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

After Barrick Gold Corp.’s (ABX-T, GOLD-N) annual Investor Day event on Nov. 18, National Bank Financial analyst Mike Parkin now expects production to be slightly higher in 2023 and lower in 2024 with all-in sustaining costs declining in both years when compared to his prior estimates.

“However, higher than expected capital spending drove our FCF lower and weighed on our NAV,” he said. “We’ve tweaked our capital estimates higher to align with the provided outlook which incorporates the increased capex at the Pueblo Viejo (PV) JV, which drives our FCF estimates to fall over the next two years. Our LOM [life-of-mine] production estimates continue to be based on reported P&P reserves, which we believe may result in further upside to our future estimates should Barrick continue with its recent track record of resource conversion. At Reko Diq, we have increased our credit/oz valuation to US$55/oz (prev. US$35/oz) given the continued advancement of the project outlined during the presentation and the growing commitment to develop it.”

Mr. Parkin is now projecting adjusted earnings before interest, taxes, depreciation and amortization for Toronto-based Barrick, the world’s second most valuable miner, of $4.629-billion in 2023, up from US$4.355-billion previously, and $4.701-billion, narrowly lower than his last estimate of $4.771-billion. His cash flow per share forecast for both years increased to $2.13 and $2.17, respectively, from $1.87 and $2.10.

Maintaining a “sector perform” rating, he raised his target by $1 to $25. The average on the Street is $29.42.

“We have also moved to align on the capex spend for the PV JV expansion and new TSF [Tailings Storage Facility],” said Mr. Parkin. “As a result of our model updates, we see our NAV fall 3 per cent to $24.96 per share (previously $25.65 per share) on an unchanged 7.00 times NTM [next 12-month] EV/EBITDA multiple, largely due to higher than expected capital spending. Our target price has increased to $25.00 (prev. $24.00), helped by higher production estimates in 2023 driving a lift to our EBITDA estimates.”


Desjardins Securities analyst Benoit Poirier expects investors to react positively to Canadian National Railway Co.’s (CNR-T, CNI-N) appointment of Ed Harris as its new executive vice-president and chief operating officer.

“Ed Harris, a 40-year veteran railroader and former Hunter Harrison disciple, has been named CN’s COO effective immediately, replacing Rob Reilly,” he said. “Mr Harris has a wealth of experience with more than three decades at Illinois Central (began in 1968), CN until 2007 (executive vice-president and COO), CP from 2010–12 (COO) and CSX from 2018–20 (executive vice-president and COO). Since April 2022, Mr Harris has been working at CN as an operational consultant to the CN operations leadership team on service excellence initiatives.

“We do not view this announcement as a sign of needed change at CN resulting from negative circumstances, but rather as a continuation of the positive operational improvements since Mr. Harris and new CEO Tracy Robinson joined the fold. CN’s train speed in 3Q averaged 20.2 miles per hour, up 5 per cent quarter-over-quarter following a 16-per-cent increase in 2Q. Both train speed and dwell metrics posted their best 3Q numbers in three years, and are on pace to deliver similar results thus far in 4Q. Ms. Robinson has made operations improvement through scheduled railroading and car velocity a top priority since joining CN (visited hump yards and flat switching yards, worked on train departures, connections, block integrity, etc), so this latest move does not come as a surprise.”

Mr. Poirier thinks long-time investors will see the appointment, announced after the bell on Monday, will see it “as a return to the old days,” noting Mr. Harris’s tenure under Mr. Harrison when CN implemented its scheduled railroading model.

“On the other hand, we believe that CN will continue on the new operational path set out by Ms. Robinson, with an emphasis on driving top-line growth to the bottom line, and we do not expect any drastic cost-cutting initiatives,” he added. “Ms. Robinson was clear that she is still assessing the team, and we believe this change is in line with her day 1 plan to build the next generation of railroaders. Mr. Harris knows the CN network well and will be able to mentor and coach the operations team as well as a potential successor in due course.”

Mr. Poirier reiterated a “hold” rating and $171 target for CN shares. The current average is $161.43.

“It will provide Ms Robinson with an experienced partner to help implement her operational plan,” he said.


In a research note titled Everyone gets paid in 2023, Desjardins Securities analyst Chris MacCulloch raised his production and cash flow forecast for MEG Energy Corp. (MEG-T) after its 2023 capital budget and production guidance, released after the bell on Monday, fell “slightly” above his forecast.

“MEG outlined a $450-million capital budget for 2023, a 20-per-cent increase from 2022, reflecting an expanded production base and inflationary adjustments, which the company estimates will have a 7-per-cent annualized impact,” he said. “Production guidance has been pegged at 100,000–105,000 barrels per day, which incorporates a 6,000 bbl/d provision for a planned maintenance turnaround during 2Q23. Notably, the 2023 guidance also reflects a sustained improvement in field and plant operations following a recent string of outperformance at Christina Lake, where the company achieved record production of more than 110,000 barrels per day in October.

“For reference, the $450-million capital budget was slightly above our assumption ($410-million), although incremental spending is fully recovered through additional FCF generation next year based on current strip prices and our revised production forecast of 103,500 bbl/d (from 99,250 bbl/d). We also highlight that 2023 royalty cost guidance of 20– 25 per cent reflects the impending transition to post-payout at Christina Lake, as we were previously modelling. With respect to the capital allocation framework, we now expect the company to exit 2023 with net debt of US$850-million based on current strip prices while allocating $375-million to share repurchases next year.”

Mr. MacCulloch predicts MEG will achieve its US$600-million corporate net debt floor by late 2024, “at which time the company plans to return 100-per-cent of FCF to shareholders, potentially resulting in the introduction of a modest dividend.”

With his revised production projections for the next two years, he now anticipates cash flow per share of $6.17 in 2022 and $5.11 in 2023, up from $6.13 and $4.89, respectively.

He maintained a “hold” recommendation, citing a limited potential return to his $22 target for MEG shares. The average is $24.07.


Even though its third-quarter results fell short of his expectations, BTIG analyst Jonathan DeCourcey sees Jushi Holdings Inc. (JUSH-CN) “poised for outperforming growth in 2024 and beyond.”

He called the Boca Raton, Fla.-based vertically integrated, multi-state cannabis operator as a “one of the top growth stories” in the sector moving forward, pointing to “favorable positions” in Virginia and Pennsylvania.

“Importantly, concurrent with the recent earnings report the company announced a new four-year debt financing with sufficient binding commitments to retire looming debt maturities,” said Mr. DeCourcey. “We expect additional funding will come beyond the committed but even without it, in our view this new financing de-risks the story for Jushi meaningfully and permits our focus to remain on looming growth.”

Seeing it trading at a premium valuation to its peers following recent gains, which he thinks it’s “warranted given the fact that growth opportunities for the company ramp outside 2023 forecasts,” Mr. DeCourcey reaffirmed his “buy” rating for Jushi shares with a target of $3. The current average on the Street is $4.12.

“With the successful roll-up of assets through M&A, Jushi has become one of the top growth stories in US cannabis in recent years and now appears disproportionately poised to benefit from any easing of macro headwinds in 2023 and 2024 and specifically expansion opportunities in Pennsylvania and Virginia,” he said. “Jushi has a leading position in each of these state markets and should benefit as much or more than any other operator from looming recreational opportunities. These should drive both top-line growth and margin expansion for the foreseeable future.

“For us, Virginia remains the key for Jushi. Virginia’s population is similar to New Jersey’s and bigger than Massachusetts so a multi-billion-dollar eventual run-rate in annualized sales for the state is very much in play and Jushi is one of just five operators positioned to capitalize from the upcoming recreational market opening in early 2024. Importantly, the roll-out of the rec market in Virginia thus far offers greater transparency than has occurred in other markets which is important for operators and investors and will genuinely favor incumbent license holders at the outset. Meanwhile, the state’s regional license model limits competition between operators and Jushi in our view has the best location in Virginia in which to capitalize on the looming rec rollout particularly if there is any delay in a presumed Maryland market expansion to come. We note that Jushi is already beginning to benefit from a recent expansion of the medical program in the state, and we expect that to drive meaningful growth for the company in 2023.”


Echelon Capital Markets analyst Rob Goff thinks Think Research Corp.’s (THNK-X) “impressive” cost-cutting measures position it for a record fourth quarter and “strong base” into 2023.

On Monday, the Toronto-based digital health software solutions reported revenue of $18.4-million for its third-quarter, narrowly below both Mr. Goff’s $19.3-million forecast and the consensus estimate of $19.6-million. However, an EBITDA loss of $0.7-million was better than the projection of a loss of $1.0-million from the analyst and the Street.

Calling the results “solid,” Mr. Goff said he’s “encouraged that the Company is on the cusp of generating meaningful EBITDA cash flows exiting 2022, which should set a baseline for expectations heading into 2023.”

“Despite a seasonally softer top-line result, we’re encouraged by the Company’s focus on cost efficiencies and come away feeling more confident that Think can generate sustainably positive EBITDA cash flows from here on out,” he said. “While areas of the business have experienced considerable quarter-to-quarter variability in 2022 – especially considering the Company has highlighted its 85-per-cent-plus recurring or highly reoccurring revenues, with a further 10 per cent or more from Clinic360, where pent-up demand has pushed backlogs to two-years-plus – Think should be commended for its efforts and success in realizing substantial cost synergies and operating leverage. When comparing Think’s Q322 to a year ago, the Company has grown its gross profit $4.4-million (104 per cent) versus its cash operating expenses approximately $0.7-million (8 per cent). Going forward, we expect Think to continue delivering operating leverage by expanding its revenues with a seasonal recovery in clinical services and its SaaS data solutions, alongside a higher revenue base at BioPharma with the recent contract wins while keeping cost control in check. Questions still remain around a realistic organic growth rate on the Company’s leaner operations, but regardless, Think’s valuation is not reflecting its improved fundamental outlook and we would recommend investors consider a long-term position at these levels.”

Keeping a “speculative buy” recommendation for Think shares, he trimmed his target to 90 cents from $1.50. The average target is 61 cents.


In other analyst actions:

* Deutsche Bank analyst Amit Mehrotra upgraded Canadian Pacific Railway Ltd. (CP-N, CP-T) to “buy” form “hold” and raised his target to US$98 from US$80. The average on the Street is US$82.09.

* CIBC World Markets’ Scott Fletcher bumped his DRI Healthcare Trust (DHT.UN-T) target to $11.75 from $11.50 with an “outperformer” rating. The average is $14.79.

* Following the release of its Preliminary Economic Assessment for its flagship Ikkari resource, BMO Nesbitt Burns’ Brian Quast trimmed his Rupert Resources Ltd. (RUP-X) target to $8 from $10, remaining above the $7.25 average, with an “outperform” rating.

* DA Davidson’s Tim Forte raised his Shopify Inc. (SHOP-N, SHOP-T) target to US$34 from US$29 with a “neutral” rating. The average on the Street is US$40.65.

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