Inside the Market’s roundup of some of today’s key analyst actions
While green energy stocks “suffered” in 2022, National Bank Financial analyst Rupert Merer expects energy securiyy and climate concerns to drive growth in the year ahead.
“At the start of 2022, stocks in our coverage related to the energy transition were supported by the global push towards clean energy for climate change and energy security concerns,” he said. “However, with higher yields, supply chain issues, liquidity concerns and operational challenges, the sector saw a valuation reset. With strong support for the sector in 2023 and some contracted cash flows, the companies should generally perform well despite recession concerns. Access to capital could be a challenge for some.”
In a research report released Tuesday titled Energy transition is the unstoppable solution to climate change and energy supply concerns, Mr. Merer maintained “a generally positive outlook” for 2023, but he thinks continued market headwinds could continue to hurt share price performance, leading him to lower his expectations “with higher discount rate and lower multiple assumptions across much of our coverage.”
”In general, a continued push toward the energy transition should be supported by government regulation and subsidies, falling costs of technology, and a continued energy crisis which has put pressure on energy costs,” he said. “The opportunities lie across the world, for renewable energy, EV’s, hydrogen and materials companies. The focus for investment could be closer to home for most companies, and we believe capital recycling should continue to be a source of financing in weak markets.”
He named five stocks as his top picks for the year:
- Innergex Renewable Energy Inc. (INE-T, “outperform”) with a $23 target. The average target is $20.48.
- Altius Renewable Royalties Corp. (ARR-T, “outperform”) with a $13.50 target. Average: $14.38.
- Polaris Renewable Energy Inc. (PIF-T, “outperform”) with a $21 target. Average: $27.57.
- Northland Power Inc. (NPI-T, “outperform”) with a $46 target, down from $47 previously. Average: $47.73.
- 5N Plus Inc. (VNP-T, “outperform”) with a $3.75 target. Average: $3.50.
Mr. Merer also made these other target adjustments:
- Ballard Power Systems Inc. (BLDP-Q/BLDP-T, “sector perform”) to US$7 from US$8. Average: US$8.29.
- Boralex Inc. (BLX-T, “outperform”) to $47 from $48. Average: $47.69.
- Brookfield Renewable Partners LP (BEP-N/BEP.UN-T, “outperform”) to US$33 from US$35. Average: US$39.16.
- Loop Energy Inc. (LPEN-T, “outperform”) to $2.50 from $5. Average: $2.70.
- NanoXplore Inc. (GRA-T, “outperform”) to $6 from $8. Average: $6.82.
- Next Hydrogen Solutions Inc. (NXH-T, “sector perform”) to $2 from $2.50. Average: $3.25.
- TransAlta Renewables Inc. (RNW-T, “sector perform”) to $14.25 from $15.50. Average: $14.23.
After an “incredible” 2022, Scotia Capital analyst Cameron Bean thinks unseasonably warm conditions over the last several weeks have “injected considerable negativity” into the North American natural gas market.
“We expect 2023 NYMEX prices to run between US$3.00 per metric million British thermal units and US$5.00/mmBtu, with growing bias toward the lower end of the range on faltering winter demand,” he said. “We have adjusted our NYMEX price assumptions to US$4.00/mmBtu throughout our forecast horizon (down from US$5.00/mmBtu for 2023 and US$4.25/mmBtu for 2024, previously). We continue to believe US$4.00/mmBtu is a good estimate for the marginal cost of supply and a reasonably long-term expectation, but we expect significant near-term price volatility on transitory supply and demand dynamics. We have reduced our 2023 AECO differential forecast to US$1.49/mmBtu on our lower NYMEX forecast and expectations for relatively stronger winter pricing in the Western Canada.”
In a research report released Tuesday, Mr. Bean said he expects lower commodity prices, cost inflation, supply chain issues, and a tight oil field services market to “increase capital intensity and chew into free cash flow in 2023.”
“Nevertheless, we continue to believe the oil & gas sector is materially undervalued and likely to outperform in a turbulent and inflationary economic environment,” he added.
“Our stock selection process continues to favour companies with (1) track records of prudent capital allocation, (2) a high degree of financial flexibility, (3) deep high-return drilling inventories, (4) high cash flow margins, and (5) compelling “rate-of-change” stories. Our top picks are TOU, PEY, and SWN.”
With his expectations for lower commodity prices and “continuing volatility” in the sector, he downgraded three companies:
* Birchcliff Energy Ltd. (BIR-T) to “sector perform” from “outperform” with a $13 target from $16.50. Average: $13.86.
Analyst: “The steep and sudden natural gas price decline creates risks for BIR’s near-term plans. The company’s Q4/22 capex increase pushed its debt extinguishment plan into Q1/23; however, the 2023 NYMEX strip has dropped ~33% since the announcement — likely pushing the zero debt horizon further into the future. Moreover, BIR’s plan for a tenfold dividend increase beginning in Q1/23 could put additional pressure on the company’s cash flows. We estimate the company’s 2023 break-even (capex and base dividend) at $3.25/mmBtu to $3.50/mmBtu Henry Hub (with the later estimate based on our higher capex forecast versus the company’s guidance). Given BIR’s relatively high break-even (and lack of hedges), we expect the market to have concerns about the sustainability of the planned dividend barring a sudden reversal for natural gas prices. It is important to note, these issues are not major risks for the company. BIR’s has a strong balance sheet, high quality asset base, and sub-US$2.00/mmBtu capex break-even. However, we believe the equity could lag in 2023, given the headwinds for natural gas prices.”
* Kelt Exploration Ltd. (KEL-T) to “sector perform” from “outperform” with a $7.50 target from $10.50. Average: $9.23.
Analyst: “Despite a strong year for energy commodities and equities, KEL lagged during 2022 on guidance misses and a lack of tangible catalysts. While we like the company’s asset base and NAV growth mantra, we see risks that 2023 could be another catalyst light year for the company. We expect production at KEL’s Wembley Montney asset to run relatively flat until additional processing capacity comes online in late 2023 (Pipestone plant expansion) and late 2024 (new Albright plant). The company’s Oak Montney asset is still relatively early stage, with recent progress somewhat hindered by the protracted negotiations between the BC government and the Blueberry River First Nation over the future of development in the region. We do expect to see additional results from the asset (and Charlie Lake drilling results) in 1H/23; however, we are skeptical this will be enough to reinvigorate the stock. We see the resumption of growth at Wembley as the key catlyst for the stock.”
* National Fuel Gas Co. (NFG-N) to “sector perform” from “outperform” with a US$85 target from US$91. Average: US$77.60.
Analyst: “We continue to believe NFG offers relative stability and downside protection in a volatile natural gas market. While we expect the company to generate a relatively low free cash flow yield at our higher natural gas price scenarios, we believe the business is better positioned to withstand lower price and volatility versus its U.S. upstream pure play peers. However, we believe the company will face some of the same headwinds from inflationary pressures and decreasing natural gas prices as the peer group in 2023. Moreover, we are becoming increasingly concerned about the negative rhetoric toward residential and commercial natural gas connections in New York state (home to over two thirds of NFG’s utility customers). While the plan proposed by Governor Hochul is unlikely to have an immediately detrimental impact on NFG’s utility business, it could forestall future growth and signal decline for the business segment if it is implemented. Given that investors tend to take a long term view on utilities, we believe the risks posed by the plan could negatively affect the multiple the market assign to NFG’s utility business and limit the premium it holds versus its upstream peers.”
For his top picks, his target changes are:
* Tourmaline Oil Corp. (TOU-T, “sector outperform”) to $112 from $117. Average: $95.92.
* Peyto Exploration & Development Corp. (PEY-T, “sector outperform”) to $24 from $26. Average: $18.02.
* Southwestern Energy Co. (SWN-T, “outperform”) to US$12 from US$13. Average: US$10.30.
In response to share price appreciation, National Bank Financial analyst Mike Parkin downgraded Eldorado Gold Corp. (ELD-T) to “sector perform” from “outperform” based on valuation concerns.
“We see limited return to our target after ELD’s recent strong share price performance over the past several months,” he said. “On Sept. 26, 2022 the price of gold (in USD) bottomed and has steadily rebounded since, closing up 18.4 per cent as of last Friday. On a relative basis, using Sept 26th as the baseline, ELD has outperformed the gold index by nearly 30 per cent over this same period.”
Mr. Parkin now sees Eldorado trading at close to its last 12-month (LTM) peak price to net asset value multiple, trading at 0.68 times as of Friday’s close. Its average over their last year is 0.56 times.
Updating his financial model to account for Monday’s release of preliminary fourth-quarter 2022 production results that narrowly missed his expectations, Mr. Parkin lowered his Eldorado target to $13.75 from $14. The average target on the Street is $13.93.
“Our $13.75 target price implies Eldorado reaching a valuation of 0.75 times NAV, which is in line with the LTM peak valuation multiple,” he said. “Based on the current near peak valuation and recent strong share price outperformance, we would expect Eldorado to trade more in line with peers moving forward, and thus are downgrading to Sector Perform from Outperform. We continue to regard Eldorado as a quality name to own and our downgrade is solely based on valuation. We could become more positive if valuation improves.”
BMO Nesbitt Burns analyst John Gibson thinks Mullen Group Ltd.’s (MTL-T) 2023 business plan and outlook “spells [a] more conservative approach,” prompting him to lower his recommendation to “market perform” from “outperform” previously.
“MTL is guiding to revenue of $2.0 billion and EBITDA of $300 million in 2023,” he said. “While the revenue guidance was in line with expectations, MTL’s EBITDA guidance sits 10 per cent below prior estimates. The company is seeing some pricing degradation as freight demand has slowed, which could put some pressure on margins over the next few quarters. Management tends to guide relatively conservatively, however, and we believe its initial 2023 projections represent somewhat of a base case for what’s to come.”
“MTL’s stock has been on a strong run the past year (up approximately 25 per cent), well ahead of the majority of its trucking/logistics peers. While tight freight volumes (and higher associated pricing) helped drive a record year for the company in 2022, Mullen also benefitted from strategic M&A completed in 2020/2021. We wouldn’t be surprised to see management pursue additional tuck-ins during 2023, in line with its counter-cyclical strategy of pursuing growth. Note that MTL holds nearly $250 million in available liquidity (including the recent sale of several non-core businesses).”
His target for Mullen shares slid to $15 from $17 and below the $16.45 average.
“MTL remains a quality name to hold over the longer term, especially given its current 5-per-cent yield and counter-cyclical M&A strategy,” said Mr. Gibson. “That said, the outlook for 2023 presents some uncertainty relative to an (expected) record in 2022, causing us to shift to a more neutral tone on the shares near term.
Elsewhere, Raymond James’ Andrew Bradford reduced is target by $1 to $17 with a “strong buy” rating.
Stifel analyst Martin Landry predicts the first half of the year could be “lacklustre” for the toy industry, leading him to lower his financial forecast for Spin Master Corp. (TOY-T).
“We hosted a panel of three toy industry experts to get insights on the outlook for the toy industry in 2023,” he said. “According to our panelists, toy sales for the 2022 holiday season were down year-over-year due to a difficult comparable period. Our experts believe that inventory levels are still elevated, a difficult situation for both retailers and manufacturers. Looking further into 2023, our panelists were not too upbeat and expected toy industry sales to decline year-over-year for the first half before potentially rebounding in the second half, with industry sales being flat to up mid-single-digits for the full year.”
Ahead of the webinar, Mr. Landry surveyed industry participants and concluded revenue growth is likely to be “slight” at best in 2023.
“Only 17 per cent of respondents expect revenues to decline in 2023, which is encouraging given the blurring economic outlook and recent industry trends,” he said. “Nonetheless, our panelists pointed to limited growth rates in-line with historical patterns of negative 2-per-cent to 2-per-cent growth for 2023, which would suggests declining unit growth given inflation.”
“Entertainment tie-ins becoming increasingly important. Amongst the trends discussed during our webinar, the reliance on content (i.e. movies, TV shows, short series) caught our attention the most. Innovation has always been the main driver of growth for the industry, but the biggest changes appear to be related to the ecosystem around such innovation. It is becoming increasingly hard to have a stand-alone toy according to our experts and entertainment tie-ins are becoming just as important. In our view this favors the larger toy manufacturers, such as Spin Master, given their ability to offer entertainment content unlike smaller OEM’s.”
With that “muted outlook,” Mr. Landry cut his 2023 revenue and earnings per share estimates to $2.15-billion and $2.37, respectively, from $2.18-billion and $2.45. His 2024 projections declined to $2.29-billion and $2.58 from $2.32-billion and $2.67.
Keeping a “buy” recommendation for Spin Master shares, he lowered his target to $48 from $51. The average on the Street is $46.40.
“We remain constructive on Spin Master as most of the concerns raised above are already reflected in the company’s valuation,” he said. “However, absent an acquisition, we see limited near-term catalysts to move the shares higher. The NCIB should help support the shares.”
Seeing “mark-to-market upside” in a “defensive asset class,” Echelon Partners analyst David Chrystal initiated coverage of Dream Residential Real Estate Investment Trust (DRR.U-T) with a “buy” rating, calling it a “deeply discounted play on U.S. apartments.”
The Toronto-based REIT completed its initial public offering in May of 2022, raising $125-million of gross proceeds. That largely went to fund its portfolio, consisting of 16 garden-style apartment properties in the U.S. Sunbelt and Midwest.
“The REIT’s Class B portfolio offers affordable accommodation catering to the sizeable and growing mid-market demographic,” said the analyst. “Organic growth should come from eliminating the mark-to-market gap over the coming 12-18 months, as well as from completing a significant repositioning program over the next few years.”
“On the back of exceptional growth in market rents through 2021 and the first half of 2022, current in-place rents remain 7 per cent below market rents. Given the absence of rent control across DRR’s markets, we expect this gap to narrow over the next 12-18 months. This embedded rent growth should generate incremental NOI [net operating income] of $2-million, or 10 cents of FFO [funds from operations] per unit over this period. Further, we expect that market rents for DRR’s Class B suburban product will increase going forward given the significant decline in housing affordability (higher prices combined with higher mortgage interest rates), increasing the propensity to rent, and outsized wage growth within the REIT’s target demographic (mid-market, renters by necessity).”
Mr. Chrystal said Dream’s portfolio includes a significant number of suites set for “substantial repositioning” over the next five years, noting: “Management expects to spend $8,000-16,000 per suite and generate an average return in investment of 14 per cent through higher rents. In aggregate, we expect that repositioning activities will result in $4-million of incremental NOI, contributing 20 cents to FFO/unit.”
While U.S. apartment fundamentals “appear to be ‘consolidating’ after recent demand and rent increases, Mr. Chrystal thinks the REIT’s Class B portfolio “should be well insulated.”
“We believe that DRR’s portfolio of Class B suburban garden-style mid-market apartment properties is defensive and should fare well in the event of any economic weakness,” he said. “The REIT’s portfolio caters to tenants who are typically renters by necessity, a cohort that has grown alongside rising home prices and mortgage interest rates, and which we would expect to increase in size should the broader U.S. labour market show any signs of slowing. Across the REIT’s core markets, the average tenant pays approximately 19 per cent of household income in rent compared to the U.S. average of 27 per cent.
“Not only do the REIT’s current tenant incomes support solid incremental rent growth, we also note that income growth, which is strong across all segments of the U.S. labour market, is strongest among lower-income earners. In our view, this bodes well for affordability and market rent growth for DRR’s mid-market offering.”
He set a target of US$12 per unit. The current average is US$11.14.
“Our target price, combined with a distribution yield of 5.2 per cent, represents a potential 12-month total return of 53.7 per cent,” he said.
RBC Dominion Securities analyst Greg Pardy thinks net debt levels will be in “sharp focus” during the approaching fourth-quarter earnings season for Canadian integrated oil and energy exploration and production companies.
“Fourth-quarter results for energy producers should continue to showcase their commitment to return abundant free cash flow to shareholders — notably through share buybacks — amid ongoing net debt reduction and stern capital discipline,” he said.” We estimate that Canada’s oil sands weighted majors—CNQ, Suncor, Cenovus and Imperial—generated free cash flow (before dividends) of $8.8 billion in the fourthquarter, repurchased $3.8 billion of their common and paid/accrued cash taxes (to all jurisdictions) of $2.0 billion.
“On balance, we anticipate still healthy refining & marketing cash flows from integrated oil companies including Suncor, Cenovus and Imperial in connection with supportive crack spreads, elevated utilization rates, partially offset by FIFO inventory headwinds for IFRS reporters. The impacts of extreme weather conditions generally occurred late in the fourth-quarter and impacted both upstream production and downstream operations in some cases.”
Mr. Pardy reaffirmed Canadian Natural Resources Inc. (CNQ-T) as his “favourite” producer heading into earnings season. The stock remains on the firm’s “Global Top 30″ and “Energy Best Ideas” lists. He has an “outperform” rating and $89 target for its shares, which is below the $92.29 average on the Street.
“Our fourth-quarter outlook for CNQ reflects production of 1.3 million boe/d (vs. 1.35 million boe/d prior), down 3% sequentially amid severe winter weather impacts, the full extent of which is still being calibrated. Our outlook includes 430,000 bbl/d from CNQ’s Horizon/AOSP oil sands mining segment,” he said. “We peg oil sands mining operating costs at $25.70/bbl amid strong realizations of $111/bbl and a 19.1-per-cent royalty rate. Our production outlook also factors in Canadian oil & liquids volumes (excluding mining) of 479,500 bbl/d, with Canadian natural gas volumes of 2.17 bcf/d. Also included within our fourth-quarter outlook are cash taxes of $627 million, capital spending of $1.3 billion and share repurchases of $745 million. All said, we peg CNQ’s fourth-quarter operating cash flow at $4.0 billion ($3.62 per share) and free cash flow (before dividends and working capital movements) at $2.7 billion. Our 2023 outlook now factors in $2.1 billion of cash taxes payable in the first-quarter (contained in working capital).”
Enerplus Corp. (ERF-T), which is also on the firm’s “Energy Best Ideas” list, continues to be his favourite intermediate producer. He has an “outperform” rating and $21 target, below the $24.21 average.
Mr. Pardy made three target changes on Tuesday. They are:
- Cenovus Energy Inc. (CVE-T, “outperform”) to $32 from $33. Average: $33.33.
- Ovintiv Inc. (OVV-N/OVV-T, “sector perform”) to US$58 from US$60. Average: US$67.12.
- Vermilion Energy Inc. (VET-T, “sector perform”) to $29 from $32. Average: $34.86.
CIBC World Markets analysts Dennis Fong, Jamie Kubik and Christopher Thompson made a series of target price adjustments to energy sector stocks in their coverage universe on Tuesday.
“Energy stocks performed well in 2022, and we expect the space will perform favorably in 2023,” they said. “Companies entered the year with materially cleaner balance sheets and strong intentions to allocate most of the generated free cash flow towards shareholder returns. While energy demand has recovered from the pandemic, and we expect the space will continue to naturally benefit from an inflationary environment, excess inflation and rising interest rates also carry potential to spur a recession. We believe prolonged downside risk for the oil price may be limited given a combination of China’s re-opening, producer capital discipline, and available global storage capacity. The volatility of this macro environment suggests the best opportunities show a combination of strong FCF yields, balance sheet strength, quality inventory depth, and increasing return of cash to shareholders. We hold a stronger bias for liquids over natural gas for 2023, and also see energy service companies generating competitive free cash flow yields relative to E&Ps.”
Mr. Kubik raised his recommendation for Precision Drilling Corp. (PD-T) to “outperformer” from “neutral” with a $150 target, up from from $125 but remaining below the average of $152.72.
“We are upgrading Precision Drilling ... as a result of an attractive return to target, underpinned by further increases in our EBITDA assumptions for the name, largely driven by expanding margin potential and a discounted valuation compared to historical levels,” he said. “While we are cautious on a potential moderation in drilling activity should recessionary forces play out in 2023, we believe most capital spending budgets are rooted in conservative commodity pricing, which will result in less volatility for drilling activity.”
The analysts’ target changes included:
- Advantage Energy Ltd. (AAV-T, “neutral”) to $12 from $13.50. Average: $14.48.
- Baytex Energy Corp. (BTE-T, “neutral”) to $8 from $8.50. Average: $8.57.
- Birchcliff Energy Ltd. (BIR-T, “neutral”) to $10.50 from $12.75. Average: $13.86.
- Cardinal Energy Ltd. (CJ-T, “neutral”) to $9 from $11. Average: $9.93.
- Cenovus Energy Inc. (CVE-T, “outperformer”) to $31 from $32. Average: $33.33.
- Crescent Point Energy Corp. (CPG-T, “outperformer”) to $15 from $16. Average: $14.25.
- Enerflex Ltd. (EFX-T, “neutral”) to $11 from $10. Average: $11.97.
- Ensign Energy Services Inc. (ESI-T, “neutral”) to $5 from $4.75. Average: $6.03.
- Imperial Oil Ltd. (IMO-T, “neutral”) to $76 from $70. Average: $78.94.
- Kelt Exploration Ltd. (KEL-T, “outperformer”) to $7 from $9. Average: $9.23.
- MEG Energy Corp. (MEG-T, “neutral”) to $20 from $22. Average: $23.86.
- Secure Energy Services Inc. (SES-T, “outperformer”) to $10.50 from $9.50. Average: $10.01.
- Spartan Delta Corp. (SDE-T, “outperformer”) to $20 from $19.50. Average: $21.
- Topaz Energy Corp. (TPZ-T, “outperformer”) to $27 from $29. Average: $30.34.
- Vermilion Energy Inc. (VET-T, “neutral”) to $26 from $36. Average: $34.86.
Touting its “peer-leading production growth, an attractive valuation, strong balance sheet, and management team with an extensive track record of execution and value creation,” Echelon Partners analyst Tom Hems initiated coverage of ROK Resources Inc. (ROK-X) with a “buy” recommendation on Tuesday.
“The Company has production of 4,500 barrels of oil equivalent per day (boe/d_ pro-forma a recent acquisition which is mainly located in southeast Saskatchewan, with 1,200 boe/d in Alberta’s Kaybob region,” he said. “While many companies have tempered their growth profiles, ROK is focused on being one of the fastest-growing stories in the Western Canadian Sedimentary Basin (WCSB) driven by its strong Frobisher and Midale economics. We estimate that 2023 production will almost double (up 50 per cent per share pro-forma the recent acquisition), which is the highest in the peer group and well ahead of the 5-per-cent group median. ROK also has a uniquely robust hedging program with 35 per cent of 2023E production protected at more than US$85/bbl WTI.”
“Where Echelon is Different: For those who are already familiar with ROK, we highlight here where we may differ from the market consensus. We focus clearly on diluted metrics (given materiality) whereas others may not. Despite representing a smaller portion of production, we feature the Weyburn interest as an asset that is underappreciated by investors – even though we like its implied valuation and ESG benefits. We highlight how Energy FCF yields compare favourably to other TSX sectors and that ROK’s FCF yield is attractive relative to peers. We provide estimates through 2024 which enhance visibility, but many others only show through 2023. Our FCF estimates are more conservative than consensus estimates as 1) we do not believe the consensus estimates properly reflect the recent acquisition (yet we still provide for illustrative purposes) and 2) our price deck (US$80/bbl WTI) assumptions are likely more conservative than consensus. While many discuss ROK’s valuation discount, we go the extra mile to defend downside scenarios (such as PDP NAV support) and implied upside based on several different factors (such as upside into 2024 in a non re-rate scenario).”
Mr. Hems set a target of 70 cents per share. The current average is 85 cents.
“We expect that as ROK executes on growth plans and establishes a public market track record, the Company will attract a broader investor base and close the valuation gap relative to peers. While our thesis is partially hinged on a multiple expansion, even if the valuation multiple holds flat, we believe there is meaningful share price upside given the growth and FCF profile we forecast through 2024,” he added.
In other analyst actions:
* Eight Capital’s Ty Collin initiated coverage of Andlauer Healthcare Group Inc. (AND-T) with a “buy” rating and $62 target. The average is $55.40.
“Since its December 2019 IPO at $15 per share, the stock has appreciated by 215 per cent and outperformed the S&P/TSX by 195 per cent, which we attribute to strong growth, exceptional profitability, and smart acquisitions, supported by a durable competitive moat and guided by a highly aligned, founder-led management team,” he said. “Still, we think recent overall market weakness has created an attractive entry point on valuation, and we view AND’s combination of offensive and defensive qualities as uniquely suited for the current market backdrop.”
* Following its initial 2023 guidance outlook, BMO’s Joel Jackson raised his target for Chemtrade Logistics Income Fund (CHE.UN-T) to $11 from $10.50 with an “outperform” rating. The average is $11.50.
“The stock has been outperforming of late but still looks attractive considering: i) a safe/attractive dividend (6-per-cent yield, 40-45-per-cent payout ratio), ii) even in bear case scenarios (2021 levels) the payout would stay well below 100 per cent, and iii) midterm growth opportunities,” he said.
* JP Morgan’s John Royall raised his targets for Imperial Oil Ltd. (IMO-T, “neutral”) to $78 from $76 and Suncor Energy Inc. (SU-T, “neutral”) to $52 from $51, while he cut his Cenovus Energy Inc. (CVE-T, “overweight”) target to $34 from $36. The averages on the Street are $78.94, $53.75 and $33.33, respectively
* National Bank’s Shane Nagle lowered his target First Quantum Minerals Ltd. (FM-T) to $28 from $30 with a “sector perform” recommendation. Others making changes include: Barclays’ Ian Rossouw to $20 from $23 with an “underweight” rating, TD Securities’ Greg Barnes to $31 from $32 with a “hold” rating, BMO’s Jackie Przybylowski to $20 from $24 with a “market perform” rating, Jefferies’ Christopher LaFemina to $35 from $37 with an “outperform” rating and Canaccord Genuity’s Dalton Baretto to $34 from $37 with a “buy” rating. The average is $31.53.
“We have incorporated Q4/22 production results and sales, as well as the company’s 2023-2025 operating outlook resulting in a lower target price,” said Mr. Nagle. “We reiterate our Sector Perform rating which stems from ongoing uncertainty in negotiations with the Panamá Government as well as recent share price appreciation and premium valuation. The company’s balance sheet remains in a strong position to weather a prolonged period of volatile copper prices while continuing to deliver organic growth; however, a prolonged period without contributions from Cobre Panamá would deteriorate FCF sufficiently enough to impact growth initiatives across the company’s portfolio.”