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

National Bank Financial’s Vishal Shreedhar expects Dollarama Inc.’s (DOL-T) performance in its last quarter to be “resilient despite many challenges.”

Ahead of the March 20 premarket release of its results from its fourth quarter of fiscal 2022, the analyst is projecting total sales of $1.242-billion, rising from $1.104-billion a year ago and above the consensus estimate of $1.226-billion. Driven by same-store growth of 5.8 per cent, versus a decline of 0.2 per cent during the same period a year ago, he estimates earnings per share of 72 cents, up 16 cents year-over-year and a penny higher than the Street.

“We believe that DOL can accommodate industry challenges,” said Mr. Shreedhar in a research note. “Last quarter, DOL indicated flattish year-over-year gross margins for F2022, implying gross margin contraction in Q4/F22 (management cited expectations for improved Jan. traffic; Jan. is typically lower margin). However, given Omicron-related restrictions in Jan. 2022, margin compression may not be as punitive.

“More importantly, investors will be focused on margin expectations for F2023 amid an inflationary cost environment (labour, supply chain, product etc.). Our review of management commentary from Dollar Store peers suggests that these challenges remain prevalent, but manageable. Our view is that DOL will be able to navigate pressures using several levers (multiprice point strategy, merchandise refresh, hedging, potential new higher price points).”

Mr. Shreedhar thinks the retailer is facing “accommodative” year-over-year comparisons in fiscal 2023 “aided by a solid consumer backdrop, reduced restrictions, and lower COVID-19 costs.”

“In addition, we believe that consumers will increasingly seek value amid the inflationary backdrop,” he said. “Post-pandemic, we think that DOL has capacity to deliver 4-per-cent-plus average same-store sales growth and solid double-digit EPS growth. Our expectation is that management will provide more fulsome commentary on the outlook.”

For fiscal 2023, he’s projecting EPS of $2.58, up 19 per cent year-over-year and in line with consensus estimate of $2.59.

Seeing it “relatively well insulated” from supply chain disruptions in the near-term and continuing a strategy to “remain a price follower to maintain the best relative value for consumers,” Mr. Shreedhar raised his target to $69 from $66 for Dollarama shares with an “outperform” rating. The average on the Street is $67, according to Refinitiv data.

“We continue to hold a positive view on DOL’s shares given its defensive growth orientation supported by strong cash flows, a solid balance sheet, and resilient sales performance. Over the medium term, we believe that Dollarama will be well positioned to grow earnings given anticipated network expansion, favourable same-store sales growth and ongoing development of the international business.”


With the Russia-Ukraine conflict causing prices to spike on supply concerns in an “already tight” market, Citi analyst P.J. Juvekar raised his earnings per share estimates for North American fertilizer companies by an average of 60 per cent for 2022 and 175 per cent for 2023.

“Urea prices are up 24 per cent year-to-date, [Di-ammonium Phosphate] is up 33 per cent and Potash is up 14 per cent,” he said. “We are raising base-case estimates on fertilizer names on extended high-price environment and stress-test our models for bull/bear scenarios.”

“Generally speaking, our base case estimates assumes NPK prices at least 30 per cent higher year-over-year in 2022, with prices falling slightly towards the second half of the year. We see some normalization occurring in 2023, but still to remain at elevated levels over FY2021 (Urea up 13 per cent, DAP up 22 per cent, Potash up 46 per cent). We assign this scenario a 60-per-cent probability.”

With his earnings model adjustments, Mr. Juvekar hiked his target price for stocks in his coverage universe.

In order of preference, his changes are:

* Nutrien Ltd. (NTR-N/NTR-T, “buy”) to US$126 from US$89. The average on the Street is US$96.81.

“Nutrien recently announced their intent to increase their potash production by 1 million tons to 15 million tons per year, capitalizing on the tight supply & export scenario,” he said. “We expect these tons to hit in the back half of the year and conservatively estimate 2022 sales volumes of 14.5 million tons. We raise our FY22 EPS estimates on the updated pricing scenarios (with a lag/adjustment to spot prices). FY23-24 estimates go up on higher forecast prices.”

He added: “Our Buy rating on the shares reflects:1) Segment diversification by fertilizer, and large exposure to the historically stable nitrogen fertilizer industry. 2) Retail segment, which provides additional earnings stability against the more cyclical fertilizer segments. The Retail segment continues to be an area of growth for NTR, especially its online platform. 3) Emphasis on shareholder return through both dividends and share repurchases. Management has proven itself to be effective capital decision makers, and has successfully executed and integrated M&A as well.”

* CF Industries Holdings Inc. (CF-N, “buy”) to US$121 from US$86. Average: US$89.14.

* Mosaic Co. (MOS-N, “neutral”) to US$74 from US$49. Average: US$59.50.


While its fourth-quarter 2021 financial results exceeded expectations, Scotia Capital analyst Phil Hardie reduced his projections for Propel Holdings Inc. (PRL-T) after its 2023 guidance fell beneath his estimates.

Shares of the Toronto-based fintech company fell 3.4 per cent on Monday with the premarket release, including core earnings per share of a loss of 3 cents. That was a year-over-year improvement of 2 cents and ahead of the estimate of both Mr. Hardie and the Street of a 10-cent loss.

“As expected, Propel’s Q4/21 results were characterized by strong loan and origination growth but profitability margins were pressured,” the analyst said. “This largely reflected what we view as a sales strain reflecting elevated operating expenses driven by data and customer acquisition-related costs and provision for expected losses from performing loans. We expect a strong rebound in profitability and earnings growth over the coming seasonally stronger quarters.”

“Management provided annual financial targets for 2022 and 2023. Overall, the guidance implied better profitability margins but lower revenues than our forecast initially reflected. We continue to have a strong outlook for EPS growth in 2022E and 2023E but have reduced our forecast”

Maintaining a “sector outperform” rating for Propel shares, Mr. Hardie cut his target to $16, below the $17.25 average, from $18.

“We estimate that PRL trades at 18.9 times P/E [price-to-earnings] on our 2022 estimates and 5.9 times P/E on our 2023 estimates, despite its robust growth profile,” he said. “Looking ahead, we are expecting EPS growth to average almost 130 per cent in 2022 and 2023, with the expansion likely to be driven by the deepening and expanding of its bank partnerships, rather than building a household digital brand. We believe a continued borrower migration up the credit ladder is not only likely to represent a solid source of growth but also likely serves to de-risk Propel portfolio and operating profile.

Elsewhere, Canaccord’s Scott Chan trimmed his target to $15.50 from $16.75 with a “buy” rating.


In a research note released Tuesday, Barclays analyst Gaurav Jain lowered Canopy Growth Corp. (CGC-Q, WEED-T) to “underweight” from “equal weight” with a US$6 target, down from US$9 and below the US$10.56 average.

Mr. Jain upgraded Cronos Group Inc. (CRON-Q, CRON-T) to “equal weight” from “underweight” with a US$5 target, down from US$5.50. The average is US$5.11


While acknowledging both Bitcoin spot prices and the operating outlook for Bitcoin miners can change quickly, Canaccord Genuity analyst Joseph Vafi sees Toronto-based Hut 8 Mining Corp. (HUT-Q, HUT-T) “as a beneficiary of both company-specific growth drivers and a favorable industry backdrop over the medium to long term.”

“Hut 8 is emerging as a diversified blockchain infrastructure company, in our view,” he said. “With installed hashrate of 2.5EH/s, HUT 8 is already one of North America’s largest Bitcoin miners. Furthermore, with the acquisition of TeraGo’s data center business earlier this year, Hut 8 now owns a high performance computing platform. We like the steady cash flow, uncorrelated to mining, this acquisition will provide. In addition, we think there is still appetite to further diversify the business.”

“At a macro level, despite some volatility in spot prices, we think overall sentiment around Bitcoin’s long-term outlook is trending in a positive direction, particularly among institutional investors. We are also seeing some movement on the regulatory front, which bodes well for further institutional adoption.”

After a fourth quarter that saw it log a year-over-year revenue gain of 350 per cent, Mr. Vafi thinks a mining crackdown in China last year has enabled Hut 8 to “opportunistically exploit the supply chain and procure over an exahash of new mining equipment, which is resulting in an ongoing exahash ramp at existing facilities.”

“In addition, Hut 8 is making solid progress in developing its third facility in North Bay, Ontario, with 35MW of power expected to come online this year,” he said.

However, emphasizing bitcoin miners are “quite exposed to both the up and downsides of volatility in underlying spot price,” he reduced his target for Hut 8 shares to US$12, below the US$16.25 average, from US$20 with a “buy” rating.

“At the margin, however, we are encouraged that BTC has come out the other side of overall market weakness and has shown strength recently,” he added.

“In our view, Hut 8 has one of the more seasoned track records across the Bitcoin mining industry, having been operating in this space since 2018,” he said. “We think the management team is executing well on its plan to expand the mining operations while also diversifying the business model. Given a P&L valuation equivalent to peers, combined with the growth catalysts of recent equity raises and access to cheap power, we like the earnings trajectory here. When also contemplating the $253-million of BTC on the balance sheet, we believe valuation here remains attractive.”


Citing its “strong owner brands and growing co-pack volumes,” Acumen Capital analyst Nick Corcoran thinks Waterloo Brewing Ltd. (WBR-T) is “well positioned to weather any inflationary challenge.”

However, pointing to softer industry volumes and lower margins due to supply chain challenges, he cut his financial projections for the next two fiscal years.

“In FY/23 and FY/24, we maintain top-line growth of approximately 15 per cent and 10 per cent, respectively, and slightly lower margin assumptions,” said Mr. Corcoran. “We note that our Adj. EBITDA estimates in FY/23 and FY/24 reflecting 15-per-cent year-over-year growth (in line with Management’s target).”

When it reports its financial results on April 7 before market open, Mr. Corcoran expects the company to log its second strongest volume quarter in its history.

“Landshark and Seagram were up double digits year-over-year, and Laker and Waterloo were down single digits year-over-year,” he said. “The divergence may be due, in part, to consumer patterns normalizing post-pandemic. Supply chain challenges impacted gross margins.”

Seeing “strong” growth overall, he’s projecting revenue of $28-million, up 14.6 per cent year-over-year, with adjusted EBITDA of $5.4-million, jumping 68.4 per cent.

However, with his forecast reductions, he cut his target for Waterloo shares to $8 from $8.50 with a “buy” rating. The average is $9.29.

Elsewhere, Canaccord’s Luke Hannan lowered his target to $7.50 from $9 with a “buy” rating “to reflect margin headwinds stemming from the current supply chain backdrop.”

“We believe the bigger challenges WBR faces relate to the supply chain environment. Specifically, (1) input cost increases, (2) longer lead times to secure said inputs, and (3) higher distribution costs will all weigh on WBR’s margins for the quarter and, in our view, the first half of F2023,” he said. “We forecast gross margin of 24.2%, representing an increase of 600 basis points year-over-year, but leaving the company well short of its 29-30-per-cent goal. We estimate SM&A will reach 16.0 per cent of revenues for Q4/F22, a 380 basis points increase year-over-year, as WBR tactically increases marketing spend to drive awareness of its Laker brand ahead of F2023, when the company expects value brands in general to outperform.”


In a research note reviewing earnings season for TSX-listed miners, Raymond James analyst Farooq Hamed downgraded Calibre Mining Corp. (CXB-T) to “outperform” from “strong buy” based on lower-than-expected production and higher-than-anticipated capex from the recently acquired Fiore assets.

His target slid to $2 from $2.25. The average is $2.44.

Mr. Hamed also made these other target adjustments:

  • Agnico Eagle Mines Ltd. (AEM-N/AEM-T, “outperform”) to US$65 from US$66. Average: US$71.02.
  • B2Gold Corp. (BTG-N/BTO-T, “outperform”) to US$5.50 from US$6. Average: US$5.87.
  • Ero Copper Corp. (ERO-T, “outperform”) to $23 from $24. Average: $25.23.
  • First Quantum Minerals Ltd. (FM-T, “outperform”) to $41 from $39. Average: $39.39.
  • Hudbay Minerals Inc. (HBM-T, “outperform”) to $13 from $14. Average: $13.37.
  • Kinross Gold Corp. (KGC-N/K-T, “outperform”) to US$7.50 from US$8. Average: US$7.71.
  • Lundin Mining Corp. (LUN-T, “market perform”) to $15 from $14. Average: $13.21.
  • OceanaGold Corp. (OGC-T, “outperform”) to $3.25 from $3. Average: $3.41.
  • Yamana Gold Inc. (AUY-N/AUY-T, “market perform”) to US$6.50 from US$6. Average: US$6.51.


In other analyst actions:

* Canaccord Genuity analyst Kevin MacKenzie lowered his Alexco Resource Corp. (AXU-T) target to $3 from $3.25, below the $3.33 average, with a “speculative buy” rating.

* Eight Capital initiated coverage of Apollo Silver Corp. (APGO-X) with a “buy” rating and $1.50 target. The average is $2.48.

* Raymond James’ Steven Hansen cut his Boyd Group Services Inc. (BYD-T) target to $235 from $255, keeping a “strong buy” rating. The average is $226.

“We are trimming our target on Boyd Group Services ... based upon recent industry channel checks that suggest the margin recovery path for North American collision shop operators will take longer than first envisioned, with normalized margins now expected to emerge in 1Q23 (vs. our prior 3Q22 estimate),” he said. “To be clear, conversations suggest that margins are already on the mend (vs. depressed 3Q21 levels) thanks to healthy price increases now flowing from the industry’s largest insurance partners. The wrinkle, however, is that labor & parts cost pressures have (until recently) also remained stiff, thus dampening a portion of the price benefit. Fortunately, industry contacts suggest labor pressures are now beginning to abate and additional price increases are still deemed likely given record industry backlogs & sustained pricing power — conditions that ultimately support our margin recovery/normalization thesis.”

* TD Securities’ Sam Damiani raised his Dream Unlimited Corp. (DRM-T) target to $58, exceeding the $55.33 average, from $55 with a “buy” rating.

* Calling its $435-million acquisition of Rubicon Pharmacies “transformative,” Scotia’s Patricia Baker increased her target for Neighbourly Pharmacy Inc. (NBLY-T) to $41 from $35. The average is $38.58.

“We believe the ownership of Rubicon and the enhanced scale will serve to provide NBLY with an even stronger capability with respect to pursuing further M&A in this still highly fragmented Canadian community pharmacy market,” she said. “Ownership of Rubicon removes a primary competitor for M&A. With a strengthened position for NBLY and incremental scale we take our one-year target to $41.”

* After a fourth-quarter earnings beat, Canaccord’s Matthew Lee said Playmaker Capital Inc. (PMKR-X), a Toronto-based sports media company, “continues to impress with its organic growth, reflecting robust demand for its audiences and the benefits of the company’s platform-based strategies.” He raised target to $1.15 from $1.10 with a “speculative buy” rating. The average is $1.20.

“On a pro-forma basis, PMKR generated 49-per-cent revenue growth in the quarter driven by a combination of session growth and improving monetization,” he said. “Looking forward, we have elevated our revenue estimates to reflect continued subscriber and advertising momentum. Our EBITDA forecasts are also increased modestly, which reflects increased revenue offset somewhat by opex reinvestment to drive further growth. We maintain our Speculative Buy on PMKR given the consistency of tailwinds supporting its organic revenue growth.”

* CIBC World Markets’ Todd Coupland cut his Quarterhill Inc. (QTRH-T) target to $3.50 from $4 with an “outperformer” rating, while Canaccord’s Doug Taylor lowered his target to $2.75 from $3.25 with a “speculative buy” rating and Raymond James’ Steven Li reduced his target to $3.25 from $3.80 with an “outperform” rating.. The average is $3.53.

“Quarterhill announced Q4 results that were short of EBITDA expectations with a slight top-line miss as WiLAN underperformed our model in the first full quarter of ETC contribution. The ongoing volatility of the WiLAN business, the wide range of outcomes for its Apple suit and ongoing strategic review continue to distract from the steady progress in building the ITS business. We see QTRH as undervalued overall at current levels but note that multiple points of uncertainty in the model dictate our SPECULATIVE BUY rating,” said Mr. Taylor.

Follow David Leeder on Twitter: @daveleederOpens in a new window

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