Inside the Market’s roundup of some of today’s key analyst actions
With ongoing operational challenges “compounded” by COVID-related pressures, CIBC World Markets analyst Bryce Adams lowered his recommendation for Sierra Metals Inc. (SMT-T) to “neutral” from “outperformer” following the release of weaker-than-anticipated third-quarter results.
Shares of the Toronto-based miner fell 3.9 per cent on Tuesday after it reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $17.4-million for the quarter, falling short of both Mr. Adams’s $21-million estimate and the consensus projection on the Street of $30-million. An adjusted earnings per share of loss of 2 cents also missed expectations (gains of 3 cents and 5 cents, respectively), due largely to higher-than-expected costs at its Bolivar and Cusi mines.
Pointing to ongoing issues at Bolivar in Mexico, including delays in mine development, infill drilling and high personnel turnover, Sierra cut its 2021 EBITDA guidance to $105-$110-million (from $130- $140-million) and increased its cost guidance for the mine to $3.30-$3.47 per pound (from $2.60-$2.74).
“Bolivar is expected to remain under pressure into H1/21, and at Yauricocha higher-grade ore from below the 1120 level is not mineable until permits are granted, expected in two to three years,” said Mr. Adams.
Cutting his 2022 operational expectations, he also dropped his target for its shares to $2.50 from $4.25, falling below the $2.99 average.
“We continue to see organic growth within the portfolio, as well as FCF potential, but expect that 2022 will be a ‘show me’ story, given the challenging 2021 year-to-date results,” said Mr. Adams.
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Seeing significant strategic benefits from its US$2.846-billion acquisition of Kentucky Power, BMO Nesbitt Burns analyst Ben Pham upgraded Algonquin Power & Utilities Corp. (AQN-N, AQN-T) to “outperform” from “market perform” on Wednesday.
“Kentucky Power offers enhanced scale (EV up 16 per cent), higher electric utility exposure (to 72 per cent vs. 63 per cent), and low-risk rate base opportunities including new renewables in the medium term,” he said. “On a pro forma basis, 77 per cent (vs. 73 per cent) of AQN’s business mix will be regulated by mid-year 2022 and the number of utility customers will increase 19 per cent to 1.4 million from 1.2 million. Equally important, the deal supports AQN’s 8-10-per-cent EPS CAGR [earnings per share compound annual growth rate] guidance..”
Calling the transaction multiple ”fair,” Mr. Pham thinks Algonquin “paid a reasonable price for the Kentucky Power assets, which is an important starting point for long-term shareholder value accretion.”
“AQN has stated that the acquisition will be accretive to EPS in the first full year (2023) with mid-single digit percentage accretion thereafter,” he said. “The cash consideration will be financed with the recently closed US$650-million equity offering. AQN does not expect further common equity through mid-2022 and is budgeting for issuance of hybrid debt, equity units and/or non-core asset sales instead. Currently, Kentucky Power is under-earning with a 6.6-per-cent realized ROE vs. allowed 9.3 per cent. Achieving the ROE will be one of the biggest drivers of achieving expected accretion.”
He maintained a US$17 target for Algonquin shares, which falls 56 US cents below the consensus.
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While Citi analyst Ashwin Shirvaikar raised his target price for shares of Nuvei Corp. (NVEI-Q, NVEI-T) after increasing his financial forecast in response to better-than-anticipated third-quarter results, he warned upside is now “modest.”
“Nuvei delivered strong growth in absolute terms, partly with the help of acquisitions that have added a number of new capabilities. The beat-and-raise contributes to higher estimates but the sharp appreciation in the stock during the September quarter already anticipated this,” he said.
On Tuesday before the bell, the Montreal-based online-payments technology company reported quarterly revenue of US$184-million, up 97 per cent year-over-year and topping both Mr. Shirvaikar’s US$180-million estimate and the Street’s US$179-million expectation. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of US$81-million also exceeded expectations.
“The upside risk to our view remains the continued use of its cash position to make acquisitions that add clients and capabilities,” he said. “On the other hand, a deceleration in the growth towards the medium-term outlook would imply the stock is fairly valued and remains our baseline assumption.”
With Nuvei making modest increases to its full-year 2021 guidance, Mr. Shirvaikar hiked his target for its shares to US$120 from US$100. The average on the Street is US$147.40.
However, he maintained a “neutral” recommendation, citing valuation concerns.
“While we continue to believe in the many positives in the Nuvei story (high percentage of revenues from e-commerce; exposure to differentiated and growing revenue mix including online gaming; tech stack geared to take advantage of the revenue mix; attractive financial metrics, etc.), we are cautious of the risks (M&A-heavy backdrop; limited track record in current form; controlled corporation dynamics, etc.,),” he said. “Taken together, we believe the risk/reward is balanced. We believe the implied forward outlook should support the stock at current levels but also that a combination of sustained follow-through on the profitability metrics and better disclosure is needed to provide a material upside catalyst.”
Other analysts making target changes include:
* BMO’s James Fotheringham to US$114 from US$106 with a “market perform” rating.
“Nothing from NVEI’s 3Q21 positive earnings release, improved outlook, or upbeat conference call justified [Tuesday’s] share price underperformance,” said Mr. Fotheringham. “However, after re-rating during the pandemic, payment stock valuation multiples (in general) are now transitioning, perhaps back down to levels implied by the pre-pandemic industry-wide relationship between organic revenue growth potential and P/E.”
* Credit Suisse analyst Timothy Chiodo to US$155 from US$145 with an “outperform” rating
* Raymond James’ John Davis to $166 from $143 with an “outperform” rating.
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Though it continues to face headwinds from chip shortages and supply chain disruptions, Linamar Corp. (LNR-T) is “managing well in a difficult environment,” said CIBC World Markets analyst Krista Friesen after the late Tuesday release of better-than-anticipated quarterly results, including “strong” free cash flow, a dividend raise and reintroduction of its buyback initiative.
“Heading into the back half of the year, expectations had been low for the auto suppliers,” she said. “However, LNR’s better-than-expected management of the headwinds produced solid results across the board for the quarter. While labour, commodity prices, chip shortage and supply chain issues remain problems for the industry, and we do expect Q4 to be another difficult quarter, we expect to see LNR continue to navigate these issues well.”
“LNR’s third-quarter results helped highlight the benefits of the company’s strategy. While LNR posted solid consolidated results, there is no denying that it benefited from its Industrials division. The company posted an operating margin of 7.7 per cent (excluding CEWS), which benefited greatly from the double-digit margin in the Industrial division. The Industrial division is able to provide a cushion for the rest of the business during difficult times in the auto sector (i.e., the chip shortage). These results reinforce our view that while LNR trades like an auto supplier (4.3 times on our 2023 estimates), on a sum-of-the-parts basis, using comp multiples, it could trade at a blended multiple of 6.5 times, inferring an equity value of $125.”
Calling its balance sheet, including $1.8-billion in liquidity, “strong” and pointing to negative net debt and “impressive” FCF, Ms. Friesen set the Guelph, Ont.-based company is prioritizing returning cash to shareholders. It announced a raise to its quarterly dividend of 25 per cent (to 20 cents per share) and a re-launch of its share buyback program, which the analyst expects to be “active.”
However, in response to reductions to its guidance brought by industry conditions, Ms. Friesen cut her target for Linamar shares to $94 from $99, below the $96 average, with an “outperform” rating.
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Seeing “limited near-term catalysts to expand [its] range-bound valuation multiple,” Scotia Capital analyst Paul Steep lowered TMX Group Ltd. (X-T) to “sector perform” from a “sector outperform” recommendation.
“Our long-term investment thesis on TMX remains intact, but we are tactically downgrading the stock ... given what we view as a lack of near-term catalysts over the next 12 to 18 months,” he said.
“TMX valuation has likely garnered a sustainable re-rate reflecting the transformation of its business over the past few years and demonstrated ability to prosper across a range of market conditions; however, its valuation multiple appears to have become more range-bound recently. The next leg of multiple expansion will likely relate to: (1) increased confidence in TMX’s ability to generate average double-digit growth over the mid-term, and (2) material acquisitions that accelerate its strategy and further shift its exposure to less cyclical segments that support recurring revenue.”
Mr. Steep trimmed his target for its shares to $154 from $157. The average is $154.14.
“TMX likely faces tougher year-over-year comparables and potentially reduced benefit of operating leverage over the near-term as it continues to invest in new growth initiatives and faces a bit higher cost inflation across its largely fixed expense base,” the analyst said. “Looking into 2022, we expect to see a year-over-year decline in earnings from a record 2021 with fewer opportunities for upside earnings surprise.”
Elsewhere, BMO’s Étienne Ricard raised histarget to $157 from $154 with a “market perform” rating.
“TMX’s operating businesses are performing well, with progress on strategic initiatives providing self-help revenue growth opportunities. Our Market Perform rating remains valuation-based, with absolute valuations near cyclical highs. That being said, we recognize our estimates could prove conservative, given capital deployment optionality and a more constructive macro backdrop for interest rate derivatives trading,” he said.
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Dialogue Health Technologies Inc. (CARE-T) “continues to impress” by optimizing and improving its virtual platform and expanding its member base, according to iA Capital Markets analyst Chelsea Stellick, who emphasized its growth story continued to “land and expand” in the third quarter.
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Before the bell on Tuesday, Montreal-based company, which began trading on the TSX in late March after the completion of initial public offering, reported revenue of $17.2-million, up 120 per cent year-over-year but just 3.5 per cent from the previous quarter and below the $18-million estimate of both Ms. Stellick and the Street. Adjusted EBITDA of a loss of $4.9-million also fell short of expectations (losses of $3.8-million and $4.7-million, respectively).
However, Dialogue members grew to nearly 1.8 million, up 132.2 per cent year-over-year and 21.5 per cent from the previous quarter, which Ms. Stellick called “impressive.”
“While seasonality in Optima impacted Q3 revenue, we expect this to normalize in Q4/21 which is also typically a strong quarter for [Annual Recurring and Reoccurring] growth,” said he analyst. “CARE continues to execute on its ‘land and expand’ strategy as it added new direct Members through larger contract wins as well as expanding into non-traditional segments to grow its indirect Member base. With $111-million cash on hand, the Company has ample dry powder to execute on other strategic acquisitions, which we anticipate could be announced by year-end.”
Maintaining a “buy” rating for its shares, Ms. Stellick trimmed her target to $15 from $18 “given the compression in health tech multiples.” The average on the Street is currently $13.11.
Elsewhere, RBC’s Douglas Miehm lowered its target to $12 from $14 with a “sector perform” rating, while Desjardins Securities analyst David Newman trimmed his target to $14.50 from $16, reiterating a “buy” rating, and Canaccord’s Doug Taylor moved his target to $12 from $15 with a “speculative buy” recommendation.
“We are trimming our target price ... based on our DCF and 8 times EV/2023 revenue (was 9 times on 2022 revenue), which is more in line with the general sell-off in the digital healthcare sector although CARE continues to prove its resilience and sustainability, driven by its B2B SaaS model (1–3-year contracts with direct and embedded customers),” Mr. Newman said. “In our view, CARE trades at an unwarranted discount at 2.8 times 2023 revenue vs peers at 8.0 times.”
In a separate note, Ms. Stellick cut her target for shares of Quipt Home Medical Corp. (QIPT-X) to $13.25 from $13.40 with a “buy” rating following the acquisition of a strategic location in Central Illinois.
“QIPT continues to expand through M&A to build out a national DME platform, completing six acquisitions totalling more than $16-million in revenues since July,” she said. “The acquisition announced [Tuesday] expands the Company’s footprint within Illinois, a market with higher-than-average COPD prevalence in the U.S.. With $30-million cash on hand, access to
$20-million of credit, and an active pipeline, we expect more strategic M&A in the next six months. These results confirm that QIPT continues to successfully execute on its growth strategy and benefit from increased scale through operational leverage.”
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RBC Dominion Securities analyst Pammi Bir sees Granite Real Estate Investment Trust (GRT.UN-T) “hitting all the right notes, with wind at its back,” expecting organic growth momentum to build through 2023.
“Our outlook for GRT continues to improve against a backdrop of exceptionally strong industrial fundamentals and investment appetite,” he said. “Rising tenant demand from on-shoring, e-commerce expansion, and transportation and logistics needs should collectively exert further upward pressure on rents, replacement costs, and ultimately asset values across the majority of GRT’s portfolio. Amid an aggressively bid private market, we’re also pleased to see the development pipeline expand.”
On Tuesday, the Toronto-based REIT reported third-quarter results that largely met expectations as Mr. Bir saw encouraging underlying fundamentals.
“Overall, results were in line with our call, but nonetheless marked strong progress on multiple fronts,” he said. “Notably, organic growth accelerated on stronger rent growth. As well, momentum in industrial fundamentals and investor demand drove another substantial round of portfolio value gains, pushing GRT’s IFRS BVPU up 10 per cent sequentially. The distribution was also raised 3.3 per cent to $3.10 per unit annualized (effective December, payable in January), marking the 10th consecutive annual hike and providing another confident signal on growth. The balance sheet remains in solid form, with low leverage and plenty of liquidity.”
After raising his adjusted funds from operations projections through 2023 to account for increased investment activity, Mr. Bir increased his target for Granite units to $110 from $96, topping the $106.40 average, with an “outperform” rating.
“GRT’s trading at 19 per cent above NAV (26 times 2022 estimated AFFO/4.2-per-cent implied cap rate), relatively in line with its Canadian and US industrial comps, and above the sector’s 1-per-cent discount,” he said. “At current levels, we continue to see an attractive risk-adjusted return, supported by a solid growth outlook, improving portfolio quality, a growing pipeline of value-add developments, and solid balance sheet.”
Elsewhere, Raymond James analyst Brad Sturges raised his target to $110 from $98, reiterating an “outperform” rating.
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In other analyst actions:
* National Bank Financial analyst Michael Parkin cut his target for Agnico Eagle Mines Ltd. (AEM-T) to $82 from $83, keeping a “sector perform” rating. The average is $98.91.
* CIBC World Markets analyst Nik Priebe increased his target for Alaris Equity Partners Income Trust (AD.UN-T) to $22 from $21 with an “outperformer” rating. The average is $22.19.
“Normalized EBITDA came in slightly below our estimate and consensus, but this can be attributed to a timing issue related to an earlier-than-normal management bonus accrual (i.e., Q3 instead of the typical Q4),” said Mr. Priebe. “In general, we feel that the minor earnings variance is relatively inconsequential and we prefer to focus on the stability of partner distributions and corporate development updates to inform our view on the units. On that front, the outlook remains positive with a strong weighted-average ECR and a positive reset expected in 2022, despite a challenging year for the company’s only uncollared investment (i.e., LMS).”
* Cowen and Co. analyst Vivien Azer raised her Aurora Cannabis Inc. (ACB-T) target to $10 from $8.50, exceeding the $7.45 average, with a “market perform” rating. Others making changes include: ATB Capital Markets’ Frederico Gomes to $5.75 from $6 with an “underperform” rating and Canaccord Genuity’s Matt Bottomley to $6 from $6.50 with a “sell” rating.
* Credit Suisse analyst Andrew Kuske bumped up his Brookfield Asset Management Inc. (BAM-N, BAM.A-T) target to US$63 from US$54, reiterating a “neutral” rating. The average is $64.54.
“After a general lull, BAM’s overall deployment activity markedly increased – rather importantly on external transactions versus solely the re-packaging of the real estate portfolio,” he said. “These are positive elements for the continued growth of the Brookfield franchise. Beyond faster deployments and related fund raising, the continued growth of Brookfield’s insurance unit and real estate re-packaging look to aid funds flow and capital efficiency. Those major areas could also result in greater carry generation than in our views. Ultimately, we like several aspects of the Brookfield business, but just look for a better entry point.”
“BAM’s core franchise and overall platform continues to be positively positioned on a longer-term basis. Most recently, the firm’s fund raising, deal deployment and monetizations collectively accelerated. Continued progress with these efforts, growth from the insurance business along with accelerated real estate re-packaging could result in upside to our existing forecasts and valuation.”
* CIBC’s Sumayya Syed raised her CT Real Estate Investment Trust (CRT.UN-T) target to $19 from $18 with a “neutral” rating, while National Bank’s Tal Woolley increased his target to $19.50 from $19 with an “outperform” recommendation. The average is $18.46.
“CT REIT reported another in-line quarter, reflecting the contractual nature of its cash flows,” said Ms. Syed. “The REIT continues to complement built-in growth with accretive intensifications and opportunistic acquisitions at attractive cap rates north of 6 per cent on average. The Walmart-anchored acquisition provides a good strategic fit given the net leased structure and investment-grade tenant rating, and we would view similar future acquisitions as complementary. We continue to expect stable performance, though the units appear fairly valued, with a NAV premium of 7 per cent on consensus, moderately above the historical average.”
* RBC Dominion Securities analyst Douglas Miehm lowered his DRI Healthcare Trust (DHT.UN-T) target by $1 to $15, keeping an “outperform” rating. The average is $18.28.
* CIBC’s Cosmos Chiu cut his target for Endeavour Silver Corp. (EDR-T) to $8 from $8.25, keeping a “neutral” rating, while BMO’s Ryan Thompson raised his target to $6 from $5.25 with a “market perform” rating. The average is $7.12.
* Scotia Capital analyst Michael Doumet increased his target for Finning International Inc. (FTT-T) to $44 from $42 with a “sector outperform” rating. Others making changes include: National Bank Financial’s Maxim Sytchev to $45 from $44 with an “outperform” rating and BMO’s Devin Dodge to $39 from $36 with a “market perform” rating and Canaccord’s Yuri Lynk to $44 from $42 with a “buy” recommendation. The average is $43.11.
“We believe FTT is performing well and the benefits from its cost improvement efforts are becoming more visible,” said Mr. Dodge. “While the company is on-track to surpass $2 of EPS in 2021 (6 months earlier than expected), the transition to a ‘sustained up-cycle’ in 2022 requires further cyclical demand progression in its territories. We rate FTT Market Perform but would consider a more constructive view on improved visibility into favourable outcomes to at least some of the macro overhangs in its markets.”
* RBC’s Maurice Choy raised his Hydro One Ltd. (H-T) target to $33 from $32 with a “sector perform” rating. The average is $33.19.
“Notwithstanding the strong Q3/21 results (which were primarily driven by timing of OM&A activity), we believe the investment thesis on Hydro One’s stock remains intact, including its defensive and dividend growth characteristics,” said Mr. Choy. “The market’s focus remains on the JRAP proceeding, which is progressing in line with management’s expectations, and we highlight that Hydro One’s stock price might be a relative beneficiary from regulated utility investors seeking better protection against the current high levels of inflation.”
* RBC’s Geoffrey Kwan increased his Intact Financial Corp. (IFC-T) target to $200 from $195 with an “outperform” rating, while National Bank Financial’s Jaeme Gloyn raised his target to $215 from $209 with an “outperform” rating. The average is $196.69.
“IFC reported another excellent quarter driven by better-than-forecast underwriting income (primarily from the U.K./International and U.S. Commercial segments) and to a lesser extent, distribution income. IFC increased the dividend by 10 per cent and we think could announce another dividend increase when it reports Q4/21 results (we forecast an additional 10-per-cent dividend increase),” said Mr. Kwan. “Our Outperform rating reflects our view that the shares offer attractive valuation upside driven by continued positive fundamentals; a favorable industry backdrop; strong defensive attributes; and potential catalysts (e.g., de-risking of the RSA acquisition).”
* National Bank Financial analyst Endri Leno lowered his K-Bro Linen Inc. (KBL-T) target by $1 to $45 with a “sector perform” rating, while Raymond James’ Michael Glen sliced his target to $50 from $53 with an “outperform” rating. The average is $51.79.
“K-Bro 3Q results were mixed with healthcare revenue growth moderating significantly, but offset by an upside surprise from the hotel business (with the UK staging a very strong recovery),” said Mr. Glen. “Canadian healthcare sales were essentially flat year-over-year with gains from price increases, temp service, and some initial AHS contract volume offset by a downward price adjustment associated with the existing AHS business (Edmonton and Calgary) coupled with moderation on COVID related volumes. Looking forward, management communicated that healthcare volumes will continue to see moderation and KBL faces difficult comparables through 2Q22 on this segment. In terms of the hotel business, we were quite surprised by the strength and rebound seen in the UK (very strong) and Canada as travel returns in the face of reduced COVID related restrictions. We anticipate this improvement will hold through the balance of this year and into 2022. All-in-all, while there were a few puts and takes to consider with the 3Q results, K-Bro sits with a healthy balance sheet, offers growth optionality with respect to more contract wins, and we also see sufficient hotel upside to largely offset any near-term pressure that may be seen as healthcare volumes moderate.”
* Deutsche Bank analyst Gabriella Carbone hiked her Lululemon Athletica Inc. (LULU-Q) target to US$486 from US$474, exceeding the US$458.54 average, with a “buy” rating.
* RBC’s Paul Treiber raised his Magnet Forensics Inc. (MAGT-T) to $48 from $47 with an “outperform” rating, while National Bank Financial’s John Shao hiked his target to $55 from $45 also with an “outperform” rating and Canaccord’s Doug Taylor bumped his target to $48 from $42 with a “buy” recommendation. The average is $51.83.
“Magnet reported another beat-and-raise quarter. Q3 revenue rose 44 per cent year-over-year and ARR increased 48 per cent. Solid growth is increasingly being driven by strong demand from enterprises, which are looking for software to help with cyber investigations. We believe the valuation re-rating in the shares is likely to be sustained as investor visibility to 30-per-cent-plus growth continues to improve.,” said Mr. Treiber.
* CIBC’s Cosmos Chiu cut his target for Pan American Silver Corp. (PAAS-Q, PAAS-T) to US$38 from US$42, maintaining an “outperformer” rating. The average is $35.60.
* RBC’s Michael Harvey raised his Peyto Exploration & Development Corp. (PEY-T) target by $1 to $13 with a “sector perform” rating. Others making changes include: Canaccord Genuity’s Anthony Petrucci to $13 from $12.50 with a “buy” rating; Raymond James’ Jeremy McCrea to $11.50 from $11 with an “outperform” rating; BMO’s Randy Ollenberger to $13 from $11 with a “market perform” rating; National Bank Financial’s Travis Wood to $15 from $15.50 with an “outperform” rating and CIBC’s Christopher Thompson to $13 from $11 with a “neutral” rating. The average is $13.46.
“Peyto has always been a cost and profitability conscious organization,” said Mr. McCrea. “Focusing on aligning its capital allocation priorities with commodity pricing has helped the Company navigate the commodity volatility of the last 18-months. Now in a more constructive environment, Management is once again committed to distributing the excess earnings of the Company back to shareholders. The substantial dividend increase along with a return to the monthly payment schedule will no doubt be welcomed by shareholders and is a product of prudent capital allocation, progress made on well productivity as well as drilling costs. The company has plenty of torque to current natural gas prices.”
* In response to its proposed acquisition by Newcrest Mining Ltd. (NCM-T), CIBC’s Anita Soni increased her target for Pretium Resources Inc. (PVG-T) to $18.50 from $14.50 with a “neutral” rating. The average is $18.14.
“We see interloper risk as moderate, given the potential tax synergies of some Canadian-headquartered producers. However, these tax synergies are somewhat mitigated by the premium paid, which is high relative to the recent trend of no- to low-premium transactions,” she said.
* Raymond James analyst Jeremy McCrea raised his Spartan Delta Corp. (SDE-T) target to $7.50 from $7 with a “market perform” rating. The average is $10.16.
“Spartan posted a strong operating quarter having completed two material consolidation transactions in the period,” he said. “As the Company steps into full-scale Montney development we still maintain our more cautious stance on the shares but do credit the Company with the strong early results shown in the latest month’s GeoSCOUT data. If the company can continue to deliver well results like this (i.e., 900+ bbls/d IP30 rates with the recent pad) while continuing to pay down debt, less risk in the business should translate into a higher share price. Overall, while still in the early innings in terms of proving up its Montney portfolio, the strong quarter and well results are heading in the right direction.”
* While he thinks “management is positioning the business to leave 2021 volatility behind,” Desjardins Securities analyst Benoit Poirier cut his target for Stella-Jones Inc. (SJ-T) shares to $52 from $59, keeping a “buy” rating. The average is $54.44.
“While we were disappointed with 3Q results and the 2021 guidance revision, we appreciate that management is taking the necessary steps to right size the residential lumber business to reduce earnings volatility in 2022 and beyond,” he said. “The outlook for 2022 appears healthy, thanks to recent acquisitions and continued demand for utility poles. SJ’s solid balance sheet should enable management to unlock shareholder value through continued M&A and/or share buybacks. We maintain our Buy rating.”
* RBC’s Michael Harvey cut his Storm Resources Ltd. (SRX-T) target to $6.85 from $7.50 with an “outperform” rating. The average is $7.58.
* CIBC’s Todd Coupland raised his Sierra Wireless Inc. (SWIR-Q, SW-T) target to US$14 from US$13, below the US$20.85 average, with an “underperformer” rating, while BMO’s Thanos Moschopoulos raised his target to US$18 from US$17 with a “market perform” rating.
“The company continues to step through its multi-year transition,” said Mr. Coupland. “Our view is that it will take more time before material benefits of the transition are visible. Once Sierra’s new CEO places his stamp on the corporate strategy, investors will have the opportunity to assess the company’s progress before deciding to invest. We do not recommend buying Sierra’s shares at this time.”
* RBC’s Matt Logan increased his Summit Industrial Income REIT (SMU.UN-T) target to $25.50 from $23 with a “sector perform” rating. Others making adjustments include: Canaccord’s Mark Rothschild to $24 from $23 with a “hold” rating; CIBC’s Sumayya Syed to $24.50 from $22.50 with a “neutral” rating; Raymond James’ Brad Sturges to $25 from $23.75 with an “outperform” rating and BMO’s Joanne Chen to $25 from $23 with an “outperform” recommendation. The average is $24.58.
“The macro backdrop for Summit Industrial Income REIT’s business continues to strengthen,” said Mr. Logan. “Rent growth is reaccelerating, SMU’s mark-to- market opportunity is growing, and the wall of capital chasing industrial real estate continues to push cap rates lower—particularly in the land constrained GTA market. Taking a step back, on-going supply chain headwinds for most businesses are a tailwind for SMU, as tenants continue to shift from a ‘just-in-time’ to a ‘just-in-case’ model. With SMU’s units trading at a well-earned 29-per-cent premium-to-NAV, we maintain our Sector Perform rating.”
* CIBC’s Mark Jarvi raised his TransAlta Corp. (TA-T) target to $16.50 from $16, exceeding the $15.95 average, with an “outperformer” rating. Others raising their targets include: Scotia’s Robert Hope to $16.60 from $16 with a “sector outperform” rating; BMO’s Ben Pham to $17 from $16 with an “outperform” rating and RBC’s Maurice Choy to $17 from $14 also with an “outperform” rating.
“TA continues to post impressive results this year, punctuated with another guidance raise. We believe the current momentum on the Alberta fleet (Thermal & Hydro) can persist into next year, and we expect TA to deliver positive announcements around growth initiatives and de-risking of cash flows in coming quarters. Even though the shares have had a good run this year, we believe there remains good relative value and upside,” said Mr. Jarvi.
* Mr. Jarvi cut his TransAlta Renewables Inc. (RNW-T) target to $20.50 from $21, keeping a “neutral” rating. The average is $20.08.
“For RNW, the near-term operating challenges that led to two guidance reductions and lingering uncertainty on the resolution for the Kent Hills turbine/foundation problems may cap the stock in the short term,” he said.
* BMO’s Ray Kwan raised his Vermilion Energy Inc. (VET-T) target to $17 from $15, exceeding the $14.91 average, with a “market perform” rating.
“Vermilion’s quarterly results had both positive and negative takes,” he said. “While spending will be higher in 2021/2022, the potential re-implementation of a dividend will likely be taken positively, in our view. We expect Vermilion to generate nearly $630 million of free cash flow in 2022 (26-per-cent FCF yield) and could pay up to $0.05-$0.10/share in quarterly dividends initially.”
* Cowen and Co. analyst Jeffrey Osborne cut his Westport Fuel Systems Inc. (WPRT-Q, WPRT-T) target to US$5 from US$8 with a “market perform” rating. The average is US$9.80.
* Canaccord Genuity analyst Yuri Lynk increased his WSP Global Inc. (WSP-T) target to $190 from $168, topping the $171.89 average, with a “buy” rating, while Raymond James’ Frederic Bastien raised his target to $185 from $175 with an “outperform” recommendation.
“A solid 3Q21 performance, anticipated revenue synergies from the Golder acquisition, passage of the bipartisan infrastructure bill, and massive opportunities related to sustainability and the net-zero transition have us increasingly more confident on the earnings growth trajectory of WSP Global through 2022,” said Mr. Bastien.
“There is also much to look forward to beyond our forecast horizon, considering the firm’s effective seller-doer approach, the unwavering support of its pension fund investors, and the still highly-fragmented nature of its industry.”
David Leeder