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

While the third-quarter financial and production results from Freehold Royalties Ltd. (FRU-T) exceeded his expectations, iA Capital Markets analyst Matthew Weekes lowered his recommendation for its shares to “buy” from “strong buy” in response to a nearly 60-per-cent total return thus far in 2022.

“While FRU continues to trade at a discount to peers, this has narrowed and further upside based on valuation expansion to peers is likely reduced going forward,” he said.

After the bell on Tuesday, the Calgary-based company reported average production of 14,219 barrels oil equivalent per day, up 23 per cent quarter-over-quarter and exceeding the Street’s estimate of 14,113 boe/d. Funds from operations and earnings per share of 54 cents and 42 cents, respectively, topped Mr. Weekes’s estimates (50 cents and 31 cents).

“FRU’s production and cash flow were both modestly above estimates in Q3/22 and the Company reaffirmed its 2022 production guidance,” the analyst said. “FRU’s U.S. volumes ramped up, driven by both accretive acquisitions and drilling activity on the Company’s lands. Drilling continued at strong levels during the quarter and is expected to drive continued growth in U.S. volumes in Q4 and into 2023. In addition to our constructive views on the sector, we continue to believe that FRU is well positioned through its strong balance sheet and presence on both sides of the border to pursue further accretive M&A.”

Refreshing his valuation to reflect higher peer multiples, Mr. Weekes raised his target for Freehold shares to $20.50 from $19. The average target on the Street is $20.72.

Elsewhere, other analysts making target adjustments include:

* RBC’s Luke Davis to $21 from $19 with an “outperform” rating.

“Q3/22 results were generally in-line with expectations, with strong payor activity favourably shifting the organic growth profile of the NAm portfolio,” said Mr. Davis. “We expect the company will remain focused on M&A nearterm, with FCF generation improving financial positioning. We reiterate our Outperform rating and have increased our price target to $21 per share given strong momentum in Canada and the US, and insulation from industry inflationary pressure.”

* BMO’s Mike Murphy to $18 from $16.50 with a “market perform” rating.

“We see the dividend (currently yielding 6.2 per cent) as highly sustainable in this environment with the potential for increases in the coming quarters,” said Mr. Murphy.

* Canaccord Genuity’s Mike Mueller to $20.50 from $19.50 with a “buy” rating.

* CIBC’s Jamie Kubik to $19 from $18 with a “neutral” rating.

* National Bank’s Travis Wood to $20 from $19 with an “outperform” rating.


Calling it “a good option for investors looking for more offence,” BMO Nesbitt Burns analyst Devin Dodge upgraded Finning International Inc. (FTT-T) to “outperform” from “market perform,” seeing improving visibility into 2023 and “significant momentum in product support growth initiatives.”

“In Canada, activity levels are expected to be strong in 2023, underpinned by elevated commodity prices and public/private infrastructure investments,” he said. “Capex budgets have improved, which is driving new equipment demand and FTT appears well-positioned to gain market share as customers gravitate towards CAT’s autonomous solutions. In South America, construction is expected be softer, but mining activity should be robust and customers are increasingly looking at fleet replacement/rebuilds.”

“At the Investor Day last year, FTT targeted a CAGR [compound annual growth rate] for product support revenue of 5-9 per cent over the intermediate-term underpinned by leveraging its connected asset base, market share gains in construction and an improved rebuild offering. In 2022, FTT is tracking ahead of plan (year-to-date: up 21 per cent). While pricing has been much higher than previously expected, volumes are also tracking above plan. Moreover, management continues to target 5-9 per cent in 2023 but the risk may be to the upside should pricing remain favourable.”

Raising his estimates to “reflect the momentum in FTT’s product support business, as well as the pick-up in equipment ordering,” Mr. Dodge raised his target for Finning shares to $38 from $33. The average is $39.50.

“Demand is robust across key end-markets and FTT’s efforts to drive product support growth are gaining traction. Layering in improved cost discipline and productivity enhancements, we expect earnings and capital returns to be significantly stronger vs. prior cycles. Valuation is undemanding, and we believe there is a strengthening case for the multiple gap with TIH to narrow. In our view, FTT is a compelling option for investors looking to selectively transition away from more defensive stocks,” he concluded.

Elsewhere, others making changes include:

* CIBC’s Jacob Mr. Bout to $40 from $37 with an “outperformer” rating.

* Scotia’s Michael Doumet to $37 from $35 with a “sector outperform” rating.


In a separate research note released Wednesday, Mr. Dodge lowered his Toromont Industries Ltd. (TIH-T) to “market perform” from “outperform,” seeing a “full” valuation and a lack of near-term catalysts.

“In our view, TIH is one of the highest quality industrial names in our coverage, and the demand outlook in its territories continues to be favourable,” he said. “However, we believe TIH’s valuation is looking increasingly stretched vs. FTT and the broader market. For longer-term investors, TIH may still look attractive, but we believe the near-term upside in the shares is limited.

“TIH is trading at a forward P/E multiple of approximately 20.5 times. While the multiple is approximately one turn below its 5-year average, we believe TIH has benefited from an investor preference towards defensive names in recent months. The P/E multiple premium vs. the broader market is currently more than 70 per cent (5-year avg: 45 per cent) while the valuation gap with FTT is at/near all-time highs (10 turns).”

Mr. Dodge now sees limited upside to earnings estimates, despite heavy equipment demand in TIH’s territories “remaining robust underpinned by significant infrastructure development in Ontario and Quebec and healthy commodity prices.”

“Though we believe there is an emerging risk that certain construction markets (e.g., residential, general contractors) could see some softness in 2023, current activity levels are solid, and we suspect a potential weakening may be short-lived,” he said.

“A near-term catalyst is becoming less apparent. While the equipment backlog remains just shy of the all-time high established earlier this year, sluggish supply chain performance and extended lead times have resulted in a more gradual ramp-up in financial performance. The balance sheet is in great shape which provides capital deployment flexibility, but management appears more focused on organic growth opportunities in the near-term and there is limited visibility into potential M&A activity.”

He cut his target for its shares to $112 from $120. The current average on the Street is $117.25.


After a third-quarter earnings beat on “solid” execution, Raymond James analyst Frederic Bastien raised his recommendation for Bird Construction Inc. (BDT-T) to “strong buy” from “outperform.”

“Bird rebounded from a tough 1H22 operating environment to deliver solid 3Q22 results,” he said. “For us, the related implications are twofold. First, the challenges brought on by delays, inflation, supply constraints and labour disputes, while still a factor, are gradually easing. Second, management’s efforts to crack Canada’s nuclear sector and diversify the business across end markets, provinces and project types are clearly paying off. With its record order book heavily weighted toward lower risk contract types, growing recurring revenue streams that now include environmental remediation work, and strong balance sheet, BDT is exiting 2022 with much to look forward to. Since we expect the constructor to successfully navigate the uncertain macro environment and its stock to vastly outperform market indices in 2023, we are upgrading it.”

He maintained an $11 target. The current average on the Street is $9.53.


Citing continued operational issues and a challenging macro outlook, Beacon Securities analyst Ahmad Shaath downgraded Algoma Steel Group Inc. (ASTL-T) to “hold” from “buy” previously.

“We revised our forecasts to reflect further deterioration in volumes (demand and slower ramp in plate mill production), lower prices and margins,” he said. “We remain positive regarding the long-term value from the operational improvements projects, but we believe shares will face headwinds from multiple fronts in the near term including 1) declining prices; 2) uncertain demand environment; 3) heightened operational risk and 4) negative equity market sentiment. Thus, we are lowering our valuation multiple.”

On Tuesday, shares of the Sault Ste. Marie-based company dropped over 6 per cent with the announcement of its second-quarter fiscal 2023 results, despite reporting adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $83-million that exceeded both its pre-released range of $75-$80-million and the Street’s estimate of $77-million.

Investors were concerned about lingering short-term obstacles, given the company’s expected decision to not release third-quarter guidance. Algoma did point to sequential growth in volumes, lower prices, and margin compression.

“Management noted a $130-million hit to its adjusted EBITDA due to the previous operational challenges, 60 per cent of which was absorbed during Q2/FY23, with the balance ($52-million) to be felt in Q3/FY23,” said Mr. Shaath. As a reminder, the operational challenges are related to 1) fire on one if its coal conveyors; 2) issues at the plate mill due to ongoing upgrades (Phase I) and 3) labour issues (COVID outbreak) impacting operations at the DSPC.

“Additionally, we still expect some near-term headwinds on production as the recommissioning of the plate mill remains ongoing (not back to 100 per cent availability yet) following the completion of Phase I of the modernization project. The plate mill is expected to be back to full availability only in Q4/FY23.”

Expecting capex to “creep up” and given further delays to plate mill modernization phase 1 commissioning, Mr. Shaath cut his target for Algoma Steel shares to $10 from $16 and lowered his recommendation based on “limited upside potential.” The average target on the Street is $13.30.

Elsewhere, Stifel’s Ian Gillies cut his target to $10.25 from $10.75 with a “hold” rating.


Desjardins Securities analyst Gary Ho expects a positive reaction from the Street for Ag Growth International Inc.’s (AFN-T) third-quarter earnings beat and guidance raise.

However, he warns “some optimism has already been baked into the share price,” noting it is up 14.5 per cent since his quarterly preview was published on Oct. 24 versus a 3.9-per-cent gain for the TSX.

“After heavy investments in product and regional expansion, AFN is primed to leverage its size and scale in the centre of a global food infrastructure buildout, with exposure to an ag supercycle,” said Mr. Ho. “Our positive investment thesis is predicated on: (1) strong growth across all segments; (2) U.S Farm and International market share growth; (3) margin expansion; and (4) deleveraging.”.

After the bell on Tuesday, the reported adjusted EBITDA for the quarter of $76-million, topping Mr. Ho’s $67-million estimate and the consensus forecast on the Street of $62-million. It also raised its full-year guidance by 6 per cent to $228-million (from $215-million), which the analyst thinks “leaves room for upside.”

“3Q margin of 19.0 per cent was well above our 16.4 per cent and the Street’s 16.0 per cent, driven by operational efficiencies, a higher mix of Farm portable (vs permanent, but starting to normalize), increased Commercial volume and lower steel prices,” said Mr. Ho. “AFN is making solid progress on its mid-term goal of a 16–17-per-cent annual margin, now in the ‘5th or 6th inning’.”

“Backlog was up 4 per cent year-over-year. While growth seems slower, last year’s record backlog was up 99 per cent year-over-year, current backlogs are longer and dealers’ early orders were placed post-3Q.”

Raising his earnings estimates for 2022 and 2023, Mr. Ho increased his target for Ag Growth shares to $55 from $53. The average on the Street is $5.26.

“AFN was our favourite heading into 3Q,” he noted.

Elsewhere, iA Capital Markets’ Matthew Weekes cut his target by $1 to $50 with a “buy” rating.

“AFN delivered strong operational performance in Q3/22, with EBITDA and earnings beating estimates on an adjusted basis, driven by expanded margins on operational efficiencies, a favourable sales mix, and lower steel prices. Revenue was in line with our estimate with strong growth across multiple geographies and platforms. AFN updated its 2022 guidance and is on track to deliver a very strong year with 30-per-cent projected Adj. EBITDA growth mostly driven by organic growth. While we expect demand across AFN’s business to remain strong, we do see growth moderating, which is indicated by a lower year-over-year backlog growth in the quarter. AFN notes significant efficiency improvements achieved in its Commercial segment and expects to realize the benefits of these initiatives going forward. Our 2023E Adj. EBITDA is modestly increased as we raise our margins but temper sales growth assumptions. This is offset by changes to our valuation,” said Mr. Weekes.


Ahead of the Nov. 16 release of their quarterly results, ATB Capital Markets analyst Kenric Tyghe raised his financial forecast for both Loblaw Companies Ltd. (L-T) and Metro Inc. (MRU-T), expecting them to continue to benefit from higher-than-anticipated food inflation.

“Food CPI ticked higher in each month of the quarter, versus starting to moderate as some had hoped, for a September print of 11.4 per cent (and a Q3/22 average of 10.7 per cent),” he said. “While inflation (within a reasonable range) is a good thing for grocers, at these levels (and for this length of time) it starts to become problematic, both practically and politically (or, rather more accurately, becomes politically opportune to target the country’s largest grocers).

“The derivative trade-down impact (with and across channels) of high food inflation on consumer behaviour, while material, only tells half the story in our opinion. The other half of the story is the trade-down from eating out in restaurants to eating at home on the sticker shock of menu price increases in restaurants that dramatically overshadow that in grocery (restaurants have less buying power and fewer levers to pull but also have a lower fixed cost base to cover). We expect that the increased rate and macro pressures, and the drag this creates on consumer confidence, will increasingly translate into heightened caution by consumers (and a rebalancing of spend between out-of-home and in-home dining options following a summer of catching up with getting out).”

For Loblaw, he’s now expecting year-over-year revenue growth of 4.4 per cent to $16.75-billion driven by retail same-store sales gains of 4.3 per cent (versus 3.4 per cent previously. He raised his earnings per share estimate to $1.91 from $1.82 for the quarter with his full-year 2022 and 2023 projections rising to $6.71 and $7.37, respectively, from $6.61 and $7.08.

“We have increased our Q3/22 and 2022 estimates ahead of the print to better reflect (i) higher (and fresh-focused) food inflation than initially anticipated on food CPI of 10.7 per cent in-quarter, (ii) the gross margin tension between food and drug retail, with expected flat to lower food margins more than offset by a positive mix impact in drug retail, and (iii) the benefit of best-in-market loyalty analytics and promotional efficiency,” said Mr. Tyghe. “Our revenue estimate of $16.75-billion (from $16.64-billion prior) remains below consensus on our expectation of tight management of expense increases (on competitor and political impacts). We expect that the margin trade-offs of disciplined growth and cost-cutting measures will translate into a more attractive margin profile than imputed by consensus, supporting our in-line EBITDA and EPS expectations.”

Keeping an “outperform” rating for Loblaw shares, he raised his target to $135 from $130. The average on the Street is $131.70.

For Metro, Mr. Tyghe raised his revenue estimate for its fourth quarter to $4.24-billion from $4.22-billion with his earnings per share projection increasing by a penny to 91 cents.

“We believe, given this backdrop, that food retail same-store sales (SSS) growth will lag that of food inflation, as Metro redoubled its effort to drive its value proposition,” he said. “While Metro’s sales are less discount weighted than one of its key Canadian grocer competitors, we remind investors that not only is the average Quebec consumer’s food expenditure higher than the rest of Canada, but also that Metro benefited in-quarter from year-to-date builds (and conversions) of it discount banners.”

Reiterating a “sector perform” rating for its shares, he increased his target to $76 from $72, exceeding the $74.70 average.

Elsewhere, in his own quarterly preview, Scotia’s George Doumet raised his Metro target by $1 to $77 with a “sector perform” rating. He maintained a $125 target and “sector perform” recommendation for Loblaw.

The upcoming reporting quarter (Q3/F22 for L, Q4/F22 for MRU) marks the first full quarter in which the grocers cycled a normalized volume trend after COVID restrictions were lifted last year (which also coincided with an acceleration in inflation),” he said. “We do not expect a significant shift in food at home trends in the quarter, but are looking for considerable sequential improvement in same-store sales numbers given the lapping of easier comps. We will also be looking for continued momentum in pharmacy comps (especially at the front end). Lastly, we look to a discussion on the latest top line trends at grocery (including the impact of trade-down and conventional/discount manner mix trends) and drug stores (r/x recovery and sustainability of front end trends), and updates on the ongoing inflation and labour pressures.

“We continue to be of the view that we are in the late stages of grocer out-performance (vis-a-vis the TSX/TSX discretionary, when compared to historical valuation parameters vs. CPI expectations, etc.). In this environment, we prefer non-food staples and/or the food processors. We rate both MRU and L Sector-Perform.”


While seeing signs of cost inflation “beginning to slow,” National Bank Financial analyst Ryan Li expects it to weigh heavily on Lassonde Industries Inc.’s (LAS.A-T) third-quarter results.

“Our analysis of commodity prices suggests that inflationary headwinds continued in the quarter, though year-over-year impacts may show sequential improvements,” he said. “Juice concentrate costs continue to be higher year-over-year, though prices are stabilizing for both orange/apple. Interestingly plastic and inbound shipping costs (though domestic transportation costs remain elevated) have improved vs. Q3/21, which could aid results slightly. ... Last quarter, management indicated that it expects H2 profitability to remain under pressure given labour challenges and continued inflationary pressures. Our analysis of management commentary in the food sector suggests that labour conditions are improving, which could aid performance in the coming months/quarters.”

For the quarter, Mr. Li is expected a 12-per-cent year-over-year decline in earnings per shares, “reflecting rising costs (input, labour, freight/transportation), partly offset by price increases and favourable F/X.” He’s projecting EBITDA of $38.2-million, narrowly lower than the Street’s $39.8-million forecast and below last year’s result of $40.5-million.

“We believe that Lassonde is a mature and historically well-managed company, with potential to grow through future acquisitions (over the medium-to-long term) and continued organic vectors (market share gains),” said the analyst. “Beyond near-term cost and productivity pressures, we are looking for progress updates regarding Lassonde’s multi-year strategic plan to drive long-term value, accelerate growth/improve overall margins and profitability. ... In August 2022, Lassonde amended its NCIB to allow for the repurchase of 160,000 (was 80,000) subordinate voting shares through to December 22, 2022; we estimate about 57-per-cent utilization as of the end of Q3.”

Ahead of Friday’s earnings release, Mr. Li cut his target for Lassonde shares to $138 from $141 with an “outperform” rating. The current average is $139.


In other analyst actions:

* CIBC’s Anita Soni increased her target for Agnico Eagle Mines Ltd. (AEM-N, AEM-T) to US$66 from US$65, above the US$61.15 average, with an “outperformer” rating.

* Scotia’s Justin Strong increased his Altius Renewable Royalties Corp. (ARR-T) target to $13.25 from $11 with a “sector outperform” rating, while Raymond James’ David Quezada cut his target to $15 from $16 with a “strong buy” rating. The average is $14.38.

“An early mover in renewable royalties, we believe ARR is delivering strong risk-adjusted returns that are baked into the company’s royalty agreements and has progressed more quickly in terms of capital deployment than we had expected. Further, we believe the opportunity set for the company remains robust and, at a P/NAV of just 1.1 times, ARR sits at a material discount to its royalty/streaming peers which trade at 1.8x P/NAV on average. We have adjusted our target price lower reflecting an increased assumed discount rate in our DCF-derived target,” said Mr. Quezada.

* IA Capital Markets’ Gaurav Mathur trimmed his BTB REIT (BTB.UN-T) target to $4 from $4.50 with a “buy” rating, while RBC’s Tom Callaghan cut his target to $4 from $4.25 with a “sector perform” rating. The average is $3.93.

“:BTB REIT reported a generally in-line, yet solid set of third-quarter results, punctuated by organic growth which continues to clip along at a healthy rate. Looking ahead, while our cautious stance towards office fundamentals remains unchanged, we do believe portfolio high-grading undertaken by the REIT will continue to bear fruit. At a 7.5-per-cent implied cap, and a healthy, and above average, 8.4-per-cent yield, BTB should appeal to patient, income-oriented investors,” Mr. Callaghan said.

* CIBC’s Jacob Bout raised his target for Chemtrade Logistics Income Fund (CHE.UN-T) to $11 from $9.50 with an “outperformer” rating. Others making changes include: Raymond James’ Steve Hansen to $12 from $13 with an “outperform” rating, Desjardins Securities’ Gary Ho to $13 from $11.75 with a “buy” rating and National Bank’s Endri Leno to $12 from $11 with an “outperform” rating. The average is $11.21.

“CHE reported a massive 3Q beat, accompanied by a 15-per-cent guidance raise to $420–430-million. We upped our 2022 EBITDA to $427-million and 2023 EBITDA to $378-million (factoring in some conservatism). Another quarter of delivering on results, leverage reduction and organic investments should all contribute to CHE’s track record over time,” said Mr. Ho.

* CIBC’s Dean Wilkinson lowered his CT REIT (CRT.UN-T) target to $16.50 from $17.50, below the $17.21 average, with a “neutral” rating. Others making changes include: BMO’s Jenny Ma to $17 from $18 with an “outperform” rating and Desjardins Securities’ Kyle Stanley to $17 from $18 with a “hold” rating.

* Mr. Wilkinson also reduced his target for European Residential REIT (ERE.UN-T) target to $4.25 from $4.75 with an “outperformer” rating. Others making changes include: RBC’s Jimmy Shan to $4.50 from $5.25 with an “outperform” rating, National Bank’s Matt Kornack to $3.45 from $3.30 with a “sector perform” rating and iA Capital Markets’ Johann Rodrigues to $3.75 from $4.75 with a “buy” rating. The average is $4.44.

“European Residential REIT reported an in line quarter,” said Mr. Shan. “SP NOI growth of 6.8 per cent was healthy. 2023 revenue/NOI growth is shaping up to be slightly better than 2022, but there is a sizeable move in interest rates eating somewhat into FFO/unit and some uncertainty on the regulatory front. At an implied cap rate of 4.8 per cent, we believe that much of the asset pricing and regulatory risks are priced in. However, we do believe that the stock will trade at an above average discount to NAV.”

* RBC’s Pammi Bir cut his Dream Office REIT (D.UN-T) target to $19.50 from $21, keeping an “outperform” rating. The average is $19.53.

“Post an in-line set of Q3 results, we’ve tempered our outlook on D, mainly on a weaker macro tone. Operationally, we believe the portfolio remains positioned to deliver stronger organic growth in the year ahead as leasing velocity gathers traction. As well, amid elevated levels of uncertainty, Management’s prudent approach to capital allocation seems appropriate in our view,” said Mr. Bir.

* With weaker-than-anticipated third-quarter results, National Bank Financial’s Richard Tse cut his E Automotive Inc. (EINC-T) target to $5 from $5.50 with a “sector perform” rating. Others making changes include: Scotia Capital’s Michael Doumet to $5 from $10 with a “sector perform” rating and ATB Capital Markets’ Martin Toner to $12.50 from $17.50 with an “outperform” rating.. The average is $10.25.

“While we continue to believe the Company has a unique model of driving technology into a mature used car auction market, the degree of headwinds combined with the cash burn has us remaining on the sidelines,” Mr. Tse said.

* BMO’s Tom MacKinnon raised his Element Fleet Management Corp. (EFN-T) target to $21 from $20 with an “outperform” rating, while Raymond James’ Stephen Boland bumped his target to $21 from $20 with an “outperform” rating. The average is $20.78.

“We believe the company continues to be hampered by supply chain issues at the OEM level. From a valuation perspective, there may be concerns that the stock is getting expensive based on historic averages. However, we would argue the historic average has been negatively skewed by a disastrous integration with GE, a prolonged restructuring (Transformation Plan), COVID, and finally supply chain issues over a 6-year period. We believe that as the company sees higher OEM capacity, moves to a lighter capital model, and generates material cash flow it can find a higher valuation range. This was the expectation when the company separated the fleet operations from the other leasing segments. EFN is part of an oligopoly in an industry with massive barriers to entry,” said Mr. Boland.

* Wells Fargo’s Praneeth Satish trimmed his Enbridge Inc. (ENB-T) target to $59 from $63 with an “overweight” rating. The average is $58.40.

* CIBC’s Cosmos Chiu lowered his Endeavour Silver Corp. (EDR-T) target to $7.50 from $8, above the $6.12 average, with a “neutral” rating, whileBMO’s Ryan Thompson raised his target to $4.25 from $4 with a “market perform” rating.

* Scotia’s Orest Wowkodaw raised his Ero Copper Corp. (ERO-T) target to $22 from $18, maintaining a “sector outperform” rating. Others making changes include: Stifel’s Ian Parkinson to $25 from $27 with a “buy” rating and Raymond James’ Farooq Hamed to $19 from $17 with an “outperform” rating. The average is $19.59.

* Scotia’s Benoit Laprade cut his Hardwoods Distribution Inc. (HDI-T) target to $53 from $69 with a “sector outperform” rating. The average is $51.88.

“We believe HDI is well positioned to navigate through potentially turbulent markets in the next few quarters,” said Mr. Laprade.

* RBC’s Geoffrey Kwan cut his Home Capital Group Inc. (HCG-T) target by $1 to $36 with an “outperform” rating, while Raymond James’ Stephen Boland lowered his target to $47 from $48 with an “outperform” recommendation. The average is $40.14.

“Q3/22 results were a bit mixed with EPS largely in line with our forecast and consensus but non-prime residential originations much lower than forecast as housing activity slowed much more than we expected,” said Mr. Kwan. “The housing market continues to weaken, which we think the sector is likely to continue trading on sentiment, but trading at 0.6 times P/BV, HCG’s shares are factoring in a significant housing downturn. We expect EPS growth to remain subdued, but HCG is well-capitalized and we think the shares show substantial valuation upside when the housing market outlook improves.”

* RBC’s Nelson Ng cut his Innergex Renewable Energy Inc. (INE-T) target to $19, below the $20.58 average, from $21 with an “outperform” rating.

“After posting three years (2019-21) of payout ratios exceeding 100 per cent, Innergex is on track to deliver a payout ratio below 100 per cent this year,” said Mr. Ng. “We expect management to focus on delivering strong cash flows from its operating portfolio, commissioning projects under construction and moving advanced developments forward. We believe the shares of Innergex are appropriate for renewables investors who want yield, as we expect the payout ratio to improve in the coming years.”

* Barclays’ J. David Anderson bumped his Pason Systems Inc. (PSI-T) target to $15 from $14 with an “underweight” rating. The average is $20.58.

* National Bank Financial’s Vishal Shreedhar raised his Pet Valu Holdings Ltd. (PET-T) target to $44 from $42, reiterating a “sector perform” rating, while RBC’s Irene Nattel raised her target by $1 to $46 with an “outperform” rating. The average is $44.67.

“While we have a favourable view of Pet Valu’s business model, its outlook and the industry, we believe these positive attributes are adequately reflected in valuation. We continue to see better value elsewhere in our coverage universe. In addition, looking forward, we expect PET’s growth rates to moderate as the backdrop normalizes,” said Mr. Shreedhar.

* National Bank’s Dan Payne raised his Spartan Delta Corp. (SDE-T) target to $22 from $20 with an “outperform” rating. Other changes include: Raymond James’ Jeremy McCrea to $17 from $16 with an “outperform” rating and BMO’s Mike Murphy to $19 from $18 with a “market perform” rating. The average is $20.18.

“The value narrative for the company has always been one of cash flow growth, and the special dividend is an outcome of the strength of execution of that strategy, with the company positioned to maintain that momentum while complementing shareholder returns through emerging return of capital (20-per-cent free cash yield),” Mr. Payne said.

* Credit Suisse’s Andrew Kuske raised his TransAlta Corp. (TA-T) target to $17 from $15 with an “outperform” rating. Other making changes include: Scotia’s Robert Hope to $16 from $15.50 with a “sector outperform” rating, National Bank’s Patrick Kenny to $14 from $13 with a “sector perform” rating and CIBC’s Mark Jarvi to $16.50 from $16 with an “outperformer” rating. The average is $16.14.

“We like the quarter because: 1) it highlights the optionality TransAlta’s assets have in participating in a strong power price environment, 2) the development pipeline was deepened and we could see additional project announcements in the coming months, and 3) part of the incremental cash flow will be returned to shareholders via a 10-per-cent dividend increase and share buybacks. We believe the quarter should help improve sentiment on the name,” said Mr. Hope.

* National Bank Financial’s Adam Shine cut his target for VerticalScope Holdings Inc. (FORA-T) to $15 from $19 with an “outperform” rating, while Raymond James’ Steven Li lowered his target to $16 from $20 with an “outperform” rating. The average is $22.72.

“Although the stock doubled soon after 2Q after falling more than 60 per cent post-1Q, these gains steadily reversed over the past three months. The shares may linger near current levels until signs of a recovery in trends materialize next year,” he said.

* Scotia’s Michael Doumet raised his Wajax Corp. (WJX-T) target to $25, matching the consensus, from $23.50 with a “sector outperform” rating, while BMO’s Devin Dodge cut his target to $23 from $25 with a “market perform” rating.

“EBITDA fell short versus consensus, primarily on lower sales, but given the record backlog, sales growth could more than make up for it in 4Q (three mining shovels are expected to be delivered),” he said. “Regionally, Western Canada and Eastern Canada remained solid. Central Canada is expected to show improving results in 2023. By line of business, product support growth was modestly weaker compared with our estimate, but Industrial Parts and ERS trended strongly. The company remains focused on adding technician capacity.

”While everything did not line up perfectly in the quarter, LTM EPS of $2.66 is pacing well versus 2019 levels, driven by sustainable growth in Industrial Parts and ERS. The growth opportunity from the direct distribution relationship with Hitachi remains promising in the medium-term, particularly as it relates to product support. With net debt to EBITDA (ex. leases) trending toward 1.0 times by the end of 2022 – i.e. sufficient dry power for M&A – and WJX shares trading at 1.0 times P/B, the shares remain inexpensive, in our view.”

* Cowen and Co.’s Jeffrey Osborne reduced his Westport Fuel Systems Inc. (WPRT-Q, WPRT-T) to US$1.50 from US$2.50 with a “market perform” rating. The average is US$3.77.

* CIBC’s Anita Soni cut his Yamana Gold Inc. (AUY-N, YRI-T) target to US$5.30 from US$5.80, below the US$6.13 average, while National Bank’s Mike Parkin raised his target to $7.10 from $6.75 with a “tender” reocmmendattion.

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