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

With Canadian banks having “hit a soft patch,” RBC Dominion Securities analyst Darko Mihelic cut his second-quarter core earnings per share expectations for the sector by an average 5 per cent on Wednesday.

“A lot has changed over the past couple of months and after reflecting these changes in our models, our 2022 and 2023 core EPS estimates for the large Canadian banks under our coverage both slightly decline 1 per cent on average,” he said. “We make several model changes to reflect RBC Economics’ expectations of faster and higher interest rate increases, which was offset by slower assumed loan growth, some provision for credit loss (PCL) adjustments mainly in Q2/22, higher assumed taxes, and lower wealth revenue forecasts.”

With that view, Mr. Mihelic reduced his valuation multiples across the Big 5 by half a point, and, in order to adjust for higher risks, he lowered his valuation multiples slightly. That led to these target changes:

  • Bank of Montreal (BMO-T, “outperform”) to $158 from $164. The average on the Street is $166.20.
  • Bank of Nova Scotia (BNS-T, “outperform”) to $93 from $99. Average: $96.49.
  • Canadian Imperial Bank of Commerce (CM-T, “outperform”) to $157 from $169. Average: $173.89.
  • National Bank of Canada (NA-T, “sector perform”) to $103 from $111. Average: $108.36.
  • Toronto-Dominion Bank (TD-T, “sector perform”) to $106 from $113. Average: $107.90.

“We still see good upside to owning the Canadian banks over the longer-term but a short term catalyst is hard to envision with what will likely be a ‘soft’ Q2 and the inevitable noise that it brings,” he said.


National Bank Financial analyst Vishal Shreedhar is maintaining his “favourable view” of Loblaw Companies Ltd. (L-T) ahead of the May 4 release of its first-quarter financial results, calling it his top pick among TSX-listed consumer staples stocks.

In a research report released Wednesday, he justified his bullish view by pointing to several “key themes,” including: “(1) Benefits from management’s improvement initiatives; (2) EPS growth (low double-digit year-over-year in 2022 as guided by management); (3) A return to more favourable trends in discount and drug store (where Loblaw over-indexes); and (4) Potential structural benefits, including longer-term stronger grocery demand.”

For the quarter, Mr. Shreedhar is projecting earnings per share of $1.30, a penny below the consensus forecast on the Street but up almost 15 per cent year-over-year (from $1.13). He says the growth reflects his expectation for positive same-store growth, estimating 1.5 per cent (versus 0.1 per cent a year ago), improving trends at Shoppers Drug Mart, lower COVID-19 costs, the benefits of ongoing efficiency programs and share repurchases.

“In Q1/22, we anticipate elevated grocery demand amid renewed restrictions in Ontario and Quebec as a result of rising COVID-19 cases (Omicron),” he said. “That said, our view is that investors will look beyond the impact of Omicron as consumer behaviour is expected to continue normalizing post-COVID.

“Our view is that pervasive inflation is accelerating consumer preferences toward discount banners (versus conventional) as consumers seek value amid rising food costs (we estimate that Loblaw generates 60 per cent of grocery sales from discount). This trend was confirmed when Metro reported its Q2/F22 results in April. In addition, we anticipate other consumer behaviour changes, including an increase in private label sales, trade-downs in certain categories, and improving performance at SC (led by Rx and Beauty).”

Maintaining an “outperform” recommendation for Loblaw shares, Mr. Shreedhar raised his target by $1 to $120. The average is $116.90.

“The key themes in this quarter include: (a) rising food inflation, (b) ongoing labour and supply chain challenges, and (c) changing consumer behaviour (a shift towards discount banners/private label and improving performance at SC),” he said. “In general, we believe that the backdrop is manageable, although it is evolving.”


While Canadian National Railway Co. (CNR-T) endured a “tough start” to its fiscal year, Desjaridns Securities analyst Benoit Poirier sees a “recovery on the way.”

On Tuesday after the bell, it report “softer-than-expected” first-quarter results, blaming “challenging operating conditions.” Adjusted fully diluted earnings per share of $1.32 missed both Mr. Poirier’s $1.37 estimate and the consensus forecast on the Street of $1.37. Its adjusted operating ratio, a measure of costs versus sales, came in at 66.6 per cent, also worse than anticipated (63.8 per cent and 64 per cent, respectively).

With the results, CN cut its 2022 guidance, expecting EPS growth of 15-20 per cent, down from a 20-per-cent expectation previously.

“Management reiterated its low-single-digit volume growth outlook for 2022,” said Mr. Poirier. “[New CEO Tracy] Robinson stated that she is encouraged by the operating momentum since mid-March and through April. CN is moving heavier volumes even without normal grain conditions, and velocity and consistency are improving. The current demand environment remains strong, which should translate into solid volume growth for the year if everything goes well for the grain crop.”

Trimming his target for CN shares by $1 to $172, above the $163.25 average on the Street, with a “hold” rating, Mr. Poirier said he prefers to “wait on the sidelines” until Ms. Robinson, who was appointed to the position in late January, reveals a more detailed long-term strategic plan.

“President and CEO Tracy Robinson led off the call with a breakdown on how to drive top-line growth to the bottom line and unlock CN’s full potential,” he said. “She emphasized four points: (1) running a scheduled railroad with a focus on velocity; (2) curating CN’s book of business with customers and using capacity more strategically; (3) operating in a much more integrated way in all aspects of the business; and (4) continuing to invest to improve its technology and network. She also emphasized that CN will pursue this strategy by optimizing both the operating ratio and growth. Management had hinted in the past that the lines of communication between sales and operations could have been more efficient. This new integrated vision should help the company extract the most value from its network and sell into available opportunities. Finally, among the metrics that Ms Robinson will focus on in the coming years are compliance to plan, velocity, growth and margin. We believe this heightened focus on operations while still planning to generate growth is a good combination.”

Other analysts making target changes include:

* CIBC World Markets’ Kevin Chiang lowered to $167 from $169 with a “neutral” rating.

“While CN reported Q1 results below expectations and added some cushion to its 2022 guidance ... the focus on the earnings call was to hear Tracy Robinson lay out her preliminary roadmap to drive improved results. Understandably, having been at the helm of CN for only two months, Ms. Robinson laid out conceptually what she feels are the key pillars to returning the company to best-in-class. This sets up CN with the potential to generate outsized earnings growth over the next 2-3 years as it benefits from a healthy volume pipeline (assuming we do not tip into a recession) and self-help levers. At this juncture, though, we have not built in this potential until we get more colour on the medium- to long-term strategy,” said Mr. Chiang.

* Stephens’ Justin Long to US$136 from US$140 with an “equal-weight” rating.


Citi analyst Tyler Radke sees “more near-term pain ahead” for Shopify Inc. (SHOP-N, SHOP-T).

Expecting a slowdown in gross merchandise volumes and a “difficult” first-quarter 2022 set-up, he cut his financial expectations for the Ottawa-based e-commerce giant and opened a 90-day negative catalyst watch.

“It’s hard to imagine a worse start to 2022 for Shopify, with the stock down 69 per cent year-to-date following an underwhelming 4Q print,” said Mr. Radke. “Despite the underperformance, we still see more challenges ahead as Shopify faces extremely tough compares with a weakening consumer/macro environment. Our fieldwork this quarter highlighted a number of merchant headwinds from inflation/supply chain to higher CACs [customer acquisition costs], which could drive GMV and most key metrics below consensus and likely persist into 2Q. We worry these issues, combined with ramping investments and a seemingly higher M&A appetite, could create near-term downside risk to the stock.”

Mr. Radke said he sees a “tough” start to fiscal 2022, noting his expectations for the first quarter and full year are 2-5 per cent below the Street’s forecast, which he thinks does not “fully appreciating the aforementioned headwinds.”

“While buyside expectations likely remain muted given worsening macro trends and warnings of decelerating growth for 1Q22 (also exacerbated by app/theme pricing changes), we believe it will be difficult for the stock to work in the near-term with downside risk to estimates,” he said.

“We broadly reduce our estimates based on weaker consumer sentiment, higher expenses given elevated CAC, and management’s stated plans to reinvest in the business and bring Fulfillment in-house.”

Maintaining a “neutral” rating for Shopify shares, he cut his target to US$534 from US$882. The average is US$919.01.

“We rate Shopify shares as Neutral/High Risk (2H) because while we appreciate the magnitude of the TAM, an acceleration of secular tailwinds coming into focus, a strong management team, and record of execution, we believe much of this is priced in at the current multiple —which earns a significant premium to the implied multiple of its growth/margin framework and implies a 10-year revenue CAGR that appears potentially too high,” he said.


Citing a “combination of recent stock performance, catalysts on the horizon, ongoing alternative asset manager trends and, among other things, valuation,” Credit Suisse analyst Andrew Kuske sees Brookfield Asset Management Inc. (BAM-N, BAM.A-T) “poised for performance,” prompting him to raise his rating to “outperform” from “neutral.”

“On the year-to-date, BAM generally delivered a ‘middle-of-the-pack’ performance against some U.S. alternative asset managers, but a significant lag versus the Canadian banks (a relevant comp given index weights) with negative 17 per cent and negative 16.6 per cent on the NYSE and TSX lines, respectively,” he said. “With BAM’s continued re-packaging of the property portfolio, with potential alternative asset manager spin and continued favourable funds flow into the Canadian market, we believe a number of conditions exist for BAM’s outperformance.”

“Over the last few years, trends of declining interest rates along with ample liquidity generally helped boost asset valuations and supported robust capital markets for an elevated level of industry monetizations. The combination of rising rates, uneven economic impacts, inflationary pressures and, among other factors, growing concerns associated with recessionary conditions, collectively bode well for BAM’s global franchise.”

Mr. Kuske increased his target for Brookfield’s U.S.-listed shares to US$71.50 from US$68. The average is US$71.79.

“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,” he added.


Heading into first-quarter earnings season in the Canadian real estate sector, National Bank Financial analysts Matt Kornack and Tal Woolley continue to see the highest average total returns in their industrial, seniors/healthcare and multifamily coverage universes, pointing to total returns of 24 per cent, 22 per cent and 21 per cent, respectively.

“Our expectations are stronger for the names that are better positioned to capture inflation through rental uplifts,” they said. “We see average total returns of 14 per cent for Retail coverage and 10 per cent for Office, which still have to resolve questions around growth/occupancy as COVID wears on. Our Special Situations coverage also offers some interesting opportunities in selfstorage, single-family housing and manufactured housing (again, all quasi-residential and quasi-industrial asset classes).”

The analyst see Industrial sector, bringing the highest average total return, as “one of the best inflation hedges across the real estate landscape as rental rates continue to rise with essentially no market vacancy” and see it “particularly pronounced” in the largest urban areas.

“Lease term remains an impediment to a full pass-through of MTM [mark-to-market] opportunities but needless to say, the widening spreads provide years of outsized growth prospects as increasingly annual rent escalators are moving higher,” they said. “Landlords are also capable of pushing down costs and capex items that in less frothy markets the tenant would likely try to skirt. In this context, we held target prices flat despite rising bond yields but acknowledge that multiple expansion from here is going to be challenging (absent a pullback in bond yields, which is entirely possible as the threat of a 2023 recession looms).”

They named Summit Industrial REIT (SMU.UN-T) their top pick in the asset class, keeping an “outperform” rating and $26.50 target, exceeding the $24.94 average on the Street.

“Given a rapid rise in bond yields, the ability to capture inflation over a reasonable period to offset the move in interest rates is paramount,” they said. “Summit offers one of the purist abilities to get at rent growth in light of the substantial mark-to-market potential embedded in its rent rolls with pricing power still growing in light of almost no available supply of industrial space in its core Toronto and Montreal markets.”

The analysts’ other top picks are:

Special Situations: Flagship Communities REIT (MHC.UN-T) with an “outperform” rating and US$24 target. The average is $23.71.

“Manufactured housing communities continue to be an asset class that we view favourably for multiple reasons,” they said. “It has been a counter-cyclical asset class that has posted consistently strong long-term organic NOI [net operating income] growth in the 4-per-cent range. In a tight housing market, we also see demand for cheaper housing alternatives, like manufactured homes, to remain attractive. While asset pricing is rising, MHC still has the potential to deliver double-digit returns on investment capital over time through occupancy and operational improvements in its communities.”

Seniors Housing/Healthcare: Sienna Senior Living Inc. (SIA-T) with an “outperform” rating and $17.50 target. The average is $16.77.

“At the time of publication, our total return expectation for SIA was less than 1 per cent higher than our expectations for CSH,” they said. “Like its peers, SIA has made some strong strategic moves this quarter, acquiring Extendicare’s Esprit retirement platform, along with select other retirement home acquisitions. SIA remains comfortable with its ability to reach 87-89-per-cent sameproperty occupancy in its retirement portfolio, and it should continue to benefit from reduced COVID costs over the course of 2022 in its LTC platform.”

Apartments: Minto Apartment REIT (MI.UN-T) with an “outperform” rating and $24.50 target. The average is $27.30.

“We were torn in the apartment space as to how to play the current interplay between politics, bond yields and supply / demand dynamics in housing ... The choice is essentially between the ability to capture market rents today vs. a more turnover-dependent model (with changes to rent control regimes a persistent risk),” they said. “The combination of weaker trading performance and an expected improvement and tightening of rental conditions in urban markets saw Minto take top spot this quarter in our pecking order.”

Diversified: H&R REIT (HR.UN-T) with an “outperform” rating and $17 target. The average is $15.50.

“H&R remains one of our top total return opportunities as we continue to think the market is mispricing its assets and is overly fixated with the timing of its capital recycling initiatives,” they said. “The properties slated for sale are very stable and subject to longer-term leases. Meanwhile, the REIT trades at an almost 30-per-cent discount to IFRS NAV, a figure that is likely to grow as management sees fit to reverse some overly conservative value assumptions for its apartment and industrial properties, which are in some of the hottest real estate segments out there.”

Office: Allied Properties REIT (AP.UN-T) with an “outperform” rating and $51 target. The average is $51.12.

“While we expect a COVID hangover in the office segment, the problem is that the pandemic just doesn’t seem to want to end,” they said. “This pushes out any certainty on the leasing market likely into the second half of this year but even at that point, we will then have to contend with the spectre of flexible work and what that means for company space needs. In this environment we have consistently called for investors to own quality and continue to do so with Allied in our view being the REIT that best encapsulates this strategy.”

Retail: RioCan REIT (REI.UN-T) with an “outperform” rating and $27.50 target. The average is $26.83.

“REI had a successful Q1, not just operationally, but in the market as well, with its price return year-to-date among the leaders in our coverage universe,” they said. “Its announcement of five-year strategic and financial goals appears to have generated a positive response from investors. REI is looking to deliver 10-12-per-cent total returns, driven by FFO/u [funds from operations per unit] growth of 5-7 per cent, driven by SPNOI [same property net operating income growth of 3 per cent, along with the annual distribution yield.”

The analysts also made a series of target adjustments ahead of earnings seasons with the most “significant” changes coming in their apartment coverage universe.

“While our optimism on the rent growth and fundamentals in this segment remains, the rise in bond yields is more pronounced relative to lower trading cap rates,” they said. “The Canadian apartment segment has historically been more sensitive to moves in interest rates given access to CMHC-insured financing and a market view that the segment provides consistent bond-like earnings with a bit of inflation protection.”

They made these changes:

  • Boardwalk REIT (BEI.UN-T, “outperform”) to $68.50 from $67. Average: $62.68.
  • Canadian Apartment Properties REIT (CAR.UN-T, “outperform”) to $62.25 from $70.50. Average: $67.
  • European Residential REIT (ERE.UN-T, “outperform”) to $5.50 from $5.60. Average: $5.73.
  • InterRent REIT (IIP.UN-T, “outperform”) to $17 from $19. Average: $19.58.
  • Killam Apartment REIT (KMP.UN-T, “outperform”) to $25 from $27. Average: $25.83.
  • Minto Apartment REIT (MI.UN-T, “outperform”) to $24.50 from $26.25. Average: $27.3

Many of changes also came in the retail area. They noted: “We expect operational performance to continue its trend of modest quarter-to-quarter improvement, as the retail operating environment trends back toward normal; however, we do not believe the ‘reopening trade’ is as compelling as it was last year.”

Their changes were:

  • RioCan REIT (REI.UN-T), “outperform”) to $27.50 from $28. Average: $26.83.
  • Choice Properties REIT (CHP.UN-T, “sector perform”) to $16 from $15.50. Average: $16.13.
  • First Capital REIT (FCR.UN-T, “sector perform”) to $18.50 from $20.50. Average: $21.71.
  • CT REIT (CRT.UN-T, “outperform”) to $20 from $19.50. Average: $18.82.

Others changes in their coverage universe include:

  • Nexus Industrial REIT (NXR.UN-T), “outperform”) to $15 from $14.25. Average: $14.86.
  • Slate Office REIT (SOT.UN-T, “sector perform”) to $5 from $5.25. Average: $5.47.
  • True North Commercial REIT (TNT.UN-T, “sector perform”) to $7 from $7.50. Average: $7.50.


Even with its “stellar run” since early 2020, National Bank analyst John Shao thinks Converge Technology Solutions Corp. (CTS-T) “still has plenty of upside.”

In a research report titled Unlocking Value, he initiated coverage of the Toronto-based information technology solution provider with an “outperform” rating.

“Unlike other ITSPs, Converge is one of the few consolidators in a highly segmented market where customer demands are getting increasingly complex,” said Mr. Shao. “That said, while acquisition has been one of the drivers, we’d also see a scaling organic growth potential as the Company leverages its comprehensive platform of products and services to target SMBs who are underserved. With 85 data scientists and 103 security architects (average 15 years of experience each), we believe Converge is well-positioned to transform the ITSP market with its managed and consulting services (App Modernization, Cybersecurity, Cloud and Analytics) to add value to its customers.

“The ITSP market is a segmented market with numerous small players serving SMB clients across North America. As one of the few consolidators in the market, Converge creates value by rebranding the acquired ITSPs to qualify for a higher vendor rebate and restructuring the organizations to eliminate duplicate supporting roles. Additionally, the incremental customer base and technical capabilities acquired enable the Company to cross-sell to drive organic growth.”

Mr. Shao emphasized Converge has shown its ability to execute “an effective M&A strategy to unlock value,” having already completed 30 acquisitions with an average deal size of $26-million.

“In terms of the market depth, we believe there are still numerous candidates in the market,” he added. “For instance, in North America alone, we see a strong M&A pipeline of more than 300 ITSPs, an opportunity that would take years to harvest.

“While M&A has been a major driver for the Company, we believe the Company’s organic growth is equally impressive. The Company disclosed a 9.6-per-cent organic growth in gross revenue in F2021, which is supported by our own estimates discussed in this report. In our view, M&A and organic growth are not mutually exclusive – if anything, we believe M&A has actually been an enabling factor in driving that organic growth. As Converge builds a comprehensive platform of numerous IT offerings, we see a scaling wallet-share potential for the Company to cross-sell those offerings to its SMB clients that have historically been underserved in the IT market.”

Seeing it trading at a discount to peers, he set a $14 target for Converge shares. The current average is $13.88.

“As one of the few consolidators in the ITSP market, Converge has seen significant Gross Profit/EBITDA growth driven by M&As. That said, the scaling performance metrics are not fully reflected in the stock price which is why we believe the valuation discount exists,” Mr. Shao noted.


Desjardins Securities analyst Gary Ho sees a “disconnect” between Goeasy Ltd.’s (GSY-T) fundamentals and share price ahead of its first-quarter earnings report.

“While the shares have been under pressure, we believe GSY continues to deliver robust loan book growth, with steady credit performance,” he said. “Recent buyback activity supports this view.”

For the quarter, he’s projecting adjusted earnings per share of $2.60, below the Street’s view of $2.82.

“We forecast sequential loan book growth of $96.6-million (vs guidance of $80–100-million) to$2.13-billion,” said Mr. Ho. GSY experienced solid growth in auto loans, home equity loans and cross-selling initiatives. We forecast a revenue yield of 39.0 per cent (vs guidance of 38.5–39.5 per cent) and net charge-offs of 9.6 per cent (vs guidance of 9.0–10.0 per cent). Lastly, on ACL, we do not expect material fluctuations in 1Q. We will look for 2Q guidance, particularly on its credit outlook.”

“We will look for comments on GSY’s ability to manoeuvre through a tougher economic environment and on the tools at its disposal such as its loan protection plan.”

Reiterating a “buy” rating and his confidence in its “outlook and ability to weather downturns,” Mr. Ho cut his target to $190 from $200 to reflect sector multiple contraction. The average on the Street is $217.22.

“Our investment thesis is predicated on: (1) the on-strategy [LendCare] acquisition should bolster GSY’s growth profile, including meaningful revenue and cost synergies; (2)stock buyback provides a positive signal to us; (3) GSY has been able to successfully weather the pandemic; and (4) the business has consistently generated a mid-20-per-cent ROE [return on equity],” he said.


In other analyst actions:

* Seeing the P&C insurance space as “well positioned for times of uncertainty,” Scotia Capital analyst Phil Hardie raised his target for Fairfax Financial Holdings Ltd. (FFH-T, “sector outperform”) to $820 from $810, while lowering his Trisura Group Ltd. (TSU-T, “sector outperform”) target to $51 from $53. The averages on the Street are $843.92 and $53.71, respectively.

“Low economic, interest rate and financial market sensitivity are key characteristics of P&C insurers that under current conditions appear to be increasingly coveted by financial services investors. Additionally, a continued favourable pricing environment over the next 12 to 18 months is also likely to add to the attractiveness of these stocks,” he said.

* TD Securities’ Tim James bumped up his Air Canada (AC-T) target to $30 from $29 with a “buy” rating. The average is $29.87.

“Air Canada is trading at an attractive valuation when considering its earnings potential in 2023 and beyond. Based on our current assumptions, we believe that Air Canada’s aircraft deliveries, capacity plans, and pricing power will allow it to navigate short-term inflation headwinds and reward investors who ride out the current volatility,” said Mr. James.

* Canaccord’s John Bereznicki raised his targets for AltaGas Ltd. (ALA-T, “buy”) to $34 from $32 and Pembina Pipeline Corp. (PPL-T, “buy”) to $54 from $52. The averages are $32.52 and $49.43 , respectively.

* JP Morgan’s Jeremy Tonet raised his target for Pembina Pipeline to $51, above the $49.43 average, from $48 with a “neutral” rating.

* Stifel’s Maggie MacDougall resumed coverage of Altus Group Ltd. (AIF-T) with a “buy” rating and $55 target. The average is $68.14.

“We believe Analytics will enjoy strong organic growth in the coming quarters post the acquisition of three strategic tech assets in 2021, and an internal reorganization that has aligned the entire team around a common go-to-market strategy and compensation structure,” she said. “Near term margins will be pressured but should improve as integration and growth progress, with management targeting 300 basis points of Analytics EBITDA margin expansion annually. CRE Consulting is expected to have another strong year, and we believe is poised for transition to tech-enabled service, which should drive efficiencies and a competitive advantage in Property Tax.”

* TD’s Daryl Young cut his target for Colliers International Group Inc. (CIGI-Q, CIGI-T) to US$165 from US$185, below the US$179.21 average with a “buy” rating.

“We are maintaining our BUY recommendation, but we have lowered our target price, reflecting a new lower multiple in light of the risk-off market sentiment for growth equities in a rising interest rate environment,” he said.

* BMO Nesbitt Burns’ Rene Cartier trimmed his Copper Mountain Mining Corp. (CMMC-T) target to $4.50 from $4.75, below the $5.15 average, with an “outperform” rating, while Scotia’s Orest Wowkodaw also cut his target to $4.50 from $4.75 with a “sector outperform” recommendation.

“CMMC released significantly weaker than anticipated Q1/22 results and disclosed downward revisions to previously issued 2022 guidance. However, with the Q1 issues now resolved, operational performance is anticipated to markedly improve during the remainder of the year. Overall, we view the update as negative for the shares.,” said Mr. Wowkodaw.

* In the wake of in-line fourth-quarter 2021 results, Canaccord Genuity’s Aravinda Galappatthige cut his EQ Inc. (EQ-X) target to a Street-low of $1.50 from $2, citing “ongoing headwinds due to supply chain issues as well the steep sell off in the broader ad-tech space.” The average is $5.75.

“Given the low near-term visibility around Paymi and current market conditions, we maintain our SPECULATIVE BUY rating,” he said.

* Following weaker-than-expected quarterly results as operating expenses jumped, National Bank Financial’s Jaeme Gloyn cut his First National Financial Corp. (FN-T) to $36 from $39 with a “sector perform” rating, while RBC Dominion Securities’ Geoffrey Kwan lowered his target target to $41 from $43 also with a “sector perform” rating. The average is $41.67.

“Q1/22 EPS was below our forecast primarily due to higher-than-forecast expenses and to a lesser extent a funding mix that defers some earnings to future periods,” Mr. Kwan. “Originations were slightly below forecast, with residential originations slightly above our forecast and commercial originations below our forecast. ... While the housing market is slowing, we think FN can still generate significant FCF to support continued dividend increases (current dividend yield of 6.2 per cent).”

* TD’s Greg Barnes reduced his First Quantum Minerals Ltd. (FM-T) target to $50 from $52, remaining above the $43.35 average, with a “buy” rating.

“By lowering guidance early in the year, we believe that FM has acted proactively to reflect higher costs and the build-up of COVID-19-related impacts on mine plans. We believe that the revised guidance is achievable and has likely de-risked the rest of the year with respect to the outlook for costs and production,” said Mr. James.

* CIBC’s Hamir Patel increased his Winpak Ltd. (WPK-T) target to $46 from $44 with a “neutral” rating, while Scotia’s Mark Neville raised his target to $54 from $51 with a “sector outperform” rating. The average is $48.50.

“Q1 results came in well ahead of expectations (EBITDA beat by 23 per cent) as selling price adjustments largely caught up with higher input costs,” said Mr. Neville. “We expected margins to recover (from 2H/21 levels), but the recovery was faster and more pronounced than we had forecast – i.e., Q1 gross margin (of 29.5 per cent) was above our prior full year 2023 forecast (of 29.0 per cent). While management cautioned that there could be some N/T compression in margin given the recent increase in resin prices and the lag on pricing adjustments, it doesn’t sound as if the impact will be overly material. It’s also off a higher base than we previously forecast – as mentioned.”

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