Inside the Market’s roundup of some of today’s key analyst actions
Canaccord Genuity analyst Yuri Lynk lowered his price target on Bird Construction Inc. (BDT-T) ahead of the company’s second-quarter results next week, citing a number of business challenges. But he still sees substantial upside in the stock price over the next 12 months and is reiterating a “buy” recommendation.
His one-year target dropped to C$10 from $13. That still implies a nearly 50% total return.
“We are cutting our Q2/2022 and forward estimates to account for industry-wide challenges such as supply chain disruptions, cost escalations, a strike on behalf of Ontario construction workers in May, and permitting delays,” Mr. Lynk said in a note to clients.
But he still likes the stock, “predicated on Bird’s solid execution track record, record backlog, strong balance sheet, 5% dividend yield, and undemanding valuation.” He noted Bird trades at only 9.9 times his estimated 2022 earnings per share, versus peers at 18 times.
The average analyst price target is C$10.86, according to Refinitiv Eikon data.
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While investors may be tempted to take profits on shares of Boralex Inc. (BLX-T) because of their significant outperformance this year, they should hold on because a higher valuation is warranted, said BMO analyst Ben Pham.
He raised his price target to C$50 from C$45 and maintained an “outperform” rating, reflecting an expectation that the stock can trade at an enterprise value that is 14 times EBTIDA, up from his previous estate of 13.5 times.
The stock has returned 35% this year, versus only 5% for the S&P/TSX Utilities index.
“The second-quarter results highlight that organic growth could exceed expectations, the balance sheet is in good shape ($701 million of cash or about $6.82 a share), and French spot prices are providing a significant tailwind (with optionality to re-contract assets with near-term expirations),” the analyst noted.
Elsewhere, RBC analyst Nelson Ng also raised his price target on the stock. “Boralex’s exposure to French merchant power prices is set to increase in Q4/22 as the company terminates some feed-in-tariff contracts, leading to significant upside totalling close to $900 million of net EBITDA upside through 2023,” Mr. Ng said in a note. His target went to C$48 from C$41, mainly to reflect upside from the French merchant power prices.
National Bank, Raymond James, Scotiabank, and TD Securities also all raised price targets on the stock. The average target is now C$49.15, up from C$46.52 a month ago, according to Refinitiv Eikon data.
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NFI Group Inc.’s (NFI-T) latest financials results were weak, as anticipated, but National Bank Financial analyst Cameron Doerksen is becoming a little more optimistic about the stock. He raised his price target to C$17 from $14, citing recent covenant relief in its debt obligations that removes a key market concern, as well as a strong outlook for order activity.
The bus manufacturer reported total revenue of $398 million, missing the consensus of $440 million, with deliveries coming in at 562 units versus National Bank’s 635 forecast. The adjusted EBITDA loss was $21 million versus the consensus for a loss of $20 million. NFI reaffirmed its 2022 EBITDA guidance of between $15 million and $45 million.
Mr. Doerksen said it was possible the company’s supply-chain woes are starting to improve.
“NFI has been heavily impacted by supply chain issues, especially semiconductors, but management indicates that a key electronic module supplier is on track to restart deliveries of a key component in August. The company is also likely past the worst for cost inflation as there has been some success in receiving pricing adjustments for existing orders with new orders priced in the current cost context,” he said in a note.
Meanwhile, orders and its backlog continue to grow. At the end of the second quarter, NFI’s backlog was 9,674 firm orders and options worth $5.5 billion, up significantly from 8,908 worth $4.9 billion at the end of Q1 2021. Active bids at the end of Q3 stood at 7,582, up 36% sequentially and 11% from a year earlier, pointing to strong new orders in the coming quarters, he noted.
He maintained a “sector perform” rating, saying he would like to see additional progress on the easing of the supply chain to gain more confidence in the recovery of its earnings and cash flow.
Elsewhere, Stifel GMP raised its price target to C$8.50 from C$6, but maintained a “sell” rating, saying risks remain elevated.
The average analyst price target is now C$15.
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TD Securities analyst Meaghen Annett lowered her price target on Hardwoods Distribution Inc. (HDI-T) ahead of the company’s latest financial results on Aug. 11, concerned with the storm clouds that have been building on the macroeconomic front.
She cut her target price to C$64 from C$73 but is maintaining a “buy” rating on the stock.
“We are lowering our top-line organic growth forecast for 2023,” she said in a note. “Industry indicators are pointing to signs of ‘cooling’ in the residential renovation and remodelling market that drives about 40% of HDI’s annual sales. In addition, our revised outlook reflects TD Economics’ updated forecast for U.S. housing starts that are anticipated to decline about 6% year over year in 2023.
“We maintain our view that HDI’s enhanced scale has expanded its potential growth opportunities. In the context of a softening near-term industry outlook, we believe responsible management of the balance sheet will be a top priority,” she added.
The average analyst price target is C$63.79
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Sun Life Financial Inc.’s (SLF-T) latest quarter was “a solid beat,” said National Bank Financial analyst Gabriel Dechaine, but he cautioned that many of the drivers of that surprisingly strong performance will be diminished by new accounting rules coming into effect.
Sun Life reported second quarter underlying EPS of $1.52 compared with consensus estimates of $1.38.
“Against low expectations, SLF’s Q2/22 should be a positive surprise to many investors. Moreover, they were boosted by improving claims trends in the Canadian (morbidity) and U.S. (mortality) Group insurance segments that had been under pressure over the past two quarters,” he said in a note issued prior to the insurer’s analyst conference call Thursday morning.
“On the other hand, we would highlight that a large component of the earnings outperformance was tied to drivers that will be substantially curtailed under IFRS 17,” including yield enhancement and new business claims.
He reiterated a C$67 and “sector perform” rating. The average analyst target is C$68.
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Several analysts raised their price targets on shares of Definity Financial Corp. (DFY-T) in the wake of the company’s financial results this week.
Barclays raised its target price to C$41 from C$38; BMO hiked its target price to C$42 from C$39; Cormark Securities raised its target price to C$39 from C$38; and Scotiabank raised its target price to C$36 from C$35.
As reported Wednesday, Raymond James also raised its price target, to C$36 from C$34.50, but downgraded its rating on the business and consumer insurer to “market perform” because of concerns with the stock’s valuation.
The changes bring the average price target to C$39.14, up from $37.27 a month ago.
Definity reported second-quarter operating income per share of $0.42 for the quarter versus consensus of $0.30.
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In other analyst actions:
5N Plus Inc (VNP-T): Cormark Securities raises target price by C$0.5 to C$2.5
Advantage Energy Ltd (AAV-T): Stifel FirstEnergy raises target to C$15.25 from C$13.75
Converge Technology Solutions Corp (CTS-T): Eight Capital cuts PT to C$11 from C$14.50
Dream Industrial REIT (DIR-UN-T): National Bank of Canada ups PT to C$14.25 from C$13.50; Raymond James cuts target price to C$16 from C$18.75
Lifespeak Inc (LSPK-T): RBC raises target price to C$1.50 from C$1; Cormark Securities cuts target price to C$3 from C$3.5
Waste Connections (WCN-T): Atb Capital Markets raises target price to C$180 from C$170
Brookfield Asset Management Inc (BAM-N): Scotiabank cuts target price to US$68.5 from US$72.5
Costco Wholesale Corp (COST-Q): Citigroup raises price target to US$545 from US$510; JP Morgan raises target price to $589 from $531; Oppenheimer raises target price to $600 from $535; Stifel raises target price to $565 from $515
Match Group Inc (MTCH-Q): BTIG cuts to neutral from buy; Cowen and Company cuts target price to US$100 from US$128; JP Morgan cuts target price to $90 from $105; Piper Sandler cuts target price to $80 from $125; RBC cuts target price to $75 from $115; Susquehanna cuts target price to $85 from $100.
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Darcy Keith