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

RBC Dominion Securities’ Drew McReynolds sees “another attractive entry point” into Thomson Reuters Corp. (TRI-N, TRI-T) “in light of the pullback in the stock against a still very strong fundamental set-up.”

He was one of two analysts on the Street to upgrade the Toronto-based news and information provider on Wednesday, a day after its TSX-list shares fell 1.55 per cent with the premarket release of higher fourth-quarter revenue and a dividend raise.

Believing its recent share price depreciation provides “attractive exposure to low-risk, double-digit NAV [net asset value] growth through 2025 with potential for upside estimate revisions and manageable valuation risk,” Mr. McReynolds raised his rating to “outperform” from “sector perform.”

“We continue to view Thomson Reuters as a high-quality core holding with an ability to deliver average annual total returns of approximately 10-15 per cent over the longer-term,” he said. “We believe the company remains firmly on track to meet its upwardly revised financial outlook for 2022 and 2023 – with potential for further upward revisions in our view. We also believe the company has entered a new phase of 8-12-per-cent annual dividend growth underpinned by a step-up in FCF generation driven by the ongoing Change Program.”

“Management upwardly revised the 2022 and 2023 outlooks. We view these upward revisions as leaning to the conservative side, particularly should: (i) the operating environment and end markets remain strong with still lingering COVID-19 headwinds dissipating; (ii) the launch of Westlaw Edge 2.0 sustain similar traction to that of its initial iteration (i.e., 100 basis points of organic revenue growth); (iii) the full impact of ongoing incremental strategic initiatives (i.e., product innovation and improved customer experience translating to an increased TAM [total addressable market], additional pricing power and/or improved retention) ultimately flow-through; (iv) tuck-in M&A be executed on an accretive basis; and (v) positive operating leverage postChange Program be sustained in 2023 (and beyond).”

After updating his valuation multiple to “directionally capture the impact of higher bond yields,” Mr. McReynolds trimmed his target for Thomson Reuters shares to US$120 from US$124. The average target on the Street is US$119.15, according to Refinitiv data.

Meanwhile, seeing “strong momentum” heading into fiscal 2022, Canaccord Genuity analyst Aravinda Galappatthige raised Thomson Reuters to “buy” from “hold” with a $117 target.

“We are upgrading TRI following its Q4/21 release, alongside which management made upward adjustments to 2022/2023 guidance and raised the dividend by 10 per cent,” he said. “The recent track record of TRI, the improved positioning being facilitated by the Change Programme and the underlying shift in the company toward a more tech-oriented player with higher growth prospects, we believe, can sustain high valuation multiples, alongside its broader peer group. Against this backdrop, we saw the recent retracement in the stock as a good opportunity to upgrade.”

Others making target adjustments include:

* Scotia Capital’s Paul Steep to US$122 from US$119 with a “sector perform” rating.

“We view the firm’s Q4 results as reflecting continued momentum in TRI’s ‘Big 3′ segments, driving revenues ahead of SGBM and consensus estimates while adj. EBITDA & EPS were impacted by one-time costs and normalization of compensation costs,” said Mr. Steep. “The company updated its F2022 and F2023 outlook, revising upward revenue for the Big 3, total revenues, and incremental change program investments in F2022.

“Our thesis on TRI remains that the firm is working to reposition itself as a higher-growth software business in its core markets, supported by a substantial content engine. We believe that many of the initiatives implemented by TRI during its transformation are set to take hold over the next several years as it seeks to deliver stronger organic revenue and FCF per share growth.”

* JP Morgan’s Andrew Steinerman to US$117 from US$119 with a “neutral” rating.


Desjardins Securities analyst Benoit Poirier said he’s “very pleased” with TFI International Inc. (TFII-N, TFII-T) after Tuesday’s release of its “impressive” fourth-quarter financial results, believing it demonstrated “once again” that it’s “ideally positioned to unlock value for shareholders.”

“With the integration of UPS Freight now well underway, management is warming up for another large LTL [less-than-truckload] acquisition in late 2022/early 2023, which would unlock further value from the acquired assets in the U.S.,” he said. “This is a compelling proposition at these levels as investors are not paying for this potential upside. TFII remains our preferred transportation stock for 2022.”

For the quarter, TFI reported total revenue of US$2.141-billion, exceeding both Mr. Poirier’s US$2.043-billion estimate and the consensus forecast of US$2.022-billion. Adjusted fully diluted earnings per share of US$1.57 also topped projections (US$1.18 an US$1.25, respectively).

Mr. Poirier also sees TFII’s 2022 guidance as “conservative,” seeing “more upside with share buybacks, tuckin acquisitions and successful UPS Freight integration.

“TFII remains quite bullish for 2022 and potentially for 2023 as well, noting that supply chain disruptions, driver shortages and chip shortages would remain key tailwinds for the sector,” he said. “Management is now targeting adjusted fully diluted EPS of US$6.25–6.50 in 2022 (up from US$5.23 in 2021; consensus was US$5.99 vs our initial forecast of US$5.94). Guidance excludes unannounced M&A and share buybacks.”

“UPS Freight acquisition surprises once again [leading to] further confidence that the business can generate 80-per-cent adjusted OR [operating ratio] by 2024. The division reported an impressive adjusted OR of 89.4 per cent (we expected 93.7 per cent). Recall that management had guided to 94–95 per cent in 4Q, demonstrating the early success of the integration. Management is confident that its extensive integration plan will help drive an adjusted OR of 85–88 per cent for the division by the end of 2022 (annualized run rate). Management is also confident that the division can generate an adjusted OR of 80 per cent within the next 24–36 months.”

After raising his earnings expectations through 2024, Mr. Poirier raised his target for TFI shares to $173 (Canadian) from $161, reiterating a “buy” recommendation. The average target on US$127.22.

Other analysts making target adjustments include:

* National Bank Financial’s Cameron Doerksen to $160 from $153 with an “outperform” rating.

“We continue to see strong earnings growth supported by ongoing margin improvement at the company’s U.S. LTL segment as well as supportive end markets that we believe will persist through 2022 at least,” he said. “Valuation also remains attractive with TFII trading at 13.5 times P/E based on our 2023 forecast versus the weighted average comparable multiple of 14.9 times.”

* RBC’s Walter Spracklin to US$125 from US$124 with an “outperform” rating.

“TFII delivered a strong Q4 that was well above expectations; and later on the call management provided new 2022 guidance that was also solidly above (and ultimately may prove conservative),” he said. “While meaningful deals were deferred 12-18 months, we like management’s strategy to focus on the significant market opportunity that currently exists — particularly around price, growth and continued synergy capture from ongoing integration. We view this strategy as having inherently lower risk, and we view it favorably as a result. TFII remains a top idea.”

* Scotia Capital’s Konark Gupta to $165 from $150 with a “sector outperform” rating.

“TFII was up 8 per cent today on the back of solid Q4 beat and better-than-expected guidance which is not surprising given the stock was down 14 per cent year-to-date heading into the results,” he said. “We continue to like the stock with a Sector Outperform rating for continued solid double-digit EPS growth potential despite cycle risks. We have raised our 2022 estimated EPS to near the top end of ‘conservative’ guidance while also increasing our 2023 EPS and introducing our 2024 for a projected 19-per-cent organic EPS CAGR [compound annual growth rate] through 2024.

* Susquehanna’s Bascome Majors to US$141 from US$132 with a “positive” recommendation.

“TFII’s 4Q delivered more typical upside profits and guidance, with U.S. LTL still supportive of a turnaround driving significant profit growth in 2022 and 2023,” he said. “If fundamental conditions and/or asset prices start to sour, management is well-positioned to play offense with US$700-million-plus of FCF and leverage falling toward 1.0 times EBITDA this year before major buybacks and M&A.”

* Cowen and Co.’s Jason Seidl to US$139 from US$127 with an “outperform” rating.

* JP Morgan’s Brian Ossenbeck to US$134 from US$130 with an “overweight” rating.


National Bank Financial analyst Jaeme Gloyn said ECN Capital Corp.’s (ECN-T) “solid” Investor Day event reaffirmed his favourable view of the Toronto-based company.

“First, we highlight management’s guidance that implies year-over-year EPS growth of 30 per cent in 2023 at the mid-point,” he said. “We believe ECN’s solid execution and track record in recent years suggests the upper bound of 2023 guidance, which implies up to 40-per-cent EPS growth, is achievable. Second, management increased adjusted operating income before tax guidance ranges in 2022 at both Triad (mid-point up 8 per cent) and Kessler Group (mid-point up 4 per cent). Last, and most importantly ... We like the tuck-in acquisition of Source One Financial.”

Mr. Gloyn said the $91-million deal for S1, which provides prime and super-prime RV and marine installment loans, comes at an “attractive” valuation and comes from a familiar growth playbook, proven at Triad and Service Finance, that is “low-hanging fruit.”

“For example, adding new sales reps to target geographic expansion to high-production, and currently underpenetrated states like Florida and California,” he said. “In addition, ECN intends to add floorplan financing (improves dealer penetration), servicing capabilities (leveraging Triad’s infrastructure), and near-prime loan products. Management estimates these growth initiatives could increase income 3-4 times to $30-$40 million over time.”

He raised his target for ECN shares to $8 from $6.50 with an “outperform” rating. The average is $6.44.

Others making adjustments include:

* BMO Nesbitt Burns’ Tom MacKinnon to $7 from $6 with an “outperform” rating.

“We came away from ECN’s Investor Day with increased confidence in the strength of its platform and its ability to meet or beat its increased guidance,” he said.

* Raymond James’ Stephen Boland to $7 from $6 with an “outperform” rating.

* CIBC’s Nik Priebe to $7 from $6.75 with an “outperformer” rating

* TD Securities’ Mario Mendonca to $7.50 from $6 with a “buy” rating.


Though he thinks Cenovus Energy Inc.’s (CVE-T) fourth-quarter results were a “mixed bag,” RBC Dominion Securities analyst Greg Pardy said his bullish thesis is “intact.”

“Its direction of travel in terms of upstream operating momentum, balance sheet deleveraging, and increasing shareholder returns remains unmistakable,” he said.

On Tuesday, TSX-listed shares of the Calgary-based company dropped 6.4 per cent with the premarket earnings release, despite reporting a 2-per-cent increase in upstream production and a net debt reduction of more than $1.4-billion. A non-cash impairment of $1.9-billion in the U.S. manufacturing segment weighed on results.

While he trimmed his earnings expectations through 2023, Mr. Pardy reaffirmed Cenovus as his “favorite Canadian integrated producer” and its place on the firm’s “Global Energy Best Ideas” list.

Keeping an “outperform” rating, he cut his target by $1 to $23. The average is $21.67.

“Cenovus is trading at a discount debt-adjusted cash flow multiple of 3.7 times (vs. our global integrated peer group average of 5.2 times) in 2022, and an elevated free cash flow yield of 19 per cent (vs. our peer group average of 13 per cent),” said Mr. Pardy. “In our view, Cenovus should trade at a modest discount multiple vis-à-vis our Canadian peer group, reflecting its improved upstream-downstream balance and reduced exposure to Canadian heavy oil differentials following the Husky merger, partially offset by its fractionalized downstream portfolio.”


A group of equity analysts reduced their target prices for shares of Northland Power Inc. (NPI-T) following Tuesday’s Investor Day event.

“Overall, NPI’s investor day provided a solid snapshot of its strategy and growth,” said Desjardins Securities’ Bill Cabel. “We reiterate our Top Pick rating, given the significant identified pipeline (6.5 net GW), of which we believe there is high probability today that 75 per cent of the projects will be built out by 2030. The entire identified pipeline would provide 230-per-cent growth vs current installed capacity levels. Much of this growth was known and the Hai Long update was underwhelming.”

Mr. Cabel cut his target to $51 from $52, keeping a “top pick” rating. The average is $45.94.

Others making changes include:

* ATB Capital Markets’ Nate Heywood to $50 from $52 with an “outperform” rating.

“Overall, the investor day focused on the Company’s current growth portfolio (more than14 GW) and the robust set of current opportunities, largely dominated by the offshore pipeline (approximately12 GW),” said Mr. Heywood. “Additionally, the presentation highlighted a sustainable funding strategy which will utilize non-recourse project level debt, partnership equity, NPI equity, green corporate debt and partial asset sell-downs. The asset sell-down strategy is a unique approach from NPI, which should offer more favourable project returns.”

* CIBC’s Mark Jarvi to $42 from $43 with an “outperformer” rating.


Seeing favourable conditions following a better-than-anticipated fourth quarter of 2021, Raymond James analyst Bryan Fast predicts Finning International (FTT-T) is heading “to new heights.”

After the bell on Tuesday, the Vancouver-based Caterpillar dealer reported net revenue for the quarter of $1.774-billion, up 14 per cent year-over-year and above the analyst’s $1.704-billion estimate. Adjusted diluted earnings of 65 cents also topped expectations (53 cents).

“In what we view as a conducive environment for Finning (key commodity price strength, reopening of economies, healthy backlog) we see further potential upside, particularly as the company realizes the benefits from an improving macro backdrop and operational leverage after improvements in the underlying business in recent years. Evidence of the efforts were on display this quarter, in which the company achieved mid-cycle targets ahead of schedule,” said Mr. Fast. “We expect the momentum to continue into 2022, as the company focuses on product support growth initiatives while managing margin pressures, and taking part in the energy transition.”

Raising his full-year 2022 EPS projection to 63 cents from 59 cents, he also increased his target for Finning shares by $1 to $44 with an “outperform” rating. The average on the Street is $43.11.

“On a relative basis, Finning’s stock is now trading at a 9.3-times discount to peer Toromont, versus the historical average at 3.6 times,” he said. “Though we remind investors it is a mistake not to own Toromont’s shares because of an expensive relative valuation, the premium is difficult to ignore, especially as Finning continues to deliver solid results.”


In other analyst actions:

* After a “slight” fourth-quarter earnings beat and dividend raise, National Bank Financial analyst Jaeme Gloyn cut his target for TMX Group Ltd. (X-T) to $139 from $147 with a “sector perform” rating. The average is $146.86, while Scotia Capital’s Phil Hardie trimmed his target to $148 from $150 also with a “sector perform” rating and BMO’s Étienne Ricard moved his target to $150 from $157 with a “market perform” recommendation.

“While we maintain a favourable view of TMX’s long-term growth outlook, strong track record of strategic execution (e.g., diversify business mix, invest in tech/data, grow derivatives and drive cost control) and defensive attributes (e.g. more than 50-per-cent recurring revenue, diversified/countercyclical revenue drivers, strong balance sheet and solid FCF generation), we maintain our Sector Perform rating in light of a lower total return to our target price relative to other companies in our coverage universe,” Mr. Gloyn said.

* While its second-quarter 2022 results topped expectations, delivering a “strong ‘rule of 40′ mix of revenue growth and EBITDA margin,” Desjardins Securities analyst Kevin Krishnaratne trimmed his target for Absolute Software Corp. (ABST-Q, ABST-T) to US$19 from US$21.50, remaining above the US$17.25, to “reflect recent softening in valuations in the SaaS/cybersecurity space.” He kept a “buy” rating. Elsewhere, BMO’s Thanos Moschopoulos cut his target to $14 (Canadian) from $18.50 with a “market perform” rating.

“Following outperformance in 1Q, ABST reported another revenue/EBITDA beat,” said Mr. Krishnaratne. “The highlight was broad-based strength in ARR at both Absolute core and NetMotion. Guidance was increased, but we see room for upside as the year progresses on cross-selling and new product initiatives marrying ABST’s endpoint resilience with NetMotion’s network resilience technology.”

* In advance of the March 8 release of its fourth-quarter results, Desjardins Securities analyst Kyle Stanley hiked his target for BSR Real Estate Investment Trust (HOM.U-T, HOM.UN-T) to US$23 from US$21, exceeding the US$20.56 average, with a “buy” rating, while Scotia’s Himanshu Gupta raised his target to US$22 from US$20.50 with a “sector outperform” rating.

“We are increasing our target ... reflecting new leasing data which significantly outpaced expectations, modest NOI [net operation income] margin expansion and updated NAV [net asset value] work. At a 4.4-per-cent implied cap rate (U.S. comps trade at 4.0 per cent), BSR offers investors a bargain entry price to a vehicle with a (1)sector-leading two-year FFO/unit CAGR [compound annual growth rate] of 26 per cent, and (2) 15-per-cent NAV/unit growth one year out. We do not believe this elevated growth profile is adequately reflected in consensus estimates.”

* Desjardins Securities’ Chris Li bumped up his Alimentation Couche-Tard Inc. (ATD-T) target to $59 from $56 with a “buy” rating. The average is $58.34.

“While the transition from ICE [internal combustion engine] to electric is certainly a risk, we believe the experience in Norway shows that the impact on fossil fuel demand is very gradual,” he said. “This should give ATD time to adjust its business model. We continue to believe the B2B fuel market in the U.S. is an attractive long-term opportunity. Following the recent upsized NCIB announcement, we increased our EPS estimates and our target.”

* RBC Dominion Securities analyst Geoffrey Kwan raised his Intact Financial Corp. (IFC-T) target to $216, exceeding the $200.08 average, from $200 with an “outperform” rating, while TD Securities’ Mario Mendonca hiked his target to $200 from $190 with a “buy” recommendation.

* CIBC World Markets analyst Anita Soni cut his Agnico Eagle Mines Ltd. (AEM-N, AEM-T) target to US$66 from US$97, below the US$75.01 average, with an “outperformer” rating, while Raymond James’ Farooq Hamed cut his target to US$66 from US$69 with an “outperform recommendation.

“We have incorporated the Kirkland Lake assets into our AEM model and updated our share count and cash position following the closing of the AEM-KL merger,” said Mr. Hamed. “Overall, we continue to see the industrial logic of combining asset bases in the Abitibi region and believe that cost, operating and development synergies are accessible. We also see the strategic value of creating a larger senior gold producer with over 70 per cent of its production coming from Canada and a low political risk exposure in other operating countries. In the race for market capitalization relevance amongst the senior gold producers, we believe this merger gives the new AEM the size to be a viable alternative for investors amongst the senior gold producers while also providing relatively lower political risk and operating cost profiles, more organic growth options and little financial leverage.”.

* Canaccord Genuity analyst Robert Young cut his Enthusiast Gaming Holdings Inc. (EGLX-T) target to $7 from $9, keeping a “buy” rating. The average is $9.38.

“Enthusiast Gaming provided preliminary Q4 results [Tuesday] morning, which were broadly ahead of our and consensus estimates,” said Mr. Young. “Q4, which is typically a seasonally strong quarter, is expected to report revenue growth of 34 per cent, with strong CPMs and recent acquisitions roughly offsetting FX headwinds. The early release provides confidence on continued share gains and offsets worry on potential ad spend headwinds. Strong Q4 CPMs and higher-margin revenue lines growing in the mix support continued margin expansion. Enthusiast continues to see strong direct sales momentum, up 167 per cent year-over-year and growing to 17 per cent of revenue. Subscription also saw strong new customer adds, driven by organic initiatives but supported by the addition of U.GG. Recall that Enthusiast is in a beta release of its ProjectGG social platform, which is expected to be a further tailwind to the subscription business. While Enthusiast did not provide preliminary operating margin or EBITDA figures, management indicates that the cash balance was $22.7M exiting December, with an undrawn revolver.

“Given the strong Q4 indication and positive underlying trends, we remain positive on EGLX shares despite the recent sell-off. We remain BUY rated.”

* Canaccord’s Anthony Petrucci raised his PrairieSky Royalty Ltd. (PSK-T) target to $21 from $20, topping the $19.64 average, with a “buy” rating.

* Canaccord’s Yuri Lynk lowered his target for Tantalus Systems Holding Inc. (GRID-T) to $2.25 from $2.50 with a “buy” rating. The average is $3.03.

“We believe Tantalus is well positioned to benefit from increasing demand for both its meter-agnostic modules and its high-margin recurring software and data analytics services (approximately 30 per cent of pro forma sales). The US$1.2 trillion Infrastructure Investment and Jobs Act further supports our positive outlook on smart grid investments,” he said.

* Eight Capital cut its Bragg Gaming Group Inc. (BRAG-T) target to $16 from $22 with a “buy” rating. The average is $18.25.

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