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

National Bank Financial analyst Maxim Sytchev thinks a recent rally in shares of Colliers International Group Inc. (CIGI-Q, CIGI-T) reflects “excessive investor optimism,” blaming “crowded trades around ‘peak rates’/ soft landing’ dynamics.”

Believing its “risk/reward skew appears balanced, again,” he lowered his recommendation for the Toronto-based commercial real estate services provider to “sector perform” from “outperform” previously.

“With the Fed ‘dot plot’ now pricing in around 150 basis points of rate cuts by the end of this year and a still-resilient U.S. economy/labour market, indices have rallied significantly in the last three months,” said Mr. Sytchev. “However, we believe the optimism may be excessive as rate cuts almost certainly occur in anticipation of a recession ... Moreover, given depressed leasing/capital markets transaction volumes and a structural downward shift in the demand for office space, there is still little clarity on the long-term prospects of the CRE sector as a whole.

“As the U.S. 10-year treasury yield has retreated close to 100 basis points from its peak about three months ago, CIGI shares rallied 24 per cent since October 1, 2023, greatly outperforming Canadian (up 7 per cent) and U.S. (up 17 per cent) REITs. While we continue to view Colliers as a quality name with an excellent track record/management team, we believe the recent share price action has materially lowered expected pro-forma returns.”

Seeing Colliers shares as “fairly valued,” he reiterated a target price of US$125, exceeding the average target on the Street of US$122.86, according to Refinitiv data.


In a separate report released Thursday, Mr. Sytchev downgraded Bird Construction Inc. (BDT-T), believing its “share price rally (amid better execution) requires some time to settle.”

Seeing the jump in the Mississauga-based company’s shares over the past 12 months tied to “materially higher” forward earnings expectations, which he thinks are “already priced in,” he moved his recommendation to “sector perform” from “outperform” previously.

“Since the start of 2023, 2024 consensus EPS [earnings per share] for BDT has increased by 53 per cent while share price has advanced 72 per cent last year,” said Mr. Sytchev. “Even with an anticipated standout performance in 2024, the likelihood of further material surprises is likely lessened while shares went parabolic and have reached the levels of 2012-2014 peaks when margins approached 8-per-cent EBITDA (if making the IFRS impact on like-for-like basis; this compares to 2025 forecast of 5.7 per cent).

“The higher expectations dynamic significantly reduces the margin of error when it comes to executing on the company’s project portfolio (let’s not forget that any unforeseen hiccups can be painful as we have seen with Bird pre-2016 and Atkins, Aecon, etc. over the years). Heightened expectations also apply to bookings momentum; we already model high-single-digit annual top-line growth for the next 24 months, with 70 basis points year-over-year EBITDA margin expansion already baked in for 2024 expectations and our NAV [net asset value]. While there is nothing inherently wrong with the story and management’s focus on execution and diversification have clearly borne fruit, we believe the shares need to settle as all-in upside is relatively limited, in our view.”

Warning “higher short-term expectations snowball into the longer term,” the analyst reiterated a target of $15 for Bird shares. The current average is $16.28.


Seeing “significant” upside to its current valuation, Scotia Capital analyst Maher Yaghi upgraded Quebecor Inc. (QBR.B-T) to “sector outperform” from “sector perform” on Thursday.

“We believe Quebecor continues to execute well in Quebec and is methodically growing its Freedom business without exerting pressure on the balance sheet,” he said. “While we continue to believe that the capex profile for QBR is likely to increase in the coming years, the increase is unlikely to be material until 2025 and beyond.”

Mr. Yaghi made the change in a research report previewing fourth-quarter 2023 results as well as 2024 in the Canadian telecommunications sector.

“We believe QBR will perform well in Q4,” he said. “On the Videotron side, the company was aggressive offering bundled discounts on wireless/internet during Black Friday and demand was strong based on industry contacts we have interacted with. Wireless loading is likely not as strong as Q3 (our estimate of 60K compares to 83K for consensus); however if viewed at on a year-over-year basis vs when Shaw owned the asset, the results should be very encouraging. We believe that capex at Quebecor is likely heading higher; however, the increase is unlikely to be material until 2025.”

His target for Quebecor shares rose to $38.25 from $36. The average on the Street is $39.21.

Mr. Yaghi maintained his recommendations and targets for Quebecor’s peers. They are:

* BCE Inc. (BCE-T) with a “sector perform” rating and $57.25 target. Average: $57.16.

Analyst: “For BCE Q4 should be a continuation of Q3 trends, i.e., slowing revenue but accelerating EBITDA growth due to lower equipment sales from fewer enterprise project start-ups and improved residential telecom margins. Media revenue growth will likely feel the brunt of difficult comps due to the world cup last year. On KPIs we are expecting similar post paid wireless loading vs Q3 and continued strong take up of the company’s FTTH offering. The key focus for us will be on the 2024 guidance. We expect a potential 0-4-per-cent growth range on revenues, 1-5 per cent on EBITDA and 2-6 per cent on FCF. The ultimate wild cards that will affect guidance and the 2024 dividend decision (a 5 per cent or 2-3-per-cent dividend increase) will be ARPU projections on both wireless and wireline and the potential for a significant restructuring initiative.”

* Cogeco Communications Inc. (CCA-T) with a “sector perform” rating and $77 target. Average: $71.30.

Analyst: “CCA’s stock has put on a nice rally since the sale of Rogers’ block and removal of the overhang. We expect Q1 to show continued financial pressure with negative 1-per-cent year-over-year revenue growth and negative 3-per-cent year-over-year EBITDA growth. The Canadian business should show low-single-digit revenue growth while we expect low-single-digit decline in the US. The key to CCA is to improve the U.S. business which continues to exhibit deteriorating trends. FWA competition is expected to remain elevated in the US especially with the improvement in TMUS and VZ’s spectrum holdings in early 2024. We also see FWA as a risk for the Canadian business in case Rogers decides to try to take share in Southern Ontario.”

* Rogers Communications Inc. (RCI.B-T) with a “sector outperform” rating and $74.50 target. Average: $75.32.

Analyst: “While we expect RCI to again show the highest wireless loading, its outperformance vs peers will likely be less pronounced vs Q3 as they’ve focused on loading more on the Rogers brand vs competing on the Fido brand. We expect 2024 guidance to be in the high-single-digit growth on service revenues and low to mid teens on EBITDA. FCF guidance will also be key to gauge the delivery on synergies and deleveraging, we believe a $2.8-3.2-billion bogey on FCF would be a good print.”

* Telus Corp. (T-T) with a “sector outperform” rating and $27 target. Average: $26.87.

Analyst: “2023 was a difficult year for TELUS with a guidance reduction due to a significant restructuring initiative. We are expecting FCF to nearly double year-over-year from $1.2-billion to $2.2-billion. The later forecast could have been even higher except for our view that the digital transformation initiative TELUS has embarked upon will likely require additional efforts in 2024 to be fully completed thus requiring additional cost realignment disbursement. As a result, we have reduced our 2024 FCF estimate from $2.5-billion to $2.2-billion.”


Citing the likely impact of warmer-than-expected winter conditions, Raymond James analyst Steve Hansen downgraded Superior Plus Corp. (SPB-T) to “market perform” from “outperform” previously.

“Balmy winter weather is expected to weigh on SPB’s 4Q23 volumes as the effects of El Nino drive near-record warmth across much of North America,” he said. “In Canada, specifically, Oct & Nov degree days came in 3 per cent warmer vs. 2022 and 8 per cent warmer vs. the 5-yearr average, while Eastern U.S, degree days were consistent vs. 2022 and 5 per cent warmer vs. the five-year average. Preliminary December data also supports warmer year-over-year temps. Looking into 1Q24, recent industry projections call for a continuation of mild weather through the balance of winter, further exacerbating near-term demand concerns.”

“Notwithstanding the aforementioned headwinds, we remain keen to hear more regarding SPB’s new long-term strategic priorities. As referenced last quarter, the company’s new management team (CEO, CFO) revealed its intention to release new long-term targets underpinned by an attractive (shareholder-friendly) basket of key priorities, including: 1) organic growth (Certarus, propane); 2) balance sheet deleveraging; 3) share repurchases (NCIB renewal announced LQ); and 4) dividend support.”

Mr. Hansen trimmed his target for Superior Plus shares by $1 to $11.50. The average is currently $13.15.

“While we continue to admire the firm’s revitalized organic growth prospects (anchored by its new Certarus platform) and renewed focus on platform optimization & balance sheet discipline, we feel the risk-reward scenario is more balanced near-term, hence our tactical decision to move to the sidelines,” he said.


Citi analyst Alexander Hacking wasn’t surprised by Wednesday’s Bloomberg report that Barrick Gold Corp. (GOLD-N, ABX-T) has approached major shareholders of First Quantum Minerals Ltd. (FM-T) about a potential takeover, given its previous failed approach in late 2022 and a “tolerance for geopolitical risk.”

“Any deal will hinge on price, i.e. do FM’s Board & largest shareholders believe that any Barrick offer - likely mostly in stock - would be better than going it alone,” he said. “The gap on this Bid-Ask remains to be seen.”

In a research note, Mr. Hacking pointed to three factors in explaining the logic of a deal:

1. Barrick’s balance sheet can “withstand an extended Panama shutdown,” which he called “a strong argument.”

“FM’s high debt level is its Achilles heel in dealing with a Panama shutdown (as we have previously written),” he said. “Barrick’s strong balance sheet would resolve this with close to zero net debt and $6-billion in 2023 estimated EBITDA. Restarting Panama may take some time (years not months), e.g. one possible path would involve extended negotiations followed by a national referendum to mitigate risk of further protests and/or Supreme Court rulings.”

2. Barrick is “better equipped” to revolve the dispute with Panama’s government.

“FM management has handled negotiations to date and did reach a deal with the current government – that said, there will be a new government in May,” he said. “Barrick would be new to the table but has experience of similar-ish situations in Tanzania and PNG. The Bloomberg report notes that ‘The [Barrick] CEO said he is confident Barrick could resolve the situation in Panama.’ Note: in both Tanzania and PNG, Barrick negotiated a new JV ownership structure with local participation & any equity dilution in Panama would need to be accounted for in any offer.”

3. Industrial synergies in Zambia, which he called “not especially substantial.”

Mr. Hacking kept “neutral” recommendations for both companies’ shares with a $32 target for First Quantum and US$18 for Barrick. The averages are $19.13 and US$21.50, respectively.


In a research note titled On the Cusp of a Recovery, Scotia Capital analyst George Doumet resumed coverage of Dentalcorp Holdings Ltd. (DNTL-T) with a “sector outperform” recommendation, seeing its shares as “down, but not out.”

“DNTL shares are down approximately 50 per cent since its IPO (in 2021), despite growing adj. EBITDA by 32 per cent and FCF by 75 per cent,” he said. “During this time, balance sheet leverage has remained largely unchanged. While the underperformance is partly attributable to fundamentals (labour and other cost pressures, etc.), we believe external factors (Covid restrictions and related impacts, a quickly rising interest rate environment, reduced appetite for small-caps, etc.) played a disproportional role in the decline of the shares. Fast-forward to today, we believe we can see significant upside in the shares under a soft landing scenario (where rates continue to deflate). DNTL shares are trading at a 40-per-cent discount to U.S. consolidators/practice aggregators (USCPA) peers and 10-per-cent discount to Canadian non-cyclical roll-up (CNR) peers. To derive our target, we apply an in line valuation with CNR peers, reflecting an upside of 20 per cent. Applying an average historical valuation points to an 90-per-cent upside.”

Mr. Doumet sees the Toronto-based company as “recession resilient,” predicting it is likely to see near-term gains in both organic growth and margins.

“We estimate DNTL’s same practice revenue growth (SPRG) to be 6 per cent in 2023 and 4 per cent in 2024, supported by healthy volume recovery (visits slightly below pre-pandemic levels) and price increases (which typically lag CPI by one year),” he said. “Cost inflation, labor challenge, operational inefficiencies caused by COVID and related restrictions, and investments in corporate infrastructure have pressured margins over the last two years. DNTL has largely moved past the latter two headwinds, and is expected to see easing inflationary and labor pressure with price increase and improving labor picture in 2024. For 2024 and 2025, we are looking for adj. EBITDA margins of 18.4 per cent and 18.7 per cent (up 27 bps and 23 bps), on path towards the 18.6% margin attained back in 2021.

“… while taking a more surgical approach towards M&A. The Canadian dental market is $20-billion in size and is composed of 15k dental practices - with only 6 per cent being consolidated (vs. the U.S. closer to 25 per cent). DNTL is the largest player and has typically acquired in the 7-8 times EBITDA range - but most recently as low as 5.9 times. Synergies are notable with post-integration ROICs in the mid to high teens. In 2023, DNTL targets $20-million PF adj. EBITDA after rent from M&A (vs. $43-million and $57-million EBITDA in 2021 and 2022). With strong FCF generation from the business, DNTL should be able to self-fund its M&A requirements (maintaining its double-digit growth track record) and deleverage by 0.05-0.1 times turns per quarter.

The analyst set a one-year target of $8.50 per share. The average is $10.30.


Calling its XEN1101 experimental drug a “best-in-class epilepsy asset” with additional upside to treat major depressive disorder (MDD), Citi analyst David Hoang initiated coverage of Xenon Pharmaceuticals Inc. (XENE-Q) with a “buy” rating.

“XENE shares have performed well over the past 3 years compared to the selloff in the broader biotech market, reflective of the value assigned to its de-risked, late-stage asset, XEN1101, in epilepsy,” he said. “The stock has rallied by 60 per cent since the end of Nov. 2023, following removal of a perceived overhang (Ph2 MDD data for ‘1101) and renewed interest from large pharma in CNS companies as acquisition targets. XENE raised $345-million post-MDD data in early Dec. 2023, providing a robust pro forma cash position of $984-million at year-end 2023. We expect shares to grind higher in 2024 ahead of Ph3 FOS/PGTCS data in 2025, while interest in XENE as a takeout candidate likely provides a buffer to shares on the downside.”

Mr. Hoang set a US$62 target for the Vancouver-based company’s shares. The average on the Street is US$55.03.


Four equity analysts on the Street raised their target prices for shares of Vancouver-based Lululemon Athletica Inc. (LULU-Q) on Thursday.

They are:

* Piper Sandler’s Abbie Zvejnieks to US$560 from US$495 with an “overweight” rating. The average target is US$495.66.

“Not dissimilar from our thesis last year, we think innovation and newness will drive demand in 2024 amidst a still uncertain macro,” she said. “Some things to watch this year will be a U.S. wholesale restocking for brands that have seen weak wholesale order books yet strong sell through such as SKX in addition to lower promotional levels as inventory levels become cleaner across the industry. Our top picks this year are ONON and CROX, our favorite turnaround is FL, and our favorite large cap pick is LULU.”

“We are raising our LULU PT to $560 as we roll forward our 35 times P/E multiple to 2025. We are also increasing our 4Q23 revenue estimate above the high end of guidance due to strong store checks and accelerating U.S. credit card data. We believe there is an opportunity for LULU to raise FY guidance at ICR, which we believe would be a positive catalyst for the stock. Our checks point to strong consumer reception to product across categories, and our promotional tracker is showing sale item growth in line with what we would expect based on management commentary in tandem with lower average percantage discounting year-over-year. LULU is our favorite large cap name in our coverage.”

* JP Morgan’s Matthew Boss to US$531 from US$500 with an “overweight” rating.

* Bernstein’s Aneesha Sherman to US$430 from US$400 with a “market perform” rating.

* Barclays’ Adrienne Yih to US$610 from US$530 with an “overweight” rating.


Citi analyst Christian Wetherbee is “getting tactical” on North American transportation companies, continuing to expect a recovery in freight levels as 2024 progresses.

“That said, when we look at current valuations vs. fundamentals, which are better but not yet consistently strong, particularly in early cycle, we think the tactical set-up through early 2024 is risky,” he said. “Current valuations imply a return to fairly strong earnings growth in 2024 and 2025, and while in many cases consensus numbers are at/above these expectations, we’d prefer a more de-risked set-up at the current nascent inflection. Early cycle TLs [truckloads] and intermodal have arguably run the most ahead of fundamentals, while rails are mixed, and parcel looks most attractive. In this context, we think the near-term set up is best for parcel and recent FedEx weakness will be short-lived, and while we’re a bit more cautious on UPS, we think potential 4Q earnings weakness may get bought.”

While he thinks both FedEx Corp. (FDX-N) and United Parcel Service Inc. (UPS-N) have the “potential to see upside to consensus expectations” and “stand out” in his coverage universe as the best positioned in the near term, he warns valuations for U.S. trucking companies “have run a bit ahead of modest fundamental improvements.”

“Rails sit somewhat between Parcel and the Truck complex in terms of valuations/fundamentals,” he said. “Within the sub-sector the US rails look a bit better positioned than the Canadians and Union Pacific looks best, which supports our constructive view. In addition, rail volume finished 4Q on a good note, with late December carloads taking full quarter volume above our estimates for the group. This helps with the near-term set up, although we believe outlooks may still be cautious. UP remains our top pick.”

Mr. Wetherbee has a “buy” rating and US$90 target for Canadian Pacific Kansas City (CP-N, CP-T). The average is US$86.48.

He kept a “neutral” target and US$121 target for Canadian National Railway Co. (CNI-N, CNR-T). The average is US$124.69.

Elsewhere, Stephens’ Justin Long raised his targets for CN to US$135 from US$122 and CP to US$83 from US$78 with “equal-weight” recommendations for both.

“The rail industry experienced a challenging 2023 from weaker-than-expected volumes, inflationary headwinds and costs from the strategic decision to maintain/grow resource levels during the freight downturn (to improve service resiliency),” said Mr. Long. “Investor sentiment on the sector moved lower, although there were unique story-lines that included NSC’s East Palestine derailment, the closing of the CP/KCS merger and Jim Vena’s appointment as UNP’s CEO. On a positive note, we believe we’re past the freight market/earnings trough with an opportunity for growth in 2024. However, we expect a slow recovery given the muted economic backdrop and the need for the rails to sustain better service before shippers (and investors) “buy in” to the industry’s new narrative that’s focused on driving better volumes / service through the cycle. Along with current valuations, we feel the near-term set-up is challenging. That said, we maintain our 12-month OW ratings on UNP & CSX.”


In a research report on the U.S. restaurant industry titled New Year’s Resolutions To Grow Traffic Could Be Hard To Keep, Stifel’s Christopher O’Cull predicted a widening gap between restaurant and grocery pricing is likely to increasingly hurt traffic patterns.

“An industry dynamic shaping our 2024 outlook is the widening spread between Food at Home and Food Away from Home inflation,” he said. “Without the cover of grocery store price increases, we believe it will become increasingly difficult for restaurants to raise prices without sacrificing traffic performance, especially among lower-income consumers. As a result, we recommend investors seek restaurants with identifiable traffic drivers (e.g., product innovation, compelling price-value perception, higher ad spending, growing awareness, etc.). We tend to favor high-growth restaurant companies with attractive unit economics (e.g., CAVA, DPZ, WING) but also see compelling risk/reward propositions in companies with SRS momentum, strong cash flows, and balance sheet optionality (e.g., DRI, EAT).”

The analyst downgraded a trio of stocks on Thursday: First Watch Restaurant Group Inc. (FWRG-Q) and Yum! Brands Inc. (YUM-N) to “hold” from “buy” and Papa John’s International Inc. (PZZA-Q) to “sell” from “hold” previously.

Mr. Carril increased his target for Tim Hortons parent Restaurant Brands International Inc. (QSR-N, QSR-T) to US$80 from US$72, keeping a “hold” rating. The average is US$81.05.

“Our Hold rating reflects our view that the relative scale and sophistication of RBI’s franchise system will result in greater net unit growth resiliency than most peers,” he said. “However, turnaround efforts at Burger King U.S. and Tim Hortons remain in the early stages, and we are concerned the pace of improvement will be hampered by the inflationary and competitive pressures faced by franchisees in both brands. In all, we believe the current valuation reasonably balances the risk/reward.”


In other analyst actions:

* Two days after a downgrade from Barclays dragged down the broader market, Apple Inc. (AAPL-Q) was lowered to “neutral” from “overweight” by Piper Sandler’s Harsh Kumar based on “valuation concerns and broader handset and macro weakness in 1H24.”

“We are concerned about handset inventories entering into 1H24 and also feel that growth rates have peaked for unit sales,” he said. “Handsets are 51 per cent of total revs; Deteriorating macro environment in China could also weigh on handset business; Headwinds due to negative news around both the Watch and other ongoing legal battles could be a distraction; Difficult comps from 2023 paired with constant currency headwinds are expected to continue in 1H24 with interest rates remaining elevated.”

His target slid to US$205 from US$220. The average on the Street is US$199.31.

* Touting a “large scale opportunity near major miners,” BMO Nesbitt Burns’ Rene Cartier initiated coverage of ATEX Resources Inc. (ATX-X) with an “outperform” recommendation and $2 target. The average is $2.42.

“ATEX, headquartered in Toronto, Ontario, is dedicated to advancing exploration, permitting, and development at the Valeriano copper-goldsilver-molybdenum project in the Huasco province of the Atacama Region of northern Chile. Exploration success delivered a significant updated resource, and supports an estimated sizeable block caving project located in an attractive jurisdiction in proximity to major miners with large-scale development projects,” he said.

“ATEX Resources has opportunities for positive news flow as new project resources and studies are released, financing is secured, and potentially as the project is developed, or sold. In our view, exploration success at Valeriano, and throughout the property, including new trends, will support a sizeable block cave mine in a district of major miners also with large-scale development projects.”

* JP Morgan’s Sebastiano Petti downgraded Telus Corp. (T-T) to “neutral” from “overweight” and cut his target to $26 from $29. The average on the Street is $26.87.

* Wells Fargo’s Edward Joseph Kelly lowered his Dollarama Inc. (DOL-T) target to $105 from $110 with an “overweight” rating. The average is $104.17.

* Barclays’ Adrienne Yih cut her Pet Valu Holdings Ltd. (PET-T) target by $1 to $33, below the $36.22 average on the Street, with an “overweight” rating.

* Following the late December announcement of its $1.1-billion deal for Daseke, Wells Fargo’s James Monigan assumed coverage of TFI International Inc. (TFII-N, TFII-T) with an “overweight” recommendation and US$165 target, up from the firm’s previous US$130 target, while Stifel’s J. Bruce Chan raised his target to US$148 from US$140 with a “buy” rating. The average is US$153.08.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 24/05/24 3:59pm EDT.

SymbolName% changeLast
Apple Inc
Atex Resources Inc
Barrick Gold Corp
Bird Construction Inc
Canadian National Railway Co.
Canadian Pacific Kansas City Ltd
Cogeco Communications Inc
Colliers International Group Inc
Dollarama Inc
First Quantum Minerals Ltd
Lululemon Athletica
Pet Valu Holdings Ltd
Quebecor Inc Cl B Sv
Restaurant Brands International Inc
Rogers Communications Inc Cl B NV
Superior Plus Corp
Telus Corp
Tfi International Inc
Xenon Pharmaceuticals Inc

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