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

Heading into third-quarter earnings season for North American railroad companies, Stifel analyst Benjamin Nolan thinks the environment is “certainly a challenge as it has been faced with headwinds from slow economic growth, high inflation, secular transportation trends, weakened consumer spending, and unprecedented disruptions from weather and labor strikes.”

“The overarching message for this quarter is volumes are bad, revenues are down, expenses were up from labor and fuel surcharge lags and OR’s [operating ratios] should worsen in what is typically the best quarter of the year,” he added. “The good news is volumes have seemingly bottomed, fuel impacts should reverse in 4Q, and generally the rails are running efficient operations which should allow for improved territory in the fourth quarter and into 2024. We would own the group into the end of the year as results improve against easier comps and in line with the Stifel macro strategy preferring cyclical value in 4Q.”

In a research report released before the bell on Tuesday, Mr. Nolan trimmed his target for Canadian National Railway Co. (CNI-N, CNR-T) to US$122 from US$125, reiterating a “hold” recommendation. The average target on the Street is US$127.64, according to Refinitiv data.

“We are estimating Canadian National’s total 3Q23 carloads come down by 9.6 per cent, year-over-year. Sequentially, carloads are expected to fall by 4.5 per cent,” he said. “Volumes were impacted this quarter from the ILWU strike disruptions which caused congestion for British Columbia’s busiest ports. Additionally, the company saw especially weaker lumber shipments in the summer bringing lumber RTMs [revenue ton miles] down by over 20 per cent, however, the segment has started to pick back up with increased shipments. We expect carload growth in autos (up 15 per cent) and iron and steel scrap (up 15 per cent), which we expect will be offset from weakness in intermodal (24 per cent) and primary forest products (15 per cent). As it relates to key service metrics, we estimate the average terminal dwell to be 7.2 hours, slightly worse than 6.8 hours in 2Q23. Velocity is expected to drop slightly to 19.7 mph from 19.9 mph last quarter. We are projecting Canadian National reports an operating ratio of 61.5 per cent in 3Q23, which would equate to 94 bps higher sequentially and 431 bps higher year-over-year, respectively. We forecast revenue growth to come down year-over-year, coming in at $3 billion USD. Our 3Q23 EPS estimate is $1.73 CAD/$1.29 USD, which is slightly above the FactSet consensus estimate of $1.33 USD.”

Mr. Nolan also reiterated a “hold” rating with a US$79 target (unchanged) for shares of Canadian Pacific Kansas City Ltd. (CP-N, CP-T). The average on the Street is US$91.46.

“This quarter marked the official merger of Canadian Pacific and Kansas City to create CPKC which has already resulted in both revenue and cost synergies for the combined company,” he said. “Based on preliminary data provided by CPKC and AAR, We are estimating CPKC’s total volume to flat year-over-year in the third quarter. The 3Q average Terminal Dwell estimate is 11.3 hours, up from 10.4 hours in 2Q23. Estimated velocity is 17.9 mph for 3Q, slightly down from 18.2 mph last quarter. We estimate flat revenue growth for 3Q23 of $3.3 billion CAD/$2.46 billion USD, which is largely as a result of the KSC merger. We are projecting CP’s OR to be 61.5 per cent, which would equate to a 312 bps improvement sequentially, and 484 bps better y/y. Our 3Q23 EPS estimate is $0.96 CAD/$0.72 USD vs the FactSet consensus estimate of $0.71 USD.”

On the broader sector, Mr. Nolan said: “Finding underlying value in a soft environment. The five Class 1 rails we follow have fallen further behind the market this quarter with a year-to-date return of (6.4 per cent) for the peer group versus the S&P 500, up 11.7 per cent year-to-date. Interestingly, the LTL returns have soared in recent months partly due to the Yellow bankruptcy, but still, the gap in returns is especially wide. Given the way rail shares are currently trading, expectations for Q3 are certainly low with the downside baked in, which in turn should allow for 15-20-per-cent upside on short-term trades through the end of the year in our view. We have taken down our estimates for this quarter to reflect a “bottoming” for volumes and higher overall costs. The East Coast rails, CSX and NSC, are still the cheapest of the five Class 1′s we cover. CPKC is trading at a much higher valuation at a FY1 PE of 25.8 times versus the peer group average of 19 times. We view the premium valuation a result of CPKC’s expectation to the bottoming scenario because they have less exposure to intermodal volumes, a much more reactive fuel surcharge lag, and merger synergies coming into play.”


TD Securities analyst Marcel Mclean sees an “uncertain path forward” for Laurentian Bank of Canada (LB-T) following Monday’s unexpected appointment of Éric Provost as its new chief executive officer on the heels of a failed sales process.

Laurentian Bank is hit again. But its peers aren’t doing any better

“We have increased our discount to the group to 30 per cent from 13 per cent previously to reflect removing the takeout premium we had previously incorporated, as well as to reflect increased uncertainty regarding the future path of the bank,” he said. “The stock is currently trading at a 36-per-cent discount on TD/consensus estimates and has traded at a 12-per-cent discount on average over the past five years. On a forward P/E basis, the stock is trading at 6.0 times/5.9 times TD/consensus 2024 EPS estimates vs. its past five-year average of 9.0 times (range: 5.7-16.3 times). Taking a look at P/B, the stock is trading at less than 0.5 times BV and 0.56 times TBV.”

Despite the uncertainty, Mr. Mclean does not think Laurentian’s dividend is currently at risk.

“The bank already cut the dividend by 40 per cent in May 2020, shortly before the prior CEO’s abrupt departure,” he said. “The dividend yield now stands roughly in line with BNS and below CIBC (LB 6.6 per cent vs. group average 5.3 per cent). Our forecast contemplates a payout ratio at the bottom end of the bank’s 40-50-per-cent target range. Moreover, capital levels appear solid, in our view, with a CET1 ratio of 9.8 per cent as at Q3/23 (7.0-er-cent minimum requirement). We do not believe there are issues within the bank that would result in material capital or book-value charge.”

Maintaining a “buy” recommendation, he cut his target for its shares to $36 from $45. The current average on the Street is $35.91.

“Our BUY rating is largely levered to valuation, with the bank trading at 0.5-0.6 times TBV and near the bottom end of its historical range on a forward P/E basis,” he said. “We acknowledge that there is increased uncertainty as to the future path of the bank, given the management/Board changes, but we believe that the risk is already reflected in the current share price.”


While Northwest Healthcare Properties REIT’s (NWH.UN-T) value “looks interesting” after falling under $5 per unit on Monday, National Bank Financial analyst Tal Woolley warned “entry timing [is] probably not optimal.”

In a research note released as the company’s units fell 4.5 per cent, or 23 cents, to close at $4.85, the analyst had thought an “attractive” entry point would have been reached. However, he now sees Northwest “needing to clear some hurdles,” pointing to two factors:

* Upcoming convertible refinancing with $125-million of its series G convertibles coming due at the end of December.

“The market is aware of the refinancing, so we think this is one of the things that is weighing on units right now,” he said. “Paper on these terms is expensive, but it does come with term/certainty. We would not expect much more information on dispositions prior to year end, as property dispositions are a time-consuming process (i.e., a process starting now is unlikely to close before year end). More disposition proceeds could possibly let NWH redeem the existing converts and wait until a more attractive moment to refinance.”

* The approaching tax-loss selling season.

“Given the 49-per-cent unit price decline, we believe NWH units would be a prime taxloss selling name this year, which could easily make sellers outnumber buyers in Q4,” he said. “It is unfortunate that this coincides with having to refinance the convertibles.”

Mr. Woolley did emphasize Northwest is showing “steady” occupancy and same-property net operating income growth unlike its office REIT peers.

“We continue to believe that the healthy property-level performance is sticky, given the 13.5 years of weighted-average lease term on its assets, with roughly 83 per cent of income indexed to inflation,” he said. “And for the first time in several years, foreign exchange is acting as a tailwind (NWH pays CAD distribution, but earns mostly in AUD, NZD, EUR, BRL and GBP). We do not see NWH facing the same operating challenges as traditional office REITs near-term at the property level. NWH also continues to see outside interest in its assets from other parties like HMC Capital in Australia and TMR Capital in the UK.

“NWH is now working on the balance sheet, but it will take some time to play out. We attribute NWH’s challenges to an aggressive growth strategy that has stressed its balance sheet during a rising rate period, resulting in them looking to exit markets like the U.S. and Brazil to help begin to correct the problem. NWH has very high cost bridge debt to pay down (which it is working to do), but when we think about what normalized borrowing rates should look like (secured debt probably in the 6-per-cent-range in the Americas and Australia, lower in Europe), the implied cap rate spread starts to look more attractive.”

Mr. Woolley maintained a “sector perform” recommendation and $5.50 target for Northwest units. The average target on the Street is $7.

“In a tough tape for real estate equities, we flag this as an idea that may be worth returning to over the course of Q4 as some of the events play out,” he said. “Given the ongoing steady performance at the property levels, we anticipate there is a balance sheet solution for NWH out there, which may come with some incremental costs, but even so, units have been under sufficient pressure that we think a value case for NWH equity could emerge.”


RBC Dominion Securities analyst Daniel Perlin expects “much of the same” during third-quarter earnings season for North American electronic payment solutions providers.

“Overall consumer payment volumes have remained relatively consistent for July/Aug with higher oil prices helping some of the average tickets, FX is generally worse (less of a tailwind) than when management teams last provided guidance, FX volatility remains low and provides for challenging comparisons, and travel is still holding in, but at a decelerating rate,” he said. “We believe most of the prints will be in line to slightly better as management teams mostly set guidance last quarter with an expectation that the overall macro backdrop would remain similar to 2Q23, which all else equal, appears to be the case. As in prior quarters we have tried to identify companies with specific tilts that might offer upside or downside opportunities/risks or other idiosyncratic growth drivers to offset some of the cyclicality of the volumes. We expect implied 4Q23 guides to be relatively conservative, with any early reads on FY24 to prove even more conservative. Overall, we are anticipating 3Q23 to be a largely consensus-driven quarter with few outliers and management commentary that will remain very balanced.

“Buyside expectations appear relatively muted for the group with most investors that we have spoken with favoring the lower risk names such as MA, V, FISV, and GPN, with very few looking to get more aggressive on some of the more ‘risk-on’ type names, such as NVEI, SQ, or LSPD.”

In a research report released Tuesday, Mr. Perlin said investor sentiment toward Nuvei Corp. (NVEI-Q, NVEI-T) and Lightspeed Commerce Inc. (LSPD-N, LSPD-T), both based in Montreal, is “slightly negative.”

However, he sees a “positive” setup for Nuvei, given “recent weakness and low expectation hurdle,” and is projecting a “modest” earnings beat.

“On the positive side of the ledger, as we look at the model setup, we believe our $307-million total revenue estimate (slightly above the Street’s $304-million) is achievable and is built off global ecom growing 23 per cent year-over-year, which would yield $149-million, a modest seq step-down (assumes the large client that NVEI is transitioning away from begins, while other new logos in the pipeline begin to convert), assumes FX is a tailwind of approximately $6-million, which based on average FX in 3Q, could have modest upside, and Paya grows 8 per cent year-over-year (similar to 2Q/23),” he said. Meanwhile digital assets likely remain similar to 2Q23′s level, we are modeling $18-million.”

He reiterated a “outperform” rating and US$29 target for Nuvei shares. The average is US$39.88.

“Going into 3Q23, NVEI shares are down 50 per cent since last reporting earnings vs. the SPX down 4 per cent, as last quarter’s commentary clearly disappointed the market, with a large client de-conversion and more challenging conversion cycle for large enterprise wins,” said Mr. Perlin. “With this negative commentary built into the stock, in our view, coupled with recent negative sentiment around pricing pressure in enterprise ecom (given Adyen’s 1H23 commentary), we believe the expectation hurdle is low going into the print, while our model and Street estimates appear well calibrated for many of the puts/takes, with a bias to the upside. The stock is also cheap, in our view, trading at 7 times FY24E EV/ adj. EBITDA, which is well below slower growth peers (GPN, FI, FIS, FLT).”

For Lightspeed, Mr. Perlin is expecting in-line quarterly results and sees a “neutral” setup, despite recent share price weakness.

“The Unified Payments strategy remains debated, with the Bulls pointing to recent quarter trends, with GPV % penetration into GTV of 22 per cent, up 300 basis points sequentially and management sticking to its 30-35 per cent by year-end FY24; while the Bears suggest that customer churn could accelerate, gross margins will likely remain under pressure as payments increase as a percentage and LSPD Capital is required to offset degradation (90-per-cent gross margins), but puts more risk on the balance sheet near term. We believe both points are accurate but would note that if the Unified Payments strategy is successful and able to achieve 50-per-cent penetration by FY25, then there could be more upside to our adj. EBITDA estimate for FY25.”

He has an “outperform” rating and US$21 target for Lightspeed shares. The average on the Street is US$20.31.


Citing the “possible uncertainty” of the outcome of a shareholder meeting to remove and replace three board members and “lack of clarity” on the timing of its strategic review process, Scotia Capital analyst Divya Goyal lowered Quisitive Technology Solutions Inc. (QUIS-X) to “sector perform” from “sector outperform” previously.

“This shareholder group, supported by 33 per cent of the company’s shareholders, does not believe in the Board’s current strategy and would like to replace these board members with their proposed directors,” she said. “While the company indicated that they have not received any formal requisition from this shareholder group, they have set up a special committee of independent directors to supervise the process. The company has also engaged William Blair & Company, LLC as financial advisor to assess strategic alternatives available to the company.

“Although we believe the company has taken the right steps to address the matter, we think the concerns raised by this shareholder group are justified given the recent softness reported by the business with GCS segment declining by 14 per cent year-over-year partly compensated by 9-per-cent growth in BankCard business, resulting in overall revenue decline of 4.5 per cent as of Q2/23. The company’s PayiQ business has taken longer than anticipated to commercialize which has resulted in investor fatigue.”

Ms. Goyal said the shareholder activism has raised concerns about the company’s corporate governance guidelines “invariably impacting long-term investor confidence and potentially affecting the business valuation.”That led her to cut her target to 40 cents from 70 cents. The average is 91 cents.

“Overall, we believe investors need better clarity on Quisitive’s long-term business strategy and PayiQ’s path to commercialization/profitability,” she concluded. “We think this Strategic Review process will help unravel some of the company’s strategic matters, providing shareholders further transparency on the true potential of the company’s GCS and GPS business.”


Acknowledging “interest sensitive M&A stories remain under pressure,” Scotia Capital analyst George Doumet sees “significant value” in Park Lawn Corp. (PLC-T) shares in the medium to longer-term after coming off research restriction following its withdrawal of its proposal to purchase Carriage Services Inc.

“Since the announcement, PLC shares are down 24 per cent vs. its US deathcare peer Service Corp. (SCI-US not-covered) down 14 per cent,” he said. “We believe there was significant investor concern around the deal given: (i) the expected increase in the company’s leverage profile, (ii) expectations for initially modest property-level synergies (limited overlap in geographic profile), although there likely would be significant synergies in corporate overhead, (iii) risks around getting larger in an environment where there was some concern around the more economically sensitive parts of the business, notably the pre-need sales outlook.”

Updating his estimates to account for the recent acquisitions as well as the last quarterly report, Mr. Doumet cut his target to $28 from $33.50, keeping a “sector outperform” recommendation. The average is $30.69.

“Our estimates do not reflect M&A, which could comfortably add 15-per-cent-plus upside to our NTM ‘next 12-month] adj. EBITDA numbers,” he said. “In this current environment, we believe investors will reward an elevated cadence of smaller, higher visibility and accretive targets.”

“We have reduced our valuation multiple to reflect decreased visibility around the current rate and macro-environment. We value PLC shares largely in line with SCI, despite the company’s strong growth profile and balance sheet capacity.”


Echelon Partners analyst Andrew Semple thinks Vext Science Inc.’s (VEXT-CN) $13.2-million acquisition of two cannabis retailers in Ohio is “a promising growth opportunity,” seeing its other businesses in Arizona as “relatively mature.”

“Ohio’s cannabis market has the potential to achieve annual sales greater than $2.5-billion over time upon the commencement of adult-use sales, and voters will vote on the adult-use legalization question on next month’s ballot,” he said. “The timing of this transaction is opportunistic to conclude an agreement ahead of the possible legalization of adult-use sales in the state. Vext is strategically positioned to capitalize on the burgeoning cannabis market in Ohio, due to its enhanced retail scale and capacity.

“We view the strategic rationale behind the transaction favourably. The new stores should contribute meaningfully to Vext’s profitability without adding significant overhead, and the ability to complete an acquisition on an equity-financed basis will help to de-lever the balance sheet. However, the equity financing will increase basic shares outstanding by 39 per cent, and with an issue price of 17 cents per share, this is materially dilutive to our model.”

Maintaining a “speculative buy” recommendation for the Arizona-based company’s shares, Mr. Semple trimmed his target to 70 cents from $1, pointing to the dilution stemming from its $10-million non-brokered private placement equity offering to finance the deal. The average target on the Street is 75 cents

“Although our price target declines, on a risk-adjusted basis we are overall neutral on this acquisition. In our view, the negative impact of equity dilution to our DCF valuation is mitigated by a de-risking of the balance sheet and cementing growth opportunities within Ohio, as well as the strategic value of having additional stores within the state (e.g., better buying power, more levers to move cultivation output),” he said.


Initiating coverage in a report titled Getting ready to print money, Acumen Capital analyst Nick Corcoran gave Data Communications Management Corp. (DCM-T) a “buy” recommendation, predicting notable margins and free cash flow gains for the Brampton, Ont.-based provider of print and digital solutions.

“Gross and Adj. EBITDA margins are expected to improve to historic levels over the next 18-24 months as cost and revenue synergies related to the acquisition of MCC [Moore Canada Corp.] are realized,” he said. “Management is targeting synergies of $25-30-million. Note, Adj. EBITDA excludes acquisition and integration costs, restructuring expenses, and other one-time or non-recurring items.”

“The Company is expected to incur $3-5-million of restructuring costs per quarter through the end of 2024. FCF is expected to be $40.7-million in 2025 driven by margin expansion and restructuring costs trailing off. Adj. EBITDA through the end of 2023 and into 2024 will give an indication of the cash flow generating ability of DCM following the acquisition of MCC.”

Expecting further M&A activity in the near-term, Mr. Corcoran set a target of $6 per share, exceeding the $5.50 average.

“DCM currently trades at 2.8 times 2025 EV/Adj. EBITDA compared to the peer group average of 5.2 times (2024 EBITDA),” he said. “Note, we utilize 2025 as it will be the first ‘clean’ year following the acquisition of MCC. We believe DCM will trade in line with the peer group as synergies are realized, margins expand, and FCF increases.”


In other analyst actions:

* BMO Nesbitt Burns’ John Gibson initiated coverage of Badger Infrastructure Solutions Ltd. (BDGI-T) with a “market perform” rating and $39 target, matching the average on the Street.

“Badger is North America’s leader in non-destructive excavating services and is undergoing an era of significant growth, particularly in the U.S. market,” he said. “Our $39 target price reflects 6.5 times 2024 estimated EV/EBITDA, which is relatively in line with its industrial peer group. We rate BDGI shares Market Perform mostly on valuation but recognize the company holds stronger potential upside provided it can execute on its growth strategy.”

* BTIG initiated coverage of Toronto-based Promis Neurosciences Inc. (PMN-Q) with a “buy” recommendation and US$8 target.

* After increasing his uranium price assumptions, TD Securities’ Greg Barnes hiked his Cameco Corp. (CCO-T) target to $70 from $55, maintaining an “action list buy” recommendation. The average is $61.25.

“Cameco remains one of the very few ways to invest in a publicly traded producing uranium miner, and, in our view, it is the most attractive way for investors to add uranium leverage to their portfolios,” said Mr. Barnes. “Cameco has two Tier-1 uranium mines in production, with multiple available avenues to further increase production and extend mine lives at its current operating mines, brownfield and greenfield projects. Finally, we also expect that CCO’s pending acquisition of a 49-per-cent interest in Westinghouse Electric Corporation (WEC) will further solidify and strengthen the company’s position as a leading nuclear-fuel supplier to free-market nuclear utilities.

“Given Cameco’s unique position in the uranium market and the positive outlook for uranium and the nuclear sector in general, we believe that target multiples at the higher end of the company’s historical range are justified.”

* CIBC World Markets’ Scott Fletcher lowered his target for Corus Entertainment Inc. (CJR.B-T) to $1.75 from $2, below the $2.21 average, with a “neutral” rating.

“Corus remains in a difficult position, with a challenging advertising market compounded by the slower pace of scripted deliveries for the fall season as a result of Hollywood strikes,” he said. “Deleveraging will remain a challenge against that uncertain backdrop, and results in the quarter are likely to reflect those challenges. Corus remains committed to investing in its growth opportunities (StackTV streaming, Content Licensing, Corus Studios) and the quarter should provide an important update on the progress those initiatives have made. While valuation at 4.6 times 2024estimated EBITDA and an FCF yield of 66 per cent on 2024 estimated FCF may screen as compelling, a lack of certainty around forward estimates as a result of the advertising markets and strikes keeps us on the sideline.”

* In a note titled Bear Case Priced In... But The Road Back To Fair Value Is Long, Stifel’s Cole Pereira cut his Enerflex Ltd. (EFX-T) target to $12 from $16.50 with a “buy” rating. The average is $13.03.

“EFX shares declined 27 per cent on Monday and are down 47 per cent since 2Q23 results, with the company and management experiencing a significant decline in investor confidence, and the stock in “show me” mode for the foreseeable future,” he said. “We have modestly risked our estimates, and analyze a “bear-case” scenario whereby run-rate EBITDAS declines, no further synergies are realized and capex requirements increase. In this scenario we have EFX trading at 4.4 times 2024 estimated EV/ EBITDAS and a 15 per cent 2024 estimated FCF yield, implying that the bear case is largely priced in. However, it will be a long road to recapture investor confidence, which we believe will require multiple quarters of positive FCF and meaningful insider buying. We are maintaining our Buy rating for EFX, however the stock’s overall risk profile has meaningfully increased. Accordingly, our TP declines to $12.00/sh, and we no longer view EFX as one of our top ideas in the sector.”

* Following last week’s Investor Day event in Chile, Raymond James’ Steve Hansen bumped his Finning International Inc. (FTT-T) to $52 from $50 with an “outperform” rating. The average is $48.78.

“Until recently, FTT shares have traded in a longstanding cyclical range that’s led many investors to conclude it’s nothing more than a ‘trading stock’,” he said. “While helpful in the past, we believe this view is now fundamentally outdated, failing to acknowledge: 1) impactful cost control & capital discipline implemented by (new) management in recent years; 2) the emergence of robust secular themes in high-return sectors (energy/mining) providing longer-term visibility; 3) evolutionary advances in CAT’s ultra-class truck technology (AC Drive, autonomy) that, in our view, afford Finning lucrative share opportunities; 4) demonstrable advances in Finning’s win rate, backlog complexion, and return profile (margins, ROIC); and 5) lastly, the welcome adoption of shareholder friendly capital allocation policies (including buybacks). While far from immune to economic gyrations, we ultimately believe these changes position Finning to emerge as a more resilient, more consistent compounder of shareholder value over time, an evolution that we also expect will be accompanied by healthy multiple expansion.”

* Wells Fargo’s Colin Langan cut his Magna International Inc. (MGA-N, MG-T) target to US$59 from US$66 with an “equal weight” rating. The average is US$66.88.

* Canaccord Genuity’s Yuri Lynk reduced his target for Mattr Infratech (MATR-T), formerly known as Shawcor Ltd, to $24.50 from $26 with a “buy” rating, while Stifel’s Ian Gillies raised his target to $26 from $24 with a “buy” rating. The average is $22.94.

“We would be buying MATR’s stock despite broad economic concerns; a view that there is a lack of stock specific catalysts and mid-single-digit EBITDA reductions for 23/24 .... In our view, the company’s balance sheet flexibility ($415-million of dry powder), diversified customer base, and track record of execution make it well positioned for an economic shock,” said Mr. Gillies. “The B/S flexibility will allow for accretive M&A and organic growth funded with cash on hand. The stock currently trades at 10.7 times 2025 esitmated P/E, providing a significant amount of downside protection. Our SOTP analysis indicates a value of $23.52/sh. As such, we view the current price as an excellent entry point for one of our top ideas. We think the company’s investor day in December could be a positive catalyst.”

* Seeing limited near-term catalysts, RBC’s Nelson Ng lowered his Northland Power Inc. (NPI-T) target to $28 from $31, keeping an “outperform” rating. The average is $35.50.

“We thought achieving financial close for the Baltic Power and Hai Long offshore wind developments would be the positive catalysts needed to move the shares of NPI higher,” he said. “However, the market shrugged off the key milestones and the shares of NPI traded lower with the rest of the renewable peers. We see limited company-specific catalysts going forward, and it could take time for the market to recognize the value of the offshore wind developments under construction. We are reducing our PT ... to reflect weak sentiment in the renewable energy sector.”

* After reducing his same-store sales estimate for the third quarter, CIBC’s John Zamparo cut his Sleep Country Canada Holdings Inc. (ZZZ-T) target to $28 from $31 with an “outperformer” rating. The average is $29.33.

“We are lowering our forward estimates for Sleep Country to reflect a more cautious environment for consumer spending than we previously had forecast, particularly for big-ticket discretionary purchases,” he said. “We view 2024 as a more favourable time for the stock as comparisons ease, and drivers exist—such as the continued integration of Casper Canada and store openings from new brands—for earnings growth and a possible multiple rerate.”

* In a quarterly earnings preview for precious metals producers, Scotia’s Ovais Habib and Eric Winmill trimmed their targets for SSR Mining Inc. (SSRM-T, “sector outperform”) to $28 from $29 and Torex Gold Resources Inc. (TXG-T, “sector perform”) to $22.50 from $23. The averages are $28.60 and $25.07, respectively.

“We have updated our estimates for actual Q3/23 metal prices and FX rates, along with minor adjustments to 2023 estimates in advance of Q3/23 reporting,” they said. “We expect to see improvements in production moving into Q3 as the majority of companies guided towards improved production and cost profiles that were weighted towards 2H. Metal prices have remained range-bound, with gold and silver trading in a tight channel throughout the quarter, while energy prices have broken out to the upside. We expect that this will put some pressure on margins, but unit cost pressures will likely be outweighed by production growth in aggregate.

“We continue to expect (1) 2H/23 to be generally stronger than 1H/23, with Q1 expected to be the weakest quarter; (2) sticky inflationary pressures to persist (such as labour cost inflation) especially in tight markets like Canada and the U.S., leading to flat or higher costs year-over-year; and (3) 2023 could see a continuation of active M&A for our coverage universe.”

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