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

Parkland Corp.’s (PKI-T) “strong” first-quarter results showed the “resiliency” of its business model, according to iA Capital Markets analyst Elias Foscolos, leading him to raise his rating for its shares to “strong buy” from “buy.”

After the bell, the Calgary-based company reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $314-million, exceeding both Mr. Foscolos’s $284-million projection and the consensus forecast of $295-million. The beat was driven by strong performances from its Canada and Supply segments.

Concurrently, Parkland maintained its 2021 guidance and revealed a desire to reach $2-billion in adjusted EBITDA by the end of 2025, which the analyst said is “supported by a robust set of growth opportunities, proven ability to extract integration benefits from acquisitions, flexible balance sheet, and diversified value proposition.”

After raising his financial expectations in response to the quarterly results, Mr. Foscolos increased his target for Parkland shares to $52 from $49. The average target on the Street is $48.85, according to Refinitiv data.


With demand continuing to exceed supply, Cargojet Inc. (CJT-T) possesses numerous growth opportunities moving forward, according to ATB Capital Markets’ Chris Murray, seeing it “well positioned” amid secular trends brought on by the COVID-19 pandemic.

Before the bell on Monday, the Mississauga-based company reported first-quarter results that Mr. Murray deemed “strong.”

Revenue rose 30 per cent year-over-year to $160.3-million, exceeding both the analyst’s $141.2-million estimate and the consensus forecast of $153.8-million. The beat was driven by significant gains in all three of its business segments: Domestic Network (up 16 per cent), Aircraft, Crew, Maintenance and Insurance (up 100 per cent) and All-in Charter (up 40 per cent).

Earnings before interest, taxes, depreciation and amortization (EBITDA) of $64.2-million also topped projections ($48.9-million and $58.3-million).

“With Q1/20 representing the Company’s last pre-COVID period, comparables are set to get more challenging starting with Q2/21, however, management indicated that Q2/21 should be similar in performance to Q1/21,” said Mr. Murray. “Q1/21 represented a cleaner baseline to evaluate the Company’s financial performance as the extremes seen in 2020 have abated, but with strong e-commerce demand and strong customer relationships expected to endure.

“With Adjusted FCF and EBITDA set to benefit from lower maintenance CapEx requirements and operating leverage, combined with reduced leverage levels (1.0 times) and greater liquidity following the recent equity raise, we view the Company as increasingly well-positioned for its next leg of growth as B2C/B2B e-commerce trends continue to present a significant longer-term, secular tailwind for the Company.”

The analyst emphasized the upside potential of its outperforming ACMI business, which represents 24 per cent of total revenue in the quarter.

“We view the demonstrated growth within the ACMI business positively as higher activity levels support greater fleet utilization and provide margin accretive revenue, noting that gross margins expanded by 210 basis points (year-over-year) in Q1/21,” he said. “Management on the call noted that ACMI represents a significant growth opportunity with demand in the marketplace far exceeding supply, which we see providing attractive optionality for CJT as it adds additional aircraft to its fleet this year.”

After raising his earnings expectations through 2022, Mr. Murray increased his target for Cargojet shares to $230 from $225, reiterating an “outperform” recommendation. The current average on the Street is $258.55.

Elsewhere, National Bank’s Cameron Doerksen cut his target to $226 from $231 with an “outperform” rating, while Scotia’s Konark Gupta raised his target to $260 from $250 with a “sector outperform” recommendation.

“Overall, we view the quarter as a positive and a potential inflection point for Street expectations (i.e., upside risk) as CJT executes on incremental growth opportunities this year,” said Mr. Gupta.


In the wake of the release of “impressive” first-quarter financial results, Desjardins Securities analyst Benoit Poirier thinks an increase to Stella-Jones Inc.’s (SJ-T) 2021 guidance demonstrates its “resiliency in the midst of the pandemic.”

“SJ started 2021 with strength, delivering 57-per-cent EBITDA growth and raising its 2021 outlook” he said. “While we acknowledge that the revision is mainly related to the residential lumber segment, which can be more volatile, we are pleased with the level of operation execution demonstrated by SJ since the beginning of the pandemic, which enabled it to capitalize on these opportunities.”

Shares of the Montreal-based company rose 2.2 per cent on Monday in response to the stronger-than-anticipated first-quarter report. EBITDA jumped 57 per cent year-over-year to $99-million, easily topping both Mr. Poirier’s $75-million projection and the consensus forecast on the Street of $76-million.

Concurrently, its management raised its full-year EBITDA guidance to a range of $450–480-million, up from $385–410-million and exceeding both the consensus estimate of $391-million and Mr. Poirier’s $389-million.

“Management expects to be active with its M&A strategy in 2021, noting that discussions with potential targets have continued to progress since 3Q,” the analyst said. “While SJ remains a disciplined acquirer (typically below 7 times EV/EBITDA — a key driver of value creation), management noted that valuation paid is not a hurdle to ongoing discussions. In the past, SJ noted that it could still acquire US$300-million of revenue in the long term (mostly in utility poles, although some opportunities exist in railway ties). Interestingly, management highlighted that the potential acquisition of Kansas City Southern (KSU) by CN or CP could ultimately open an M&A opportunity for SJ given its strong relationship with both railroads. For the right transaction, management would be ready to leverage its balance sheet to 3.0 times, representing up to $600-million of liquidity to deploy toward M&A (excluding EBITDA of acquired companies). This level of balance sheet flexibility would be sufficient to execute on the current M&A pipeline.”

Mr. Poirier thinks Stella Jones’ current valuation does not properly reflect its “resiliency amid the pandemic and market share leadership in segments with robust industry fundamentals.”

“SJ’s businesses are supported by robust fundamentals despite the pandemic and its balance sheet should enable management to continue to create shareholder value through share buybacks and M&A,” he said. “Management’s revised guidance for 2021 demonstrates that SJ expects to deliver solid results amid the COVID-19 pandemic. The stock is currently trading at an EV/FY2 EBITDA multiple of 10.8 times, below its five-year average of 11.5 times as well as average multiples for Class l railroads (14.3 times) and utility (15.2 times) peers. We note that SJ has traded on average at a 0.4-times premium vs Class l railroads over the last five years. We thus continue to see significant potential for the story as the shares are re-rated. That SJ has been very active with its NCIB program since 1Q is testament to the attractiveness of its share price, in our view.”

After raising his revenue and earnings expectations, Mr. Poirier raised his target for Stella Jones shares to $65 from $61, keeping a “buy” recommendation. The average is $57.94.

Others raising their targets include:

* Acumen Capital’s Jim Byrne to $62 from $58 with a “buy” rating.

“The company remains well positioned in today’s market given the improved demand for its products and its solid financial position. SJ can return excess cash flow to shareholders and pursue M&A opportunities while the shares trade below historical multiples,” he said.

* Scotia’s Benoit Laprade to $56 from $54 with a “sector perform” rating.

* TD Securities’ Michael Tupholme to $62 from $59 with a “buy” rating.


IGM Financial Inc. (IGM-T) “continues to reap benefits from its Wealthsimple investment,” said Desjardins Securities analyst Gary Ho.

On Monday, the Toronto-based online brokerage announced a landmark $750-million funding that values the company at $5-billion.

“IGM currently holds a 36-per-cent fully diluted interest (Power Group holds 62 per cent) in Wealthsimple with a fair value of approximately $550-million,” said Mr. Ho. “With this latest funding round, IGM will write up the valuation by $900-million ($3.78 per share) to $1.45-billion. Concurrent with the secondary offering, IGM will receive $295-million in proceeds ($260-million after tax), bringing down its stake to 23 per cent with a value of $1.15-billion. To bridge the math, the $5.0-billion post-money valuation includes $250-million in primary fundraising and $500-million in stock options granted to Wealthsimple’s management/board. We updated our FV [fair value] for Wealthsimple and increased IGM’s unallocated capital to $0.5-billion (up from $241-million at 4Q20).”

With that change and increases to his 2021 and 2022 earnings per share estimates (to $3.83 and $4.08, respectively, from $3.81 and $4.06), Mr. Ho raised his target for IGM shares to $48 from $44. The average is currently $46.22.

“The company’s wealth and asset management platforms are generating record flows,” he said. “However, expenses remain elevated and we view its valuation as fair. We believe a portion of the recent move in share price reflects [Monday’s] news.”

Elsewhere, CIBC World Markets Nik Priebe also raised his IGM target to $49 from $45 with an “outperformer” recommendation.


Scotia Capital’s Patricia Baker expects Gildan Activewear Inc. (GIL-N, GIL-T) to display the benefits from improving point-of-sales trends when it releases its first-quarter results on Wednesday.

The equity analyst is projecting the Montreal-based company’s EBITDA and earnings per share for the quarter to rise 62 per cent and 167 per cent year-over-year to US$82-million and 16 US cents, respectively, though both trail the current consensus projections (US$86-million and 19 US cents.

“We forecast year-over-year EPS growth to be driven by the lapping of unprecedented market conditions in the final month of Q1/F20, related to the start of the COVID pandemic, which significantly impacted operating performance,” said Ms. Baker. “GIL entered Q1/F21 with manufacturing capacity operating at 80 per cent of normal. However, early in the quarter, trends began to decline, and mid-way through the quarter, Imprintables POS (U.S. and international) was running at slightly lower levels compared to Q4/F20, with the overall run rate down 10 per cent to 15 per cent versus 2019 levels. This deterioration in rate was due to the second wave of government-mandated lockdowns in various geographies related to COIVD-19, as well as weather-related impacts in the U.S.

“This said, we believe volumes began to recover in the back half of the quarter as governments began easing restrictions and as GIL began lapping depressed sales related to the onset of the pandemic in 2020. The C/C will likely provide an update on GIL’s production levels, inventory, and demand. We also look for an update on GIL’s outlook post-pandemic.”

Citing “an improved outlook and continued COVID recovery,” Ms. Baker raised her fiscal 2020 forecast to US$1.97 from US$1.88, leading her to increase her target for Gildan shares to US$37 from US$35 with a “sector outperform” rating. The average is $34.94.


When it releases its results on May 10, Scotia Capital analyst Paul Steep said Nuvei Corp. (NVEI-T) is likely to report “on-going growth.”

“We believe that Nuvei will continue to see growth fueled by recent acquisitions and on-going organic expansion primarily through increased payment volumes,” he said.

“We expect Nuvei will continue to grow through a combination of organic and acquired initiatives and that the company’s primary focus will remain on expanding its client base in new and existing verticals. We believe the firm will remain active in evaluating acquisitions that further enhance its product/service capabilities.”

Reiterating a “sector outperform” rating for the Montreal-based tech firm, Mr. Steep raised his target to $101 from $97, The average on the Street is $90.


Touting its “near-term cash and long-term opportunity,” Canaccord Genuity analyst Sam Catalano initiated coverage of Thor Explorations Ltd. (THX-X), a Vancouver-based gold exploration and development company focused on Western Africa, with a “buy” recommendation.

“Thor’s fully funded, flagship asset Segilola (in Nigeria) is on track to imminently begin generating positive cash flow, with ramp-up expected from 3Q21. Segilola is the first major gold mine in Nigeria, where the industry is in its infancy and has been given ‘Pioneer’ status by the government (which aims to drive mining to 3 per cent of GDP versus current levels of 0.1 per cent). THX has significant additional landholdings within the country. THX’s strategy is to leverage its first-mover advantage in Nigeria, utilizing the near-term cash generation from Segilola to drive its regional exploration and development activities across Nigeria and the broader West African region.”

Ahead of a potential listing on the AIM exchange in London later this year, Mr. Catalano emphasized the company’s dividend potential, saying he expects “significant” excess cash flow over the next 12 months even after the extensive spending on exploration.

“Notably, management has publicly stated that the Board is already considering dividend policy options,” he said. “Should this transpire, we believe this would act as a clear differentiating factor to many other junior gold companies. As an illustration, we estimate a 30-per-cent payout of FCF in 2022 could result in 8 -per-cent dividend yield in that year.”

Seeing it attempt to leverage its first-mover advantage in Nigeria, he set a target of 65 cents per share, matching the current consensus on the Street.

“On balance, we believe a long list of positives, combined with compelling valuation upside potential, outweigh the risks and challenges which we see,” said Mr. Catalano.


Goeasy Ltd.’s (GSY-T) recent $320-million acquisition of LendCare Holdings Inc. is a positive for its stock, according to Raymond James analyst Stephen Boland, who sees the cash and stock deal enhancing its “growth in the consumer credit market through the expansion of its product range and point-of-sale distribution platform.”

“We believe this is an attractive strategic acquisition as it would: 1. Strengthen GSY’s nonprime consumer credit offering, 2. Expand GSY’s near-prime product range, and 3. Expand GSY’s point-of-sales lending channel,” he said.

Ahead of the May 11 release of its quarterly results, he raised his target for the Mississauga-based firm to $156 from $137 with an “outperform” rating. The average is $171.83.


In other analyst actions:

* National Bank Financial analyst Endri Leno upgraded Chemtrade Logistics Income Fund (CHE.UN-T) to “outperform” from “sector perform” and increased his target to $10.50 from $7. The average target on the Street is $9.

* National Bank’s Ryan Li raised his Lassonde Industries Inc. (LAS.A-T) target to $202 from $186, keeping an “outperform” recommendation. The average is $211.

* National Bank’s Patrick Kenny raised his Gibson Energy Inc. (GEI-T) target to $23 from $22, keeping a “sector perform” rating. The average is $24.97.

* IA Capital Markets analyst Frédéric Blondeau increased his target for Nexus REIT (NXR.UN-T) by $1 to $10 with a “buy” rating. The average is $9.38.

“Since the end of last year, management has put an even greater emphasis on the REIT’s external growth process through the acquisition of a significant number of industrial properties,” he said. “We would further underline that as at March 2021, pro-forma the London, Ontario acquisition announced in January, 67 per cent of NXR’s NOI [net operating income] was being generated from its industrial sub-portfolio. Management targets 75-per-cent exposure to industrial in the short term, which we believe to be realistic given our expectations in terms of acquisitions for the remainder of the year.”

* CIBC World Markets analyst Nik Priebe increased his Power Corporation of Canada (POW-T) target by $1 to $41 with an “outperformer” rating, while Desjardins Securities’ Doug Young raised his target to $41 from $37 with a “buy” recommendation. The average is $38.38.

“The combination of POW and Power Financial helped clean up the story, in our view. It has executed against various initiatives and valuation remains compelling,” said Mr. Young.

* Prior to the May 12 release of its first-quarter results, Raymond James analyst Rahul Sarugaser increased his target for Profound Medical Corp. (PROF-Q, PRN-T) to US$36 from US$34, keeping a “strong buy” recommendation. The average is US$26.40.

“We expect 1Q21 revenue will be attenuated by pandemic-related hospital capacity constraints and delayed installations, but we place greater importance on full-year revenue,” he said. “Any medical device company at this early stage of commercial rollout will have inherently lumpy quarter-over-quarter revenue.”

* In response to a first-quarter headline beat, Raymond James’ Bryan Fast raised his target for Wajax Corp. (WJX-T) by $1 to $21 with a “market perform” rating. The average is $23.

“We expect Wajax to continue down the path of expanding the Parts/ERS verticals, which benefit from lower working capital needs and less cyclicality. That said, we are still waiting for a more normalized operating environment and a large part of our forecasted revenue growth in 2021 is attributed to the acquisition of Tundra earlier this year,” he said.

* RBC Dominion Securities analyst Luke Davis bumped up his Parkland Corp. (PKI-T) target to $48 from $47, maintaining an “outperform” rating. The average is $48.85.

* Stephens analyst James Rutherford hiked his Restaurant Brands International Inc. (QSR-N, QSR-T) target to US$80 from US$70 with an “overweight” recommendation. The average is US$69.31.

* TD Securities analyst Meno Hulshof raised his MEG Energy Corp. (MEG-T) target to $10 from $9.50, topping the consensus of $8.19, with a “buy” rating.

* PI Financial analyst Kris Thompson initiated coverage of Well Health Technologies Corp. (WELL-T) with a “buy” rating and $10.50 target. The average is currently $11.66.

“We see a number of catalysts over the near term generating interest in the stock including: rapidly expanding EBITDA and cash flow generation, accretive M&A, margin expansion, and a potential NASDAQ listing to enhance investor interest,”

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