Inside the Market’s roundup of some of today’s key analyst actions
While investors had a harsh reaction to the first-quarter financial guidance from Shopify Inc. (SHOP-N, SHOP-T), RBC Dominion Securities analyst Paul Treiber said the Ottawa-based e-commerce company’s execution increases his confidence in its “ability to navigate through most macro scenarios.”
“Q4 was solid and the largest quarterly revenue beat in the last 6 quarters,” he said. “The quarter showed market share gains, take rate expansion, MRR [monthly recurring revenue] growth and operating leverage – all elements of our long-term positive thesis on Shopify.”
After the bell on Wednesday, Shopify reported fourth-quarter revenue of US$1.73-billion, exceeding the Street’s expectation of US$1.65-billion by 5 per cent, which is the largest upside in the last six quarters. While most key metrics topped estimates, the largest gains came from gross merchandise volume, leading to adjusted earnings per share of 7 US cents (versus the Street’s projection of a 1-US-cent loss).
However, concerns about the company’s outlook, which Mr. Treiber said “suggests limited near-term visibility due to macro,” prompted a significant drop in its shares in overnight after-market trading.
“Shopify guided to Q1 revenue to rise high-teens year-over-year, below consensus at 20 per cent year-over-year,” the analyst said. “Shopify’s Q1 outlook also calls for gross margin to be slightly higher than Q4 and opex to increase low-single digits Q/Q excluding unusuals. Shopify’s Q1 opex outlook reflects higher compensation to bring employees in line with market rates (primarily in R&D). Guidance implies a return to negative EPS (we estimate a loss of 5 cents), falling short of consensus at $0.00. Additionally, Q1 outlook implies capex of $50-million (vs. our estimate for $80-million). Shopify did not provide an outlook for FY23. Although Q1 guidance below consensus may reflect conservatism, the lack of annual guidance suggests limited near-term visibility to the sustainability of consumer spending.”
Despite those concerns, Mr. Treiber emphasized the company is “executing well,” believing its fourth quarter “showed market share gains, take rate expansion, MRR growth and operating leverage – all elements of our long-term positive thesis on Shopify.”
“The strength in Shopify’s KPIs suggest that the company is seeing strong traction of new services (e.g. Payments, Capital, SFN, POS),” he said. “MRR growth shows merchants upgrading to Shopify’s higher priced plans (Plus MRR up 23 per cent year-over-year) and monetization of the company’s bundled features (e.g. Audiences). Record GMV/merchant implies a higher quality mix of merchants, mitigating slower total merchant growth. Following Q4, our FY23 estimates move to $6.64-billion revenue and $0.05 adj. EPS, from $6.34-billion and $0.04 previously.”
With those changes, Mr. Treiber hiked his target for Shopify shares to US$65 from US$55, reaffirming an “outperform” recommendation. The average target on the Street is US$47.24..
“Sentiment regarding the macro environment is likely to sustain volatility in the shares. However, Shopify’s traction of new services, uptake of higher priced plans, improving merchant mix, recent product introductions, and focus on cost efficiencies raise our confidence in Shopify’s ability to navigate through most macro scenarios. Shopify is now trading at 10 times FTM EV/S [forward 12-month enterprise value to sales], a 17-per-cent discount to Shopify’s pre-COVID average (12.0 time),” he concluded.
Other analysts making changes include:
* Citi’s Tyler Radke to US$50 from US$54 with a “neutral” rating.
“Shopify’s Q4 results confirmed more resilient demand trends with solid upside to GMV and revenue and better profitability,” he said. “The outlook was more disappointing with a more cautious tone on the sustainability of these trends, while expenses are tracking above expectations. With the stock up 54 per cent year-to-date as of Feb. 15 we expect shares to give back some gains. While the quarter offered more signs that SHOP is gaining e-comm share and seeing good uptick in enterprise adoption and new products like SHOP App/Pay/Capital, we were underwhelmed by the limited detail on the path to profitability/capex plans. We reiterate our Neutral rating given lingering questions around margins and capital intensity of new projects (SFN), despite a premium valuation vs. peers on gross profit-adjusted basis.”
* ATB Capital Markets’ Martin Toner to $82 (Canadian) from $75 with an “outperform” rating.
“A weak outlook for Q1/23 revenue spoiled what was a very strong quarter. Initiatives aimed at driving GMV growth are working, and the Company is winning new merchants and being rewarded with a higher attach rate of overall revenue to GMV,” said Mr. Toner.
* Scotia’s Kevin Krishnaratne to US$46 from US$43 with a “sector perform” rating.
“Although SHOP’s Q4 was a beat across revenue with a profit surprise, the outlook for Q1 calls for high-teens revenue growth year-over-year (Street expected 20 per cent) and a reversion to losses (on SFN GM % headwinds and higher quarter-over-quarter opex.), which may be viewed as a disappointment,” he said. “Meanwhile, management continues to express caution on consumer spending trends given macro softness (inflation pushing more demand for non-discretionary and discounted goods). While our target moves to US$46 (prior US$43) based on 14.0 times fiscal 2023 estimated EV/Gross Profit (was 13.0 times) reflecting recent momentum in the stock (and tech.), we remain Sector Perform and would be more inclined to get constructive on bigger pullbacks.”
* Credit Suisse’s Timothy Chiodo to US$40 from US$34 with a “neutral” rating.
“We continue to view Shopify as well positioned to benefit from what we believe will be one of the most important investment themes within our coverage over the coming decade: the intersection of software platforms and the embedding of monetization- and ecosystem-enhancing financial services,” said Mr. Chiodo. “However, a combination of macro factors (discretionary/goods mix, inflationary pressures, normalizing eCommerce trends, higher rates, etc.) and near-term margins/FCF (our estimates assume roughly break-even on a non-GAAP EBIT basis in 2023, with operating expenses growing slightly quater-over-quarter off the Q1 base throughout the year), paired with an uncertain trajectory makes it more challenging to value the company, particularly given volatility of longer duration assets such as Shopify.”
* TD Securities’ Daniel Chan to US$47 from US$38 with a “hold” rating.
* Jeffries’ Samad Samana to US$44 from US$40 with a “hold” rating.
* Piper Sandler’s Clarke Jeffries to US$45 from US$36 with a “neutral” rating.
* Oppenheimer’s Ken Wong to US$65 from US$45 with an “outperform” rating.
* MoffettNathanson’s Michael Morton to US$32 from US$30 with a “market perform” rating.
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BoA Securities analyst Dariusz Lozny is “turning constructive” on Algonquin Power & Utilities Corp. (AQN-N, AQN-T), believing its bear thesis “has largely played out” and regulated disclosures “should derisk [its] core business.”
In a research report released Thursday, he upgraded its shares to “buy” from “underperform” previously, seeing it “bouncing off the lows.”
While its shares “remain discounted,” Mr. Lozney thinks negative catalysts are “largely unknown,” leading him to bump his target to US$9 from US$7. The current average is US$9.39.
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Following stronger-than-anticipated fourth-quarter results, a pair of analysts on the Street raised their recommendations for IA Financial Corp. (IAG-T) on Thursday.
The Quebec City-based firm reported core earnings per share of $2.40, up 19 per cent year-over-year and exceeding the consensus forecast of $2.27.
That led CIBC World Markets’ Paul Holden to move its shares to “outperformer” from “neutral” with a $96 target, rising from $85. The average on the Street is $96.39.
“Q4 results and 2023 guidance exceeded our expectations and we increase our core EPS estimates,” he said.
“We have positioned our estimates conservatively relative to guidance and our valuation framework still implies good upside (approximately 11 per cent). There is additional upside relative to our price target from delivering on 2023 guidance and capital deployment. We are upgrading IAG.”
TD Securities’ Mario Mendonca upgraded IA to “action list buy” from “buy” with a $100 target, up from $92.
Other analyst making changes include:
* Desjardins Securities’ Doug Young to $95 from $85 with a “buy” rating.
“Even after backing out the positive impact from a lower tax rate, core EPS (IAG’s definition) beat consensus estimates,” said Mr. Young. “Based on IAG’s guidance, the set-up for 2023 looks good, with no big changes to guidance around the impact from adopting IFRS 17/9; however, pressures will likely persist at its US extended vehicle warranty business through 2023, in our view.”
* Scotia’s Meny Grauman to $104 from $102 with a “sector outperform” rating.
“We stand by our initial take that IA’s year-end beat was lower quality given the benefit from a lower tax rate and from strong new business gains that go away next quarter under the new accounting standard,” said Mr. Grauman. “We expected investors to be more focused on the lifeco’s disappointing performance in its U.S. dealer services business which was negatively impacted by ongoing inventory constraints and rising financing costs, but instead investors focused on expanded IFRS 17 disclosure that included guidance of a 13-18-per-cent one-time bump in core EPS in 2023. No doubt forward earnings numbers will rise as a result of this disclosure, but we view it as relatively neutral given that BVPS will remain little changed. Looking forward we still like IA, and view its excess capital position as a key advantage. However, we have to acknowledge that in the near-term the outlook for the US dealer services business looks less exciting than we previously thought.”
* RBC’s Darko Mihelic to $96 from $89 with an “outperform” rating.
“IAG is guiding to earnings growth between 13-18 per cent in 2023 and 10-per-cent-plus growth in the medium term thereafter,” he said. :On transition to IFRS 17, IAG expects book value to increase more than $10 million and continues to expect a greater than 20 percentage point increase to its solvency ratio. We adjust our model to reflect our approximation of IAG’s earnings power under IFRS 17 and we expect investors to slowly build confidence in IAG’s (and the entire lifeco sector’s) earnings power under IFRS 17 over time.”
* BMO’s Tom MacKinnon to $99 from $94 with an “outperform” rating.
“With BV and core earnings expected to be unchanged upon transition to IFRS 17 (unlike peers where this is significantly down) and excess capital expected to climb to $1.9-billion upon transition (unlike peers where it is flat to down), IAG is compelling value (1.35 times BV for a 14-per-cent core ROE - long term regression suggests 1.6x) for what has consistently been a steady 8-10-per-cent EPS and dividend grower,” said Mr. MacKinnon.
* Canaccord Genuity’s Scott Chan to $92.50 from $88.50 with a “buy” rating.
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National Bank Financial analyst Vishal Shreedhar expects Loblaw Companies Ltd. (L-T) to display a “steady” performance, driven by its discount offerings and pharmacy business, when it reports fourth-quarter 2022 financial results before the bell on Feb. 23.
Despite the lingering impact of inflation across the sector, he reaffirmed a “favourable view” on the company, calling it his “preferred” grocer, pointing to several key themes:” (1) Benefits from management’s improvement initiatives; (2) Ongoing EPS growth, and (3) Favourable trends in discount and drug store (where Loblaw over-indexes.”
“We reviewed significant historical market declines of the S&P TSX 60 index and conclude that, in general, the broad index tends to outperform consumer staples and grocers during the initial 12 months following a market bottom (if we have achieved that),” said Mr. Shreedhar. “On average, performance is comparable between the broad index and consumer staples and grocers over the 12- to 24-month period following a market bottom, and consumer staples and grocers outperform the broad index over the 24-to-36-month period following a market bottom.”
For the quarter, he’s projecting earnings per share of $1.70, up 11.8 per cent year-over-year (from $1.52) and a penny below the consensus estimate on the Street. He said those gains reflect “positive” Food Retail same-store sales growth (6.2 per cent versus 1.1 per cent in 2021), continued momentum at Shoppers Drug Mart Corp., benefits from its ongoing efficiency programs and share repurchases.”
“Across North America, grocery peers continue to highlight cautious consumer behaviour (trade-down, accelerating discount market share, private label, heightened promotional intensity),” the analyst said.
“In the last quarter, L noted higher market share overall, led by its discount division; management believes industry tonnage trends remain somewhat negative, although L’s hard discount format saw positive growth. Given L’s high exposure to discount and strong private label offering, we anticipate solid sssg trends in food (although pressured by heightened discounting in general merchandise).”
Along with the impact of inflation on consumer habits, Mr. Shreedhar also thinks rising respiratory illness across the country is likely to be a “key theme” in the quarterly release.
“We highlight that respiratory illness trends have accelerated versus historical averages and are significantly above the prior year,” he said.
“Last quarter, L highlighted record sales of cough and cold medication, as well as sustained growth in Rx due to increased respiratory illnesses (COVID-19, RSV, flu, etc.). Recall, also, that management expects to return to pre-pandemic prescription levels in the near term.”
Also seeing “solid” beauty trends, Mr. Shreedhar raised his target for Loblaw shares to $134 from $130 after increasing his revenue and earnings estimates through fiscal 2023, maintaining an “outperform” recommendation. The average on the Street is $136.95.
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National Bank Financial analyst Jaeme Gloyn thinks the market sentiment for Canadian mortgage providers has “shifted more positive” and the acquisition of Home Capital Group Inc. (HCG-T) by Smith Financial “definitely inspired greater confidence.”
However, ahead of fourth-quarter earnings season for the sector, he reaffirmed his view that “caution and patience remain the appropriate strategy,” believing “downside risks that could constrain sector valuations and share price performance near term.”
“On January 12, OSFI launched a public consultation on Guideline B-20 with new ‘measures designed to better control prudential risks arising from high consumer indebtedness,’” he said “We continue to exercise caution as we await the final draft; the potential impact could be slower mortgage growth, higher capital requirements (especially for smaller lenders like EQB and HCG) and potentially lower profitability.
“The rapid rise in interest rates on both sides of the balance sheet further increases the risk to mortgage origination volumes, loan growth and profitability. We reflect lower originations in our estimates and remain cautious around the potential payment shock Alt-A mortgage holders may face in the coming quarters. Still elevated interest rates will continue to drive decelerating mortgage growth near term, in our view.”
Mr. Gloyn also thinks housing market risk remains “elevated” based on “very subdued” sales activity.
“The metric we’ll be watching closely is the Months of Inventory – how many months are required to clear all active listings - an indicator of housing market balance,” he said. “For single-family homes in the GTA (i.e., EQB and HCG’s largest markets), this metric spiked in 2017 from less than 1 month to nearly 4 months of inventory. As of December 2022, months of inventory stood at just below 2.5 months, increasing rapidly earlier in the year but sideways in recent months. At this time, historically low inventory levels are matching historically low sales activity, helping to keep the market roughly in balance.”
Seeing valuations in the sector rebounding from “crisis” levels previously, Mr. Gloyn made a pair of target price changes while warning “perhaps market sentiment has improved too much.”
“Overall, while we continue to exercise caution at least until uncertainty surrounding these risks diminishes, our EQB and FN price targets increase due to a one-quarter roll forward in our valuation methodology and improving trading multiples,” he said. “Our estimate changes largely reflect a slower pace of residential mortgage origination/loan growth.
“What could cause a shift in our view? We have a keen eye on the employment outlook and central bank positioning. We believe more widespread employment losses will pressure mortgage stocks lower, potentially to crisis trough levels that would offer investors a more attractive entry. A dovish turn from the Federal Reserve and/or Bank of Canada could also cause a change in our currently softer view.”
Mr. Gloyn’s changes are:
* EQB Inc. (EQB-T, “outperform”) to $75 from $68. The average target is $82.38.
“EQB remains our preferred name within the sector given stronger diversification relative to Mortgage Finance peers: i) asset mix (e.g., commercial, equipment and decumulation loans), ii) funding mix (e.g., more cost-effective EQ Bank and covered bond channels), and strategy (e.g., digital bank buildout, fintech / open banking relationships, Concentra acquisition, AIRB). While these fundamental strengths do NOT provide EQB with immunity, the company is more favourably positioned to manage through the current risks in our view,” he said.
* First National Financial Corp. (FN-T, “sector perform”) to $36 from $34. Average: $36.33.
“We remain positive about FN’s industry-leading and diversified origination platform, diversified funding model, limited credit risk, defensive recurring revenue model and capacity to consistently raise the dividend,” he said. “These fundamentals help explain FN’s premium trading multiple of 13 times on 2023 consensus EPS vs. the Big Six Bank average of 10 times. However, FN historically trades at a discount to Big Six Banks, particularly during periods of elevated risks to the outlook. Moreover, FN’s near-term earnings power is more sensitive to sudden shifts in origination volumes. As origination volume growth faces risks related to rapidly rising interest rates and a still unfavourable regulatory backdrop, we reiterate our Sector Perform rating.”
He maintained a “tender” recommendation and $44 for Home Capital Group Inc. (HCG-T) and “sector perform” rating and $8.25 target for Timbercreek Financial Corp. (TF-T). The averages are $44 and $8.74.
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Following a “big” fourth-quarter beat, ATB Capital Markets analyst Tim Monachello thinks North American Construction Group Ltd. (NOA-T) the “material operational headwinds that had limited its ability to maximize fleet utilization through much of 2022 are now resolved.”
He thinks that shift represents “a material improvement in the operational risk profile for investors in 2023,” leading him to raise his recommendation to “outperform” from “sector perform” on Thursday.
“While we believe NOA is likely to still face some level of whitespace in its non-oil sands business in H2/23 when its Northern Ontario Gold Mine project finalizes, we believe demand exists in NOA’s core oil sands business to help backfill this gap for an interim period while NOA solidifies other opportunities, which we view as a high-probability outcome given its $4.5-billion identified opportunity set,” said Mr. Monachello. “All told, we have increased our EBITDAS estimates by roughly 6.3 per cent across our forecast horizon.”
After the bell on Wednesday, the Acheson, Alta.-based company reported revenue of $320-million and adjusted EBITDA of $85-million, exceeding the analyst’s $284-million and $71-million estimates.
“NOA’s strong Q4/22 results are largely attributable to strong equipment utilization, which is primarily a function of improved access to heavy equipment mechanics over recent months that has increased its equipment availability to the extent that it can now work at activity levels more representative of customer demand in the oil sands,” said Mr. Monachello. For context, NOA’s fully owned equipment fleet, used primarily for its oil sands operations, operated at 75-per-cent utilization in Q4/22 (71 per cent ATB estimate) and operated at roughly 80-83 per cent in December; all told, Q4/22 utilization was the highest level since early 2018 peak levels when utilization topped 80 per cent. We understand activity and utilization has remained strong in Q1/23 and we estimate it will likely average in the 75-80-per-cent range, depending on the timing and severity of spring weather conditions in March. Overall, we believe NOA’s near-record Q4/22 utilization highlights that concerns regarding maintenance personnel are largely in the rear-view which we had viewed as a key risk for investors in 2023
Seeing its 2023 guidance as conservative, Mr. Monachello raised his target to $29 from $24.The average is $23.60.
Elsewhere, others making changes include:
* Raymond James’ Bryan Fast to $26 from $24 with an “outperform” rating.
“North American Construction Group (NACG) delivered knockout results to end the fiscal 2022 year.” said Mr. Fast. “Not only did the company blow past consensus estimates, adj. EBITDA exceeded the top end of company guidance. NACG added meaningfully to the technician headcount midway through the year, boosting utilization to a record for the fourth quarter and driving the strong performance. Looking ahead, end-markets are supportive of NACG, as commodity prices stabilize and project pipeline remains ripe for additional wins. Demand for the company’s earth moving services is solid, which allows NACG to focus on maintaining high utilization levels.
“We remain convinced that NACG has a defensible business model given the fleet size, dominant position in the oil sands and more balanced end market exposure. We expect the company to direct FCF to deleveraging, strategic M&A, and returning cash to shareholders via the dividend (increased 25 per cent) and opportunistic share buybacks (which was maxed out in 2022). Overall, we remain impressed with NACG’s ability to navigate a difficult operating environment and deliver exceptional results.”
* BMO’s John Gibson to $25 from $24 with an “outperform” rating.
“Bottom Line: NOA reported record Q4/22 quarterly results, besting previous levels by more than 40 per cent,” said Mr. Gibson. “The company benefited from strong equipment utilization, while joint venture work continues to build. NOA shifted out some larger bids a few quarters, but still expects its backlog could reach more than $2-billion in 2023 (from $1.3-billion currently).”
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Eight Capital analyst Anoop Prihar predicts Algoma Steel Group Inc.’s (ASTL-T) plate mill modernization initiatives and Electric Arc Furnace (EAF) expansion should position it as a “much more formidable” producer.
However, following its “disappointing” third-quarter 2023 financial results, he lowered his recommendation for its shares to “neutral” from “buy,” expressing “caution” on its business outlook and “will continue to look for evidence that these initiatives remain on-track from both a time and budget perspective.”
On Tuesday, Algoma reported an adjusted EBITDA loss of $35.9-million, down from a profit of $457.3-million a year ago due to previously disclosed challenges relating to Phase 1 of the plate mill modernization. The result was slightly ahead of Mr. Prihar’s estimate of a $42-million loss.
“Our FY23 adj. EBITDA estimate is essentially unchanged at $441-million, while our FY24 adj. EBITDA estimate is now $460-million versus $541-million previously. This reflects adjustments to both our realized pricing and cost of steel production estimates,” he said.
Mr. Prihar raised his target for Algoma shares to $11 from $10.35. The average is $13.50.
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In other analyst actions:
* Canaccord Genuity’s Dalton Baretto upgraded Teck Resources Ltd. (TECK.B-T) to “buy” from “hold” with a $70 target, jumping from $53.50. The average on the Street is $61.19.
* Seeing “challenged” assets under management growth, BMO’s Étienne Ricard initiated coverage of Fiera Capital Corp. (FSZ-T) with a “market perform” rating and $10 target, matching the average.
“Fiera’s 9-per-cent dividend yield appears sustainable barring a meaningful and sustained AUM decline (20 per cent plus),” he said. “However, financial flexibility for competing uses of capital is limited and a pick-up in organic AUM growth is required for the stock to work. We see the risk/ reward as balanced and would monitor for a better valuation entry point, all else equal.
* KeyBanc’s Eric Gonzalez raised Restaurant Brands International Inc. (QSR-T) to “overweight” from “sector weight” with a US$76 target, exceeding the US$70.88 average, while RBC’s Christopher Carril cut his target to US$81 from US$83 with an “outperform” recommendation.
“While QSR’s 4Q miss weighed on shares, ongoing momentum at Tims Canada and early signs of improvement at BK US are encouraging,” said Mr. Carril. “Looking ahead, we see opportunities for improvement in health/profitability across QSR’s franchisee base, as well as development, and expect these—along with brand momentum—to remain key areas of investor interest. As it relates to leadership transition, we view this as willingness to drive change at an accelerated pace, and expect to hear more next week.”
* Ahead of the March 8 release of its fourth-quarter results, Desjardins Securities’ Gary Ho hiked his Ag Growth International Inc. (AFN-T) target to $68 from $55, keeping a “buy” rating. The average target on the Street is $62.55.
“We are looking for 4Q EBITDA of $48-million (consensus $47-million),” he said. “Despite its strong share price performance year-to-date (24.7 per cent vs 6.8 per cent for the S&P/TSX), we continue to favour AFN given the increased visibility on its improved organic growth outlook, margin improvement and deleveraging. We thus increased our valuation multiple to 8.75 times 4QF EBITDA (from 8.25 times), offset by dilution from converts.
* Citi’s Stephen Trent lowered his Bombardier Inc. (BBD.B-T) target to $71, below the $71.38 average, from $73.50 with a “buy” rating.
* CIBC’s Dean Wilkinson increased his target for CT REIT (CRT.UN-T) to $17 from $16.50, keeping a “neutral” rating. The average is $17.33.
* Canaccord Genuity’s Mark Rothschild bumped his Dream Industrial REIT (DIR.UN-T) target to $16 from $15.50 with a “buy” rating. Others making changes include: Raymond James’ Brad Sturges to $16.75 from $15.25 with an “outperform” rating, CIBC’s Dean Wilkinson to $17 from $14.50 with an “outperformer” rating and National Bank’s Matt Kornack to $17 from $15.50 with an “outperform” rating. The average is $25.68.
“Dream Industrial REIT achieved strong same-property NOI growth in Q4/22, which led to a 10-per-cent rise in FFO per unit,” said Mr. Rothschild. “Industrial property rental rates continued to move higher in the quarter, and the REIT is guiding to high single-digit organic growth in 2023, which should continue for several years. Though we are not expecting rental rates to continue to rise at the pace of the past few years, there is limited availability currently, and rental rates have increased dramatically over the past few years. Therefore, Dream Industrial is uniquely positioned in the Canadian REIT sector for exceptionally robust cash flow growth as leases expire.”
In addition, the increase in rental rates almost completely offset the negative impact of higher cap rates on IFRS NAV.
* RBC’s Sam Crittenden moved his First Quantum Minerals Ltd. (FM-T) to $32 from $37 with an “outperform” rating, while Scotia’s Orest Wowkodaw cut his target to $33 from $35 with a “sector outperform” rating. The average is $29.87.
“While uncertainty remains around reaching an agreement in Panama, we continue to believe it makes sense for both sides to avoid closing the mine for an extended period. If a deal is reached, the valuation gap with peers that has opened since December can be reduced, but of course more downside risk if there is a prolonged shutdown,” said Mr. Crittenden.
* National Bank’s Jaeme Gloyn bumped his Goeasy Ltd. (GSY-T) target to $180 from $175 with an “outperform” rating. The average is $195.22
“We continue to expect GSY will successfully execute on its three-year guidance including i) demonstrating stable credit performance, and ii) executing on several loan growth initiatives (e.g., product, channel, geographic),” he said. “We forecast adjusted diluted EPS of $13.81 in 2023 (was $14.70), $17.92 in 2024 (was $18.67) and $21.89 in 2025 (new). Slightly lower revenue yields and higher interest expenses drove our estimates lower, partially offset by stronger loan growth forecasts.”
* CIBC’s Robert Catellier raised his Keyera Corp. (KEY-T) target to $36, above the $34.47 average, from $35 with an “outperformer” rating, while National Bank’s Patrick Kenny cut his target to $34 from $35 with an “outperform” rating.
* RBC’s Andrew Wong cut his Largo Inc. (LGO-T) target to $13 from $16, below the $13.80 average, with an “outperform” rating.
“We think Largo presents exposure to recent improvements in vanadium prices (largely due to improving macro outlook on China re-opening), the rampup of value-add long-term projects (pigments, Largo Clean Energy), and potential production improvements through 2023. However, this is partially offset by rising costs and recent operational challenges that have impacted production,” said Mr. Wong.
* In reaction the release of better-than-expected fourth-quarter results after the bell on Wednesday, National Bank’s Gabriel Dechaine raised his Manulife Financial Corp. (MFC-T) target to $27 from $26 with a “sector perform” rating. The average is $27.67.
“MFC’s quarter was boosted by core investment income (i.e., earnings on surplus), reflecting gains on seed capital investments and income on floatingrate securities,” said Mr. Dechaine. “The $318-million core earnings on surplus figure was the highest ever recorded (going back to Q4/16), and more than double the quarterly average since then. Going the other way, MFC reported $457-million of negative investment experience that was excluded from core, mostly on real estate losses in the ALDA portfolio. The different treatment of these investmentrelated items is consistent with MFC’s historical practices, though divergences like these are bound to generate a confused reaction among investors.”
* RBC’s Jimmy Shan bumped his Morguard North American REIT (MRG.UN-T) target by $1 to $24 with an “outperform” rating, while TD Securities’ Jonathan Kelcher raised his target to $23 from $22 with a “buy” rating. The average is $21.63.
* National Bank’s Rupert Merer cut his NanoXlore Inc. (GRA-T) target by $1 to $5, below the $6.39 average, with an “outperform” rating.
* Credit Suisse’s Edlain Rodriguez hiked his Nutrien Ltd. (NTR-N, NTR-T) target to US$70 from US$65 with an “underperform” rating. The average is US$98.85.
* CIBC’s John Zamparo raised his Spin Master Corp. (TOY-T) target to $41 from $40 with a “neutral” rating. The average is $46.60.
* After its fourth-quarter earnings per share topped the Street’s expectation by over 22 per cent, a series of analysts raised their Toromont Industries Ltd. (TIH-T) targets. They include: CIBC’s Jacob Bout to $113 from $111 with a “neutral” rating, Canaccord Genuity’s Yuri Lynk to $127 from $117 with a “buy” rating, BMO’s Devin Dodge to $118 from $112 with a “market perform” rating, RBC’s Sabahat Khan to $131 from $123 with an “outperform” rating, National Bank’s Maxim Sytchev to $124 from $110 with an “outperform” rating and Scotia’s Michael Doumet to $125 from $121 with a “sector outperform” rating. The average is $123.50.
“Our recent upgrade of TIH shares on Jan. 10, 2023 (Time to reload on high quality) elicited more of a yawn than anything else, but we continue to view the best of breed positioning amid a relatively uncertain macro backdrop as an efficient way to play ‘heads – I win, tails – I win’ as TIH shares should keep up nicely in a no-recession scenario while outperforming if there is a dislocation,” said Mr. Sytchev. “It’s also nice to see positive FCF generation from TIH despite material investment in inventory this year along with a 10-per-cent dividend increase. Material cash position affords a lot of capital deployment flexibility (looking forward to having certainty on CEO transition.”
* CIBC’s Hamir Patel lowered his target for West Fraser Timber Co. Ltd. (WFG-T) to $129 from $130 with an “outperformer” rating. The average is $140.50.
* National Bank’s Adam Shine, currently the lone analyst covering Yellow Pages Ltd. (Y-T), raised his target to $15.50 from $15 with a “sector perform” rating.
“Although top-line declines continue amid secular print pressures, competitive dynamics in digital, and customer attrition, improvements continue to be made toward a goal of revenue stability following prior success in opex/capex reduction which persists despite ongoing investments in revenue initiatives,” said Mr. Shine. “For the ninth consecutive quarter since the pandemic hit and the 14th of the past 16 quarters, Y reported progress on ‘bending of the revenue curve’.”
David Leeder