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

Credit Suisse analyst Joo Ho Kim thinks the results from Royal Bank of Canada (RY-T) followed many of the trends that he’s observed from the Big Six group in the first quarter, emphasizing its “weaker” underlying results.

“While trading did provide a boost to the results, that was overshadowed by an even sharper area of focus, which was net interest margins and expenses,” he said. “On margins, RY softened its near-term guidance, and while the bank is not alone in doing so this quarter, we believe the impact certainly looked worse given its outperformance on the metric last year. RY also wasn’t alone on higher-than-expected expenses this quarter (in fact all the banks missed our expense estimates so far this earnings season), but the magnitude of the increase certainly seemed like it was on the higher end of the group even excluding ‘one-time’ items.”

RBC shares slid 3.6 per cent on Wednesday following the premarket release, which included core cash earnings per share of $3.10, exceeding both Mr. Kim’s $2.95 estimate and the consensus projection on the Street of $2.96.

“Relative to our estimates, the result was driven by higher-than-expected revenues (14 cents [er share, strong trading results here as NII was in line), which more than offset higher expenses (12 cents per share), as PCLs were in line with our estimate,” he said. “The pre-tax pre-provision earnings growth was 12 per cent quarter-over-quarter and 7 per cent year-over-year, in line with our expectations. The bank reported core ROE of 17.1 per cent this quarter, which was up 130 basis points over the quarter. The CET1 ratio of 12.7 per cent was up 10 basis points sequentially. As expected, the bank left its quarterly dividend unchanged at $1.32 per share.”

Though he raised his full-year core cash EPS estimate by 6 cents to $11.98, Mr. Kim cut his target to $151 from $153, reiterating an “outperform” rating. The average on the Street is $142.21, according to Refinitiv data.

Other analysts making target adjustments include:

* National Bank’s Gabriel Dechaine to $145 from $147 with an “outperform” rating.

“A negative surprise from RY’s Q1/13 results was a mere 1 basis points of sequential NIM expansion (excl. trading),” said Mr. Dechaine. “The bank was caught off guard by the pace of customers switching out of zero cost deposits into higher-cost term deposits (e.g., GICs). RY quantified that GIC deposits grew 18 per cent quarter-over-quarter and 71 per cent year-over-year, with core banking account deposits (lower cost) falling 4 per cent quarter-over-quarter and 7 per cent year-over-year. Looking ahead, the bank is guiding to mid-teens NII growth in Canadian banking for fiscal 2023, with even stronger growth at City National. Given this quarter’s disappointment relative to guidance, we are keeping our expectations in check (i.e. single-digit all-bank NIM expansion this year).”

* Barclays’ John Aiken to $151 from $150 with an “overweight” rating.

“Royal continued to struggle with getting its costs under control, but strong capital markets revenues managed to offset the issue in the quarter. Moving forward, we believe expense management could result in meaningful upside in earnings and for valuation,” he said.

* Canaccord Genuity’s Scott Chan to $145 from $147 with a “hold” rating.

* CIBC’s Paul Holden to $147 from $150 with an “outperformer” rating.

* Cormark Securities’ Lemar Persaud to $152 from $161 with a “buy” rating.


Desjardins Securities analyst Doug Young called the first-quarter financial results from National Bank of Canada (NA-T) “positive” and touted the “impressive” resilience of its capital markets division.

However, he warned that he’s “confused with how NA was able to drive such strong NIM [net interest margin] expansion.”

“All-bank NIM excluding trading and one-time items was above our estimate, driven mostly by deposit margins; of note, net interest income in wealth management increased 75 per cent year-over-year,” said Mr. Young. That said, management expects NIMs to ‘subside’ over the next few quarters and would not provide an outlook for FY23 (may do so next quarter).”

Before the bell on Wednesday, the bank reported cash earnings per share of $2.56, topping both the analyst’s $2.35 estimate and the consensus forecast on the Street of $2.39.

“Adjusted PTPP earnings were 6 per cent above our estimate; relative to our estimates, capital markets, wealth management, U.S. specialty finance and international (USSF&I) and ‘other’ beat, while P&C banking was in line,” said the analyst.

While raising his EPS estimates for both fiscal 2023 and 2024, Mr. Young warned: “Management’s outlook remains cautious and this shows through in slower P&C banking loan growth vs peers so far this quarter.”

Maintaining a “hold” rating, he bumped his target to $104 from $102. The average is $105.71.

“We like NA, but see greater total potential returns elsewhere,” said Mr. Young.

Elsewhere, others making changes include:

* Credit Suisse’s Joo Ho Kim to $113 from $110 with an “outperform” rating.

“NA delivered a strong set of results to start the year, as the headline beat was supported not only by strong results from Financial Markets (more of a focus area for this bank), but also good results from net interest margins, Wealth, and USSF&I,” said Mr. Kim. “Taking some shine off the results was net interest margin guidance, which was a bit more cautious than what we expected, but seemed not to impact the bank’s PTPP earnings guidance for the year (mid to high single digit). Despite the shares’ outperformance on earnings day (and over the last twelve months for that matter), we continue to favor the bank’s defensive positioning as we head into a potentially more challenging growth environment for the group.”

* Canaccord Genuity’s Scott Chan to $104.50 from $102 with a “hold” rating.

“Our F2023/F2024 EPS estimates are up 1 per cent/2 per cent, respectively mainly due to better credit and Other income, partially offset by expenses,” said Mr. Chan. “Due to better-than-expected performance on market sensitive businesses (supporting above average EPS growth), we are lowering our target P/E discount to 0 per cent (from negative 3 per cent).”

* Barclays’ John Aiken to $98 from $93 with an “underweight” rating.

“While National also benefited from strong capital markets and lower than expected provisions, we note that it had the best credit performance to date,” he said.

* Cormark Securities’ Lemar Persaud to $113 from $112 with a “buy” rating.


Citing the value creation and potential future strategic opportunities brought by the $235-million sale of its Ontario Eastern road-building operation, ATB Capital Markets’ Chris Murray raised his recommendation for Aecon Group Inc. (ARE-T) to “outperform” from “sector perform” previously.

He was one of three equity analysts on the Street to upgrade the Vancouver-based company a day after its shares soared 8.4 per cent following the premarket release of better-than-expected fourth-quarter 2022 financial results and the announcement of the cash deal with Green Infrastructure Partners Inc. (GIP) for the segment, which represented approximately 7 per cent of its consolidated revenues in 2022.

“We estimate a sale multiple of 11.0 times EV/EBITDA, which is highly accretive, as Aecon trades at 5.0 times, while also lowering future capex requirements,” said Mr. Murray. “The divestiture accelerates management’s focus on projects surrounding the energy transition, with proceeds contributing to the redemption of $184-million in convertible debentures. The sale is expected to close in Q2/23.”

For the quarter, Aecon reported revenue of $1.27-billion, up 16.4 per cent year-over-year and exceeded Mr. Murray’s $1.17-billion estimate. Adjusted fully diluted earnings per share rose 36 per cent to 26 cents and also easily topped the analyst’s forecast of 12 cents.

“Aecon delivered strong revenue growth, though margins came in slightly below ATB estimates,” he said. “Management reiterated its positive outlook for 2023, highlighting an active project pipeline, recent significant contract wins, and a $6.3-billion backlog.”

“The backlog continues to provide long-term visibility into revenue generation, supported by an expanding mix of recurring revenue-based projects. ARE is pre-qualified on several large projects likely to be awarded in 2023, which we expect to underpin book-to-bill trends (more than 1.0 times) in 2023.”

With the divestiture and better-than-anticipated results, Mr. Murray raised his EPS projections for 2023 and 2024 to 55 cents and $1.37, respectively, from 38 cents and 82 cents.

“With governments across Canada identifying infrastructure investment as key to the recovery, management expects demand for its services to remain healthy,” he said. “The Company is pre-qualified on several large bids due to be awarded in 2023 and is expecting growing capital investment plans, primarily in telecommunications and power utilities, to drive an expansion in recurring revenue. Management expects inflationary pressure to persist but is seeing no signs of a recession. While we expect the four identified fixed bid projects to give rise to potential margin uncertainty over the near term, management remained confident in the Company’s ability to grow the backlog while gradually reducing its fixed bid exposure to approximately 50 per cent, which we see translating into earnings growth and an increasingly durable margin profile.”

His target for Aecon shares increased to $16 from $14. The average is $13.11.

Elsewhere, others making rating changes are:

* iA Capital Markets analyst Naji Baydoun to “buy” from “hold” with a $16 target, up from $13.

“The Company’s backlog remains stable quarter-over-quarter at $6.3-billion; however, (1) new contract awards have exceeded expectations, (2) the backlog is transitioning to lower-risk projects, and (3) growth in recurring revenue streams should continue to support the overall outlook,” said Mr. Baydoun. “Furthermore, ARE provided additional disclosures on the impact that its large legacy fixed price projects have had on results; as the majority of the remaining value of these projects gets worked off from the backlog over the coming year, we now see a path to much higher profitability. Combined with the asset sale announced yesterday (March 1), ARE has (1) now provided much needed clarity on its potential normalized margin profile, and (2) strengthened its balance sheet via capital recycling at an attractive valuation. These initiatives have increased our confidence in the path ahead for ARE, leading us to materially increase our financial forecasts and price target. Accordingly, we are electing to upgrade ARE.”

* Desjardins Securities’ Benoit Poirier to “buy” from “hold” with a $19 target, up from $15.

“We view the combination of encouraging 4Q results and the sale of the capital-intensive roadbuilding business at an attractive multiple as positive signs that underscore the strength of the management team. We are open-minded regarding ARE’s future, as all charges have now been taken on the four problematic contracts, but at the end of the day this is construction and the risk of further writedowns remains given the size and complexity of the projects,” said Mr. Poirier.

Other analysts making changes include:

* Canaccord Genuity’s Yuri Lynk to $11 from $10 with a “hold” rating.

“The asset sale immediately cleans up the balance sheet, reducing the risk surrounding the required refinancing of the $184 million convertible debentures and backstopping the dividend (6.3-per-cent yield),” said Mr. Lynk. “The company is executing well on over 80 per cent of its backlog, and underlying results point to a step-change in EBITDA margin over the last two years. However, the four legacy LSTK contracts lost $120 million combined in 2022, weighing on margins and, more importantly, FCF. Given these contracts comprise 17 per cent of backlog, we expect further negative cost reforecasts over the next year, and thus we see the risk/reward as neutral.”

* Stifel’s Ian Gillies to $11.50 from $11 with a “hold” rating.

“It was an eventful quarter for Aecon, with a $235-million asset sale significantly reducing the nearterm balance sheet risk for the company,” said Mr. Gillies. “This reduced risk should help support its EV/EBITDA valuation of 6.9 times, which sits above the U.S./Canadian peer group at 5.1 times. After updating our model, we only see a modest positive change in the 12-month equity value of the business.”

“Our view on Aecon’s 2023 and 2024 revenue growth is underpinned by a strong backlog. However, the backdrop of inflationary and supply chain pressure increases the risk on future margin performance. Additionally, uncertainties surrounding four problem contracts cause concerns on project risks or challenges in project close outs. As a result, a lack of certainty on margins growth makes it challenging for the company to expand its margins and achieve a higher valuation for the time being.”

* RBC’s Sabahat Khan $12 from $11 with a “sector perform” rating.

* TD’s Michael Tupholme to $12.50 from $10 with a “hold” rating.


In response to recent share price underperformance related to equity dilution in 2022, RBC Dominion Securities analyst Josh Wolfson raised his recommendation for Sandstorm Gold Ltd. (SAND-N, SSL-T) to “outperform” from “sector perform,” seeing its valuation “materially discounted versus peers while offering peer-leading growth.”

“On a 1-year basis, royalty companies have performed comparatively well at negative 7 per cent vs. GDX down 23 per cent, benefiting from the business model’s cost insulation, where inflation has impacted producers extensively,” he said. “Over the same period, SAND shares have declined 34 per cent, in our view a by-product of high equity dilution (shares outst. up 55 per cent post Nomad and Basecore acquisitions, plus equity issued) as well as a negative 12-per-cent revision to prior-issued 4-year guidance. While net negative to valuation, these events have transformed and improved the risk profile of the company. SAND is now the most highly diversified royalty company, and in our view, recent guidance targets are now reset to more achievable levels.”

Over the past year, Mr. Wolfson thinks the Vancouver-basesd company has “diversified its asset base via large acquisitions, advanced growth via permitting its cornerstone Hod Maden project, and reset guidance to more achievable targets.”

Touting its potential for “high interim growth,” he added: " At spot gold, we calculate SAND shares trade at a P/NAV [price to net asset value] of 1.1 times (royalty group 2.0 times, mid-cap royalties 1.3 times), and a blended 2023/24 EV/EBITDA of 14.8 times and FCF/EV of 5.5 per cent (royalty group 20.8 times and 2.9 per cent, mid-cap royalties 16.6 times and 4.5 per cent). We note that production over this period fully excludes Hod Maden development upside — a transformational upcoming milestone that is guided to contribute meaningfully to 42-per-cent production growth over 2025-26 and further improve valuation to 11.2 times EBITDA and 8.2-per-cent FCF/EV over this period. Despite de-risking of Hod Maden via successful permitting and stream restructuring in 2022, upside can be characterized as excluded from SAND’s shares (i.e. 1.4 times NAV at spot ex-Hod Maden). We acknowledge that development, ramp-up, and partner-linked financing are uncertainties, and the complex structure of SAND’s partnership with Horizon Copper presents risk, although current SAND valuation is punitive.”

He maintained a US$6.50 target for Sandstorm shares. The average is currently US$8.57.


While the macroeconomic environment “remains uncertain,” RBC Dominion Securities analyst Paul Treiber thinks investor visibility on Descartes Systems Group Inc. (DSGX-Q/DSG-T) is “high” following better-than-expected fourth-quarter results, pointing to its “well run operations, counter-cyclical M&A, and resilient organic growth.”

“Our Outperform thesis reflects Descartes’ ability to compound capital through balancing acquisitions and organic growth over the long-term,” he said. “With resilient organic growth and sustained M&A, we believe investor visibility is improving. Descartes is trading at 25 times FTM [forward 12-month] EV/EBITDA, below supply chain & fleet management peers (33 times) and near the mid-point of its 3-year historical average (20-39 times range).

“M&A is likely to help offset slower organic growth. While slowing global trade volumes are a headwind to near-term organic growth, we believe that Descartes is likely to deploy more capital on acquisitions during periods of macroeconomic duress. For example, Descartes’ adj. EBITDA rose 21 per cent year-over-year in CY09, despite negative 4-per-cent organic growth. On the Q4 conference call, management indicated that it is seeing more M&A opportunities as the market continues to open up and valuation expectations are beginning to decline. Moreover, Descartes has significant M&A capacity. Acquisitions are a potential near-term catalyst for the stock, in our view.”

After the bell on Wednesday, the Waterloo, Ont.-based software company reported revenue for the quarter of US$125-million, up 11 per cent year-over-year and above the US$123-million estimate from both Mr. Treiber and the Street. Adjusted EBITDA grew 10 per cent to US$55-million, matching forecasts, while GAAP earnings per share of 34 US cents was better than anticipayed (31 US cents and 29 US cents, respectively).

“Q1 baseline for $117-million revenue and $43-million adj. EBITDA implies Q1 actuals of $136-million revenue and $58-million adj. EBITDA (consensus at $127-million and $57-million), based on the delta between Q4 actuals and baseline,” the analyst said. “Q1 baseline implies organic growth slows to 6.0 per cent, slightly above the 5.5 per cent in our model. Management appears upbeat regarding organic growth, as: 1) customers expect improved shipment volumes through the year; 2) sustained prioritization of investments in supply chain and logistics software; and 3) ESG-related demand for compliance and trade data solutions.”

Seeing Descartes “well capitalized to pursue acquisitions” and touting its “solid” free cash flow, Mr. Treiber raised his target for its shares to US$95 from US$85, keeping an “outperform” recommendation. The average is US$79.35.

Elsewhere, others making changes include:

* Canaccord Genuity’s Robert Young to US$85 from US$77 with a “buy” rating.

“In our view, while Descartes’ valuation at 25 times EV/NTM EBITDA is not cheap, its solid FCF margin profile paired with a resilient business model, large M&A war chest and stable peer valuations position Descartes as a core holding,” said Mr. Young.

* Scotia Capital’s Kevin Krishnaratne to US$84 from US$80 with a “sector outperform” rating.

“Descartes exited its F2023 on a high note, with Q4 results featuring a continuation of recent trends that have seen the company benefiting from multiple macro factors driving an increase in logistics and supply chain complexity and uncertainty, and in turn, demand for its solutions,” he said.

* Barclays’ Raimo Lenschow to US$62 from US$58 with an “underweight” rating.

“While these results are a nice reversal from the negative growth seen last quarter, it’s difficult to gain confidence that the improvement in volumes will continue in the near term, and the easing port backlogs means less of a backstop against a slowdown,” he said.

* BMO’s Thanos Moschopoulos to US$78 from US$71 with a “market perform” rating.

“We remain Market Perform on DSGX following Q4/23 results—which were a hair above consensus on revenue and EBITDA, and a more meaningful beat on Q1/24 calibration, due to the recent GroundCloud acquisition. Organic growth modestly decelerated from last quarter, but remains healthy, as the macro backdrop seems to be holding up better than we might have expected. Net, we’ve raised our estimates. We think DSGX can continue to execute successfully on its strategy of delivering consistent EBITDA growth, but on a relative basis, prefer other consolidators in our coverage universe,” he said.

* Raymond James’ Stephen Li to US$73 from US$71 with a “market perform” rating.

* TD’s Daniel Chan to US$90 from US$85 with a “buy” rating.

* Stephens’ Justin Long to US$90 from US$85 with an “overweight” rating.


Credit Suisse analyst Fahad Tariq made a series of target reduction to gold stocks in his coverage universe on Thursday.

“Most of the gold producers in our North America coverage universe have reported Q4-22 results, and a common theme appears to be elevated 2023 costs, above consensus and our expectations,” he said. “Part of the story is conservatism on the part of management teams (i.e., setting the bar low) and the other part is continued inflationary pressures, particularly on labour (employees and contractors). In our conversations, investors appear concerned on weaker margins in 2023 (this is reflected in the generally subdued valuations of gold equities), and in particular a weak H1-23, with most gold producers guiding to H2-weighted production and an improving cost profile as the year progresses.”

His changes included:

  • Agnico Eagles Mines Ltd. (AEM-N/AEM-T, “outperform”) to US$57 from US$67. The average is US$62.83.
  • Alamos Gold Inc. (AGI-N/AGI-T, “neutral”) to US$11 from US$11.50. Average: US$11.37.
  • Barrick Gold Corp. (GOLD-N/ABX-T, “outperform”) to US$20 from US$23. Average: US$21.86.
  • Centerra Gold Inc. (CG-T, “neutral”) to $9 from $9.25. Average: $9.88.
  • Eldorado Gold Corp. (EGO-N/ELD-T, “underperform”) to US$9.25 from US$9. Average: US$10.90.
  • Franco-Nevada Corp. (FNV-N/FNV-T, “neutral”) to US$140 from US$150. Average: US$143.17.
  • Iamgold Corp. (IAG-N/IMG-T, “neutral”) to US$2.75 from US$3. Average: US$2.90.
  • Kinross Gold Corp. (KGC-N/K-T, “neutral”) to US$4.25 from US$5.25. Average: US$5.30.
  • New Gold Inc. (NGD-N/NGD-T, “neutral”) to US$1 from US$1.25. Average: US$1.19.
  • Wheaton Precious Metals Corp. (WPM-T, “neutral”) to $60 from $65. Average: $54.06.


In other analyst actions:

* Echelon Capital Markets’ Rob Goff became the first analyst to initiate coverage of Volatus Aerospace Corp. (VOL-X), an Oro Medonte, Ont.-based drone manufacturer, giving it a “speculative buy” rating and 90-cent target.

“Our baseline DCF of $1.00 reflects compelling absolute value while discounting peer benchmarks and significant blue-sky upside,” he said. “We believe Volatus stands out from its peers given expected 2023 revenues/EBITDA at $52.0-million/a loss of $1.9-million where its modest EV at $34.1-million offers significant revaluation upside given peer valuations.

“Our bullish outlook toward Volatus shares reflects the expectation of disciplined stewardship with a clear strategy focused on near-term commercial traction in equipment sales, data collection, and military defense while preparing for sustained market growth in these areas and as cargo delivery gains traction and expands the addressable market. The successful execution of 15 on-strategy acquisitions over the past 32 months has curated vertically integrated capabilities and formed key strategic partnerships while establishing a strong reach across the Americas as VOL gained marquee land-and-expand contracts across priority verticals.”:

* Canaccord Genuity’s Carey MacRury lowered his Agnico Eagle Mines Ltd. (AEM-T) target to $84, below the $86.22 average, from $90 with a “buy” rating.

“2022 was a transformational year for Agnico with the closing of the Kirkland acquisition and an agreement to fully consolidate ownership of Canadian Malartic (expected to close in Q1/23),” he said. “The company achieved its full-year 2022 production guidance with cash costs 1 per cent above the top end. Agnico’s 2023 and 2024 gold production guidance was more of a surprise, 6 per cent below our forecasts and below the company’s previous guidance, after adjusting for the increased ownership interest in Canadian Malartic. The lower guidance reflects lowered production expectations at LaRonde and Macassa going forward and ongoing regulatory and legal restrictions at Fosterville and Kittila (that we expect ultimately to be temporary). 2023 cash cost guidance was 9 per cent higher than our prior forecast on the back of inflationary pressures and reduced volumes. Overall, our fundamental view of Agnico hasn’t changed: this is a company with a high-quality asset portfolio with significant asset potential yet to be realized (or fully articulated), coupled with a strong balance sheet, low geopolitical risk profile and solid operating team. AEM is trading at 0.84 times NAV vs. its historical average of 1.09 times and in line with the average of its closest peers, Newmont and Barrick.”

* RBC’s Jimmy Shan lowered his Artis REIT (AX.UN-T) target to $9 from $11 with a “sector perform” rating. Other changes include: TD’s Jonathan Kelcher to $9 from $9.50 with a “hold” rating and National Bank’s Matt Kornack to $9 from $9.50 with a “sector perform” rating. The average is $10.45.

“Artis REIT reported FFO/unit of $0.30, down 6.3 per cent year-over-year, vs. RBC/ Consensus of $0.35/0.33,” Mr. Shan. “The negative variance was primarily due to higher interest expense. In our view, the risk profile is elevated given its high variable rate exposure, reduced financial flexibility, office exposure with a challenged outlook and much work is required to achieve the stated objectives of its March 2021 “transformation plan.”

* RBC’s Luke Davis bumped his target for Athabasca Oil Corp. (ATH-T) to $3.50, above the $3.30 average, from $3 with a “sector perform” rating.

* Ahead of the March 23 release of its fourth-quarter 2023 results, National Bank’s Cameron Doerksen hiked his BRP Inc. (DOO-T) target to $139 from $130 with an “outperform” rating. The average is $133.89.

“We continue to expect some softening of retail demand for powersports in the coming quarters, but also still expect BRP to outperform the industry supported by ongoing market share gains and tailwinds from new product introductions,” he said.

* RBC’s Paul Quinn cut his Canfor Pulp Products Inc. (CFX-T) target by $1 to $6 with an “outperform” rating, while TD’s Sean Steuart trimmed his target to $4.25 from $4.75 with a “hold” rating. The average is $5.30.

“Canfor Pulp reported Q4 Adjusted EBITDA of a loss of $15.1-million, which was below our forecast and consensus,” said Mr. Quinn. “We think investors were likely braced for a weak/ noisy quarter given challenges around the supply of sawmill residual chips in BC and downtime at the Intercontinental and Northwood pulp mills, as well as ongoing downtime at Taylor. We think the current share price reflects significant discounts for BC fiber issues and recent operational challenges, and see an opportunity for relative outperformance if Canfor Pulp can deliver stronger results with its rationalized platform.”

* CIBC’s Mark Jarvi cut his Capital Power Corp. (CPX-T) target to $50 from $52 with a “neutral” rating. Other changes include: TD’s John Mould to $54 from $56 with a “buy” rating, ATB Capital Markets’ Nate Heywood to $50 from $52 with a “sector perform” rating, Raymond James’ David Quezada to $50 from $53 with a “market perform” rating, National Bank’s Patrick Kenny to $51 from $53 with an “outperform” rating and BMO’s Ben Pham to $50 from $52 with a “market perform” rating. The average is $51.88.

“We remain fans of Capital Power’s balanced set of growth opportunities including renewable power development, uprating/expansions/extensions in Ontario, and repowering/CCUS projects,” said Mr. Quezada. “That said, our Market Perform rating reflects prevailing expectations of declining Alberta Power prices in 2H23 and 2024. We have reduced our price target to $50 from $53 reflecting a modestly lower assumed target multiple in part due to this outlook.”

* Following its Investor Day event on Wednesday, CIBC’s Robert Catellier raised his target for Enbridge Inc. (ENB-T) to $63 from $62 with an “outperformer” rating, while iA Capital Markets’ Matthew Weekes’ bumped his target to $58 from $57 with a “buy” rating. The average is $58.30.

* Scotia Capital’s Phil Hardie raised his First National Financial Corp. (FN-T) target to $38, above the $37.67 average, from $35 with a “sector perform” rating. Other changes include: TD’s Graham Ryding to $38 from $35 with a “hold” rating, National Bank’s Jaeme Gloyn to $37 from $36 with a ”sector perform” rating and BMO’s Étienne Ricard to $36 from $33 with a “market perform” rating.

“There were a few moving parts and offsets, but overall First National’s Q4/22 results came in above Street expectations and were also a touch ahead of our forecasts,” said Mr. Hardie. “Relative to our estimates, the beat was driven largely by lower-than-expected operating expenses.

“Given a challenging backdrop, the fourth quarter results provide an additional data point demonstrating the resilience and competitive strengths of First National’s business model. Management believes near-term origination volumes are likely to be lower from a higher mortgage rate environment resulting in a slowdown of activities. The expected pause in rate hikes combined with increased immigration could be a favourable tailwind for housing activity and support improving origination volumes in the second half of 2023. The positive change is not likely to be a return to the unsustainable pace seen in 2020 and 2021, but more likely a reversion closer to resembling the pre-pandemic environment.”

* Desjardins Securities’ Chris Li increased his target for George Weston Ltd. (WN-T) target to $192 from $189 with a “hold” rating. Other changes include: BMO’s Peter Sklar to $180 from $172 with a “market perform” rating, Scotia’s George Doumet to $181 from $175 with a “sector perform” rating and CIBC’s Mark Petrie to $210 from $204 with an “outperformer” rating. The average is $195.43.

“As a parent company of two publicly traded entities, Loblaw and Choice REIT, which, respectively, report their earnings prior to George Weston’s, we consider George Weston’s quarterly earnings to be non-eventful. George Weston’s 2023 outlook is consistent with that recently announced by Loblaw and Choice REIT, and indicates that it expects adjusted net earnings to increase due to the results from its operating segments, and to use excess cash to repurchase shares,” said Mr. Sklar.

* BMO’s Peter Sklar hiked his Linamar Corp. (LNR-T) target to $92 from $80 with an “outperform” rating. The average is $84.80.

“We believe overall industry valuations will improve and the industrial businesses are going to show strong results in the coming quarters,” said Mr. Sklar.

* National Bank’s Cameron Doerksen trimmed his target for NFI Group Inc. (NFI-T) to $13 from $14 with a “sector perform” rating. The average is $12.38.

“Although the Q4 update brought some positive news, notably ongoing strong demand for buses and some improving trends with NFI’s supply chain, we remain cautious due to ongoing risks around the supply chain as well as NFI’s capital needs,” said Mr. Doerksen.

* CIBC’s Dean Wilkinson raised his Primaris REIT (PMZ.UN-T) target to $19 from $18 with an “outperformer” rating. The average is $17.25.

* RBC’s Maxim Matushansky cut his Q4 Inc. (QFOR-T) target to $3.25 from $3.50 with a “sector perform” rating. Others making changes include: Raymond James’ Stephen Boland to $4 from $6.50 with an “outperform” rating and Canaccord Genuity’s Doug Taylor to $2.75 from $3.25 with a “hold” rating. The average is $3.96.

“We maintain a HOLD rating on Q4 following its fourth quarter results that reflected slowing growth and ongoing cash burn,” said Mr. Taylor. “The company continues to speak to the objective of achieving EBITDA breakeven by year-end and is making meaningful steps in improving gross and EBITDA margins towards that goal. However, given the challenging capital markets backdrop and a considerable gap to close to achieve profitability, we continue to wait for better visibility on both to get more constructive with QFOR shares. Until that point, we believe depressed EV/sales multiples are likely to persist despite the company’s strong competitive positioning and product leadership.”

* Canaccord Genuity’s Edward Nash cut his Theratechnologies Inc. (THTX-Q/TH-T) target to US$2 from US$3, below the US$5.80 average, with a “hold” rating.

* CIBC’s Jamie Kubik lowered his Tourmaline Oil Corp. (TOU-T) target to $80 from $85 with an “outperformer” rating, while TD’s Aaron Bilkoski cut his target to $96 from $100 with a “buy” rating.. The average is $92.07.

* Scotia’s Phil Hardie reduced his target for Trisura Group Ltd. (TSU-T) to $52 from $55 with a “sector outperform” rating. Others making changes include: Raymond James’ Stephen Boland to $52 from $56 with an “outperform” rating, Cormark Securities’ Jeff Fenwick to $51 from $56.50 with a “buy” rating, BMO’s Tom MacKinnon to $49 from $52 with an “outperform” rating, National Bank’s Jaeme Gloyn to $62 from $69 with an “outperform” rating. and CIBC’s Nik Priebe to $55 from $60 with an “outperformer” rating. The average is $54.79.

“Following a 20-per-cent sell-off in the wake of a last-minute delay in filing its year-end results surrounding an accounting issue related to reinsurance contracts, Trisura stock enjoyed a relief rally,” said Mr. Hardie. “This likely reflects a view that the outcome of the delay was not as bad as feared, and the underlying operating results were solid and roughly 30 per cent ahead of expectations. The company took a noncash write-down that was one-time in nature, but this is likely to raise some concerns related to 1) capital adequacy to support growth, and 2) risks related to managing a high-growth company. Management believes the company is well capitalized and noted a number of levers such as internally generated capital, excess cash at the holding company and additional debt capacity as sources of additional capital to support its growth.

“We have modestly trimmed our valuation multiple reflecting what we view as a transitional de-rate as investors rebalance risks related to managing a high-growth company with upside potential. We expect consistent solid performance with no further surprises to support multiple expansion and eventual return to prior valuation levels.”

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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 01/02/24 11:59pm EST.

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