screens well relative to our coverage group,” he said. “Combine this with our extremely strong outlook for oilfield service activity levels and pricing into 2023, we now rate TOT shares as Outperform.”

Mr. Gibson raised his target by $1 to $11, which is 44 cents less than the average.

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Citing “turbulence” at its construction stage Magino project in northern Ontario, Canaccord Genuity analyst Michael Fairbairn lowered his recommendation for Argonaut Gold Inc. (AR-T) to “sell” from “hold.”

“Overall, Argonaut had a strong operational quarter, with production, sales, and costs all coming out ahead of our forecasts. This was overshadowed, in our view, by further challenges at Magino, where the company flagged the potential for additional cost overruns and a possible labour action, while noting its pending financing gap may cause disruptions as early as this year,” he said. “As the weakness in the bond market continues we do not believe there are a lot of good options to plug the balance sheet hole.”

Mr. Fairbain estimates Argonaut will face a $225-million funding gap to complete Magino, which could come as early as the third quarter of the current fiscal year.

“Management is currently assessing financial and strategic solutions, including the possible sale of shares, increasing debt leverage, or the sale of mineral properties (which we believe may include a strategic sale of the company),” he said. “While management remains cautiously optimistic that it will find a solution by the end of Q2/22, the company also flags that should it be unable to close the gap promptly and upon acceptable terms, AR may need to adjust its construction plans for the Magino project. This would significantly impact the project schedule and increase expected capital.”

The analyst trimmed his target for Argonaut shares to $1.50 from $2.75. The average is $3.36.

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Following lower-than-expected first-quarter results, Raymond James analyst Frederic Bastien downgraded Dexterra Group Inc. (DXT-T) to “outperform” from “strong buy.”

“Dexterra’s ambitions to build an infrastructure support services champion are gradually coming into focus,” he said. “The company is taking advantage of a strong commodity price environment for its WAFES segment to scale its Facilities Management (FM) business and accelerate its transition to a diversified and asset-light business model. We approve of the recent acquisitions of Dana and Tricom, in particular, since they augment DXT’s position in verticals that will profit disproportionately from reopening economies (including transit, education, hospitality, and entertainment). Unfortunately, Modular Solutions (MS) has disappointed for a few quarters, a trend unlikely to reverse soon with inflationary cost pressures now hitting the segment. Two out of three ain’t bad, but it no longer supports a Strong Buy rating on the stock.”

His target declined to $10 from $12. The average is $11.09.

Elsewhere, Scotia Capital’s Michael Doumet lowered his target to $10 from $11 with a “sector outperform” rating.

“Similar to many of quarters in 2021, DXT reported solid results, with one or two segments offsetting temporary weakness in one or two of the other segments. In 1Q22, it was the better-than-expected EBITDA in WAFES and IFM that offset the weakness in MS,” said Mr. Doumet.

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In other analyst actions:

* CIBC World Markets analyst Robert Catellier upgraded TC Energy Corp. (TRP-T) to “outperformer” from “neutral” and raised his target to $77 from $73, exceeding the $72.13 average on the Street.

* Remaining bullish after a “modest” first-quarter beat, Desjardins Securities’ Gary Ho lowered his Ag Growth International Inc. (AFN-T) target to $51 from $53 with a “buy” rating. The average is $51.20.

“Our positive investment thesis is predicated on: (1) AGI’s strategy places it at the centre of the global food infrastructure buildout; (2) exposure to the agriculture supercycle, with strong momentum in many markets; (3) market share gains in the rapidly growing yet underpenetrated Brazilian market; and (4) dissipating overhang from the bin incident,” said Mr. Ho.

* Scotia Capital’s Mario Saric cut his American Hotel Income Properties REIT (HOT.U-T) target to $4.75 from $5 with a “sector perform” rating. The average is $4.07.

* CIBC’s Anita Soni reduced her Barrick Gold Corp. (GOLD-N, ABX-T) target to US$29 from US$30, remaining above the US$28.71 average, with an “outperformer” rating.

* Ms. Soni also lowered his Kinross Gold Corp. (KGC-N, K-T) target to US$6 from US$7.25 with a “neutral” rating. The average is US$7.83.

* CIBC’s Jacob Bout lowered his target for Bird Construction Inc. (BDT-T) target to $12 from $13, maintaining an “outperformer” rating. The average is $12.58.

* National Bank Financial’s Rupert Merer trimmed his Boralex Inc. (BLX-T) target by $1 to $47 with an “outperform” rating. The average is $46.73.

“We updated our model to account for Q1 results and higher power prices in France. With rising bond yields, we increased our discount rate to 6 per cent (was 5.5 per cent), resulting in a slight drop in our target,” said Mr. Merer.

* Mr. Merer also reduced his Northland Power Inc. (NPI-T) target to $44 from $45, below the $46.56 average, with an “outperform” rating.

* Canaccord Genuity’s Matthew Lee lowered his target for Bragg Gaming Group Inc. (BRAG-T) to $15 from $19 with a “speculative buy” rating, while Haywood Securities’ Neal Gilmer cut his target to $17 from $22 with a “buy” rating. The average is $15.60.

“Despite German headwinds and minimal contribution from North America, Bragg still managed to significantly outperform our forecast in Q1. The company delivered 36-per-cent revenue growth (29-per-cent organic), largely reflecting strength from the Dutch market, which continues to be a key growth driver. We see additional positive catalysts in the near to medium term as it grows its customer base in the US and Ontario, where Bragg is already seeing strong demand for its gaming content. We have increased our forecasts post-Q1 to reflect sales strength with our estimates notably above F22 guidance,” said Mr. Lee.

* Mr. Lee raised his Exchange Income Corp. (EIF-T) target to $58 from $52 with a “buy” rating. The average is $54.55, while TD’s Tim James hiked his target to $59 from $49 with a “buy” rating.

* Canaccord Genuity’s Robert Young cut his Converge Technology Solutions Corp. (CTS-T) target to $12 from $14.50, reiterating a “buy” rating. The average is $13.42.

“Converge reported a strong Q1 top line, although EBITDA was below Street expectations given product mix skewed toward lower margin hardware sales,” said Mr. Young. “The demand backdrop remains robust and is underscored by $575-million in product bookings in Q1, with North America and Europe both contributing. Heading into Q1, there was likely some worry around the impact of supply chain and endpoint device shortages, which seems to abating as Converge recognized $250-million of its $350-million backlog in Q1. While we believe a higher $472-million backlog is likely to obscure an otherwise double-digit organic growth profile, we expect M&A is a near-term tailwind as Converge sees more opportunity in the Services space given its robust balance sheet and reduced M&A competition. Management also reiterated its target of exiting 2022 with $200-million in managed services ARR, which will likely lean more on M&A than expected. In our view, the sell-off at these levels appears overdone considering the macro tailwind and near-term M&A in addition to Converge’s strong FCF generation.”

* Mr. Young also reduced his Copperleaf Technologies Inc. (CPLF-T) target to $13 from $20 with a “buy” rating, while CIBC’s Todd Coupland cut his target to $11, below the $15.33 average, from $18 with a “neutral” rating.

“Copperleaf continues to add to its bench strength to capitalize on the strong demand and robust pipeline with a focus on S&M function and partner channel development,” said Mr. Young. “We believe Copperleaf’s lumpy perpetual segment will continue to be a wild card versus our forecast going ahead while we also remain cautious on potential selling from the lockup expiry. That said, we are encouraged by the strong pipeline and overall macro dynamic including ESG and energy transition supporting Copperleaf’s growth going forward.”

* Mr. Coupland sliced his E Automotive Inc. (EINC-T) target to $17 from $27, below the $19.48 average, with an “outperformer” rating.

* Jefferies’ Owen Bennett raised his Cronos Group Inc. (CRON-T) target to $4.30 from $3.70 with a “hold” rating. The average is $5.76.

* CIBC’s Cosmos Chiu cut his Endeavour Silver Corp. (EDR-T) target to $8 from $9 with a “neutral” rating, while BMO’s Ryan Thompson lowered his target to $5.25 from $6 with a “market perform” rating and TD’s Craig Hutchison trimmed his target to $5.50 from $7 with a “hold” rating. The average is $7.33.

* RBC’s Geoffrey Kwan cut his Equitable Group Inc. (EQB-T) target to $80 from $85, keeping an “outperform” rating. Other changes include: BMO’s Étienne Ricard to $91 from $97 with an “outperform” rating, Scotia’s Meny Grauman to $80 from $79 with a “sector outperform” rating and Raymond James’ Stephen Boland to $86.50 from $85 with an “outperform” rating. The average is $84.43.

“Q1/22 EPS was better than our forecast and consensus. EQB continues to deliver strong financial results. However, with the housing and mortgage market slowing, in the short term, we think sector valuations could be driven by sentiment, not fundamentals. We think EQB has a very good track record of growth and profitability and given our view that mortgage loan growth will slow but a housing downturn with severe mortgage losses is unlikely, we view the shares as attractive,” said Mr. Kwan.

* Mr. Chiu also lowered his Fortuna Silver Mines Inc. (FVI-T) target to $5.50 from $6 with a “neutral” rating. The average is $5.94.

* CIBC’s John Zamparo cut his GDI Integrated Facility Services Inc. (GDI-T) target to $61 from $65, keeping an “outperformer” rating. Other changes include: Scotia’s Michael Doumet to $50 from $59 with a “sector perform” rating, Desjardins Securities’s Frederic Tremblay to $63.50 from $67 with a “buy” rating and Stifel’s Maggie MacDougall to $60 from $70 with a “buy” rating. The average is $64.50.

“Janitorial services’ strong organic growth, better-than-expected contribution from the IH acquisition and healthy margins fuelled GDI’s solid 1Q results,” said Mr. Tremblay. “While supply chain bottlenecks are temporarily slowing backlog conversion in Technical Services, we continue to view the recently established U.S. platform as a major potential growth driver. An NCIB opens the door to opportunistic share repurchases without preventing GDI from self-funding its growth initiatives. We are reiterating our Buy recommendation.”

* Scotia’s Patricia Baker raised her George Weston Ltd. (WN-T) target to $177, above the $174.86 average, from $174 with a “sector outperform” rating.

* CIBC’s Nik Priebe reduced his Goeasy Ltd. (GSY-T) target to $180 from $200, below the $205.56 average, with an “outperformer” rating. Other changes include: Raymond James’ Stephen Boland to $213 from $207 with a “strong buy” rating and National Bank’ Jaeme Gloyn to $155 from $220 with an “outperform” rating.

“Overall, a solid quarter with results relatively in line with our estimates and consensus though loan growth was higher than expected,” said Mr. Boland. “We note that the year-over-year comparison is somewhat difficult given the acquisition of Lendcare in 2Q21. Gross Loans grew 6 per cent in the quarter (7 per cent last quarter), and are now $2.15 billion. We are encouraged by the growing diversification of loan products that also have a stronger credit profile including home equity and auto loans. Through a combination of hedges, fixed term loans and floor agreements, higher interest rates should have a minimal impact to financials. Management provided strong 2Q22 guidance so the high growth trend will be maintained. For 2022, management expects to achieve the high end of the loan book guidance.”

* RBC’s Sabahat Khan cut his High Liner Foods Inc. (HLF-T) target to $13 from $15 with a “sector perform” rating. The average is $16.25.

* CIBC’s Paul Holden raised his target for Intact Financial Corp. (IFC-T) to $225 from $210, keeping an “outperformer” rating, while Desjardins Securities’ Doug Young increased his target to $210 from $205 with a “buy” rating and Scotia’s Phil Hardie bumped his target to $207 from $200 with a “sector outperform” rating. The average is $208.50.

“Intact delivered another better-than-expected quarter that was characterized by strong results across Canada and the U.S.,” said Mr. Hardie. “What sets Q1/22 apart from recent quarters is that this was a relatively broad-based beat that was driven by better-than-expected underwriting profitability as well as distribution income. The company is off to a solid start in 2022, and we remain bullish on the outlook.

“Intact stock has delivered significant outperformance relative to the S&P/TSX Financials Index so far in 2022 and, on an absolute level, is up 8 per cent against a backdrop of a broad market sell-off. Intact remains our “Go-To” Defensive Quality name, and we believe it can be attractive for large-cap investors looking for a high-quality name to reduce portfolio beta that trades at a reasonable valuation.”

* Canaccord Genuity’s Derek Dley reduced his Kits Eyecare Ltd. (KITS-T) target to $7 from $8, above the $6 average, with a “buy” rating

“). While there are no perfect public comparable companies to KITS, we believe the broader eyewear retail peer set is an appropriate barometer, with the group trading at an average of 2.5 times 2022 sales. In our view, KITS should trade at a premium to these peers, given its earlier stage in the growth cycle, higher expected revenue growth, healthy balance sheet, and strong management team,” he said.

* CIBC’s Krista Friesen cut her Linamar Corp. (LNR-T) target to $73 from $85 with an “outperformer” rating, while TD’s Brian Morrison trimmed his target to $80 from $83 with a “buy” rating. The average is $76.60.

* Canaccord Genuity’s Doug Taylor cut his MDA Ltd. (MDA-T) target to $15 from $20, remaining above the $13.50 average, with a “buy” rating, while BMO’s Thanos Moschopoulos lowered his target to $11 from $13 with a “market perform” rating.

“MDA posted a better-than-expected Q1 and kept its guidance for the year unchanged on the back of several substantial bookings that are expected to drive an uptick in growth in H2/22. The company said it expects to finalize contracting for Telesat’s Lightspeed program by the end of June, setting up a key catalyst that should give more confidence in this year’s execution against that guidance and cement the growth profile into 2023. This is likely to make the current valuation, at 8 times EBITDA using the 2022 guidance midpoint, look too cheap vs. historic norms and comps,” said Mr. Taylor.

* CIBC’s Nik Priebe cut his Power Corporation of Canada (POW-T) target to $40 from $44 with a “neutral” rating, while BMO’s Tom MacKinnon lowered his target to $39 from $40 with a “market perform” rating. The average is $43.94.

* National Bank Financial’s Tal Woolley trimmed his RioCan Real Estate Investment Trust (REI.UN-T) target to $27 from $27.50 with an “outperform” rating, while RBC’s Pammi Bir cut his target to $26 from $27 with an “outperform” rating. The average is $26.36.

“Our constructive view on REI is intact,” said Mr. Bir. “While the May 10 th price action on the units seemed incongruent with a good set of results, the sector is fighting a tougher tape amid rising bond yields. That said, we believe REI is in solid form, supported by fundamentals that continue to gain traction, a significant pipeline of development completions lined up, and levers to support reduction in leverage. Bottom line, at a 6.1-per-cent implied cap rate, we see a good margin of safety.”

* After a “softer” start to 2022, National Bank Financial’s Zachary Evershed trimmed his Savaria Corp. (SIS-T) target by $1 to $22 with an “outperform” rating. The average is $24.06.

“We reiterate our Outperform rating as we remain confident in SIS’s ability to accelerate out of the pandemic while protecting margins through cost pass-throughs, complemented by strategic moves such as the new Mexican production facility and vertical integration with the Ultron tuck-in,” he said.

* RBC’s Walter Spracklin cut his target for shares of Stella-Jones Inc. (SJ-T) to $40 from $43, maintaining a “sector perform” rating, while TD’s Michael Tupholme cut his target to $50 from $56 with an “action list buy” rating. The average is $51.50.

“SJ started the year strong, with Q1 results ahead of expectations and better than expected top line across all segments,” said Mr. Spracklin. “While the company did not increase its 2022 or 3-year targets(both being set only last quarter); the early trends suggest bias to the upside. While we are taking our estimates higher to reflect the early trend; the overall market uncertainty has created a higher overall equity risk premium; and we are moderating our target multiple accordingly. While we maintain our SP rating on relative returns; we flag SJ as a solid (less-cyclical) company with attractive underlying trends.”

* RBC’s Brad Heffern lowered his Tricon Residential Inc. (TCN-N, TCN-T) target to US$17 from US$18 with an “outperform” rating, while Scotia’s Mario Saric cut his target to US$17.25 from US$17.50 with a “sector outperform” rating. The average is US$17.

“TCN’s 1Q22 results were in line, and the company was the only SFR name to raise guidance,” said Mr. Heffern. “Demand continues to be very robust, which is at odds with the recent decline in the share price, and management noted that the large delta between TCN’s valuation and private market valuations is “absurd”. We tend to agree with that view. Our estimates and price target are slightly lower on a higher cost of capital.”

* Scotia Capital’s Mark Neville cut his WSP Global Inc. (WSP-T) target to $170 from $185, reaffirming a “sector perform” rating. The average is 193.64.

“We continue to view the Professional Services companies (including WSP) as being well insulated from current macro challenges: (i.) inflationary pressures are largely limited to labour and are effectively passed-through, (ii.) supply chain issues are minimal, and (iii.) public sector exposure is large, with long-term spending commitments in place that should provide top-line stability in the event of an economic slowdown,” he said.

* RBC’s Drew McReynolds raised his Yellow Pages Ltd. (Y-T) target by $1 to $15, matching the average, with a “sector perform” rating.

“We believe significant progress on cost management and now full debt repayment have improved the risk-return profile of the stock and provided a tail of declining but positive FCF that should sustain positive equity value,” said Mr. McReynolds. “Given that we have seen very few examples of successful transformation stories within the Canadian media sector over the last 20 years, we believe the company’s renewed FCF and de-levering focus over the past 2-3 years was the prudent pivot to make. In fact, we believe such a pivot is rare for publicly traded Canadian media companies and we commend management on execution. While we continue to struggle with the company’s competitive position and longer-term revenue growth strategy and therefore remain on the sidelines, we are encouraged by the notably improved revenue trajectory in 2022.”