Inside the Market’s roundup of some of today’s key analyst actions
Following Tuesday’s release of in-line first-quarter financial results, Credit Suisse analyst Joo Ho Kim said he continues to “favour” the long-term growth outlook for Bank of Montreal (BMO-T), pointing to “continued momentum in its U.S. P&C segment in particular.”
“In that regard, we thought that the guidance on the path forward with the Bank of the West acquisition looked solid, and we look for signs of execution from upcoming quarters,” he added.
BMO reported core cash earnings per share for the quarter of $3.22, matching Mr. Kim’s forecast and 6 cents above the consensus estimate on the Street as stronger-than-anticipated revenue, lower provisions for credit losses and taxes offset higher-than-expected expenses. Pre-tax pre-provision earnings rose 6 per cent from the fourth quarter of 2022 but slipped 5 per cent year-over-year, missing the analyst’s expectation..
“BMO delivered relatively in-line (to us) results this quarter, with a softer underlying performance from NIMs and expenses that led to a miss on our all-bank PTPP earnings forecast,” he said. “On the positive side, both P&C businesses beat our estimates, and credit results were also better than expected (important given the glimpse of ‘normalization’ this quarter).”
With a focus on the results from recently acquired Bank of the West, Mr. Kim made minor adjustments to his forecast, lowering his 2023 core cash EPS estimate by 2 cents to $13.44 and maintaining a 2024 projection of $13.86.
His target for BMO shares slid to $147 from $150 with an “outperform” rating. The average target on the Street is $145.17.
Other analysts making changes include:
* National Bank’s Gabriel Dechaine to $133 from $135 with a “sector perform” rating.
“BMO updated financial expectations of the [BoW] transaction, highlighted by a slight (i.e., to 7 per cent from 8 per cent) reduction to expected 2024 EPS accretion from the transaction,” said Mr. Dechaine. “The drop is primarily a reflection of a 90-day delay of transaction close relative to plan, which pushes out the timeline expense synergy delivery. For instance, IT system conversion is now slated for September, whereas it was previously anticipated for May. While these timing issues can be overlooked, business growth trends cannot. Another source of potential erosion to EPS accretion targets is tied to deposit and loan balances that are 2 per cent and 6 per cent, respectively, below initial expectations. Further declines could lead to even lower accretion expectations.”
* Barclays’ John Aiken to $149 from $146 with an “overweight” rating.
“BMO’s earnings beat was supported by what we consider unsustainably high trading revenues. While the operating segments posted reasonably solid performances, the corporate segment was an incremental drag, causing some concern on the outlook,” said Mr. Aiken.
* CIBC’s Paul Holden to $145 from $150 with a “neutral” rating.
“Our forward estimates are revised lower, mostly on lower NIM. We like BMO for the commercial loan story, which has been enhanced with the Bank of the West (BoW) acquisition. This is a good reason to believe BMO can outgrow peers in the next economic expansion cycle. However, at the current juncture we are more focused on downside risks vs. growth,” said Mr. Holden.
* TD Securities’ Mario Mendonca to $140 from $145 with a “buy” rating.
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National Bank Financial analyst Gabriel Dechaine expects shares of Bank of Nova Scotia (BNS-T) to remain range-bound until investors see the results of a strategic review aimed at improving net interest margins and return on equity.
Scotiabank dropped 5.7 per cent on Wednesday following the premarket release of its first-quarter financial results, including core cash earnings per share of $1.85 that fell well below the Street’s forecast of $2.02. Lower-than-anticipated revenue and higher expenses drove the miss.
“The market clearly had a negative reaction to BNS’ Q1/23 results,” said Mr. Dechaine. “More importantly, we believe it could remain under pressure until investors have a clearer picture of BNS’ strategic direction. Key strategic messages included accelerating deposit growth (and likely moderating loan growth) in order to improve margins, and improved risk-adjusted returns in certain International banking regions (namely Colombia and Central America). In our view, the trade-offs being contemplated involve lower revenues against higher margins and ROE. However, until investors can quantify the net upside of these tradeoffs, the stock will likely be range-bound until these items are clarified at BNS’ Investor Day, which is expected to be hosted by the end of calendar 2023.”
Mr. Dechaine expects expense growth to “moderate” in the near term and also sees the bank “easily” hitting a 12-per-cent Common Equity Tier 1 (CET 1) ratio by the end of the year.
“NIX [non-interest expenses] was 4 per cent above our forecast, with Q1/23′s NIX growth rate of 6 per cent above the 3-per-cent pace set during fiscal 2022,” he said. “Combined with negative 1-per-cent revenue growth, the negative 7-per-cent operating leverage figure makes it unlikely that BNS will achieve a positive outcome this year. However, we do expect to see improvement, especially with management communicating tighter expense management in coming quarters. Historically BNS has been capable in this regard.”
“An 11.5-per-cent CET 1 ratio was slightly above our expectation. The bank is committed to a 12-per-cent CET 1 ratio by year end. A 20-30 basis points boost from Basel III reforms during Q2/23 will obviously help. Additionally, the bank chose to implement a 2-per-cent discount on its DRIP program, which should add another 5-10/ bps per quarter of CET 1 accretion.”
Lowering his projections to reflect lower NIM and higher expenses, Mr. Dechaine cut his target for Scotia shares to $72 from $75, reiterating a “sector perform” rating. The average target is $75.69.
Elsewhere, calling the EPS miss “significant” and seeing “less visibility near term,” Canaccord Genuity analyst Scott Chan downgraded the bank to “hold” from “buy” and cut his target to $74 from $82.
“We made net negative changes to our forecasts with our fiscal 23/24 EPS reducing by 7 per cent/4 per cent, respectively, mainly reflecting lower NII and slightly higher PCLs,” said Mr. Chan. “On NII, we expect to see continued margin pressure near term relative to peers (i.e., impacted by higher wholesale funding mix) while loan growth momentum should act as an offset. Further, we believe there could be large potential strategic changes in certain segments under the new leadership (e.g., in the International segment; see below), the details of which management might unveil during its Investor Day later in the year, thereby creating some near-term uncertainty on the strategic front.”
Others making changes include”
* Credit Suisse’s Joo Ho Kim to $72 from $76 with a “neutral” rating.
“Scotiabank’s Q1 results were weak, as both the bottom line and underlying results came in well below our forecasts,” said Mr. Kim. “Net interest margins were weak at the segment (especially at IB) and all-bank levels, while expenses also surprised to the downside. The bank maintained its guidance for the PCLs ratio this year (mid-30s), and we expect BNS to build towards the 12-per-cent CET1 ratio range by the end of the year. Beyond the quarterly results, while we certainly weren’t expecting to find signs of strategic direction from these results (especially given the recent CEO transition), we nevertheless believe guideposts on the way forward will be a key focus for the bank. Overall, we continue to believe a better upside elsewhere exists in the sector despite the pullback in the shares and the steep discount they trade at, which in our view reflects the uncertainties tied to the outlook.”
* RBC’s Darko Mihelic to $77 from $86 with a “sector perform” rating.
“Q1/23 results were below our expectations as lower results in Corporate (interest rate related) overshadowed better earnings from International Banking,” said Mr. Mihelic. “BNS exceeded our expectations on the performing PCL build. Despite an expected 20-30 bps benefit to capital in Q2/23 from the Basel III reforms, the bank instituted a discounted DRIP to further build capital. We are forced to adopt more conservative earnings estimates as we wait for more information on BNS’s longer-term plans, but we applaud what might be the beginning of a fortification of the balance sheet.”
* Desjardins Securities’ Doug Young to $76 from $78 with a “hold” rating.
“Adjusted pre-tax, pre-provision (PTPP) earnings were 11 per cent below our forecast, with the drag mostly related to the ‘other’ division, or more specifically, the bank’s interest rate positioning (to benefit from lower rates). This unfortunately adds confusion and overshadows what were decent international banking results,” said Mr. Young.
* Barclays’ John Aiken to $78 from $84 with an “equal-weight” rating.
“Higher expenses, continued funding cost increases and increasing losses out of its corporate segment weighed on results against expectations. While Scotia pursues its strategic review, the market’s patience may be tested as operating headwinds are likely to persist,” said Mr. Aiken.
* CIBC’s Paul Holden to $77 from $80 with a “neutral” rating.
“The near-term outlook justifies caution, while visibility over the medium term is challenged as we wait for an updated strategic plan,” said Mr. Holden.
* BMO’s Sohrab Movahedi to $75 from $85 with a “market perform” rating.
* TD Securities’ Mario Mendonca to $69 from $72 with a “hold” rating.
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The 9.8-per-cent drop in share price endured by Baytex Energy Corp. (BTE-T) on Wednesday following the announcement of its $2.5-billion cash-and-stock deal to buy U.S. peer Ranger Oil Corp. (ROCC-Q) has resulted in an enticing opportunity for investors, according to ATB Capital Markets analyst Amir Arif.
It led him to raise his recommendation for the Calgary-based company to “outperform” from “sector perform” previously.
“We view the weakness in the stock price as a buying opportunity in what we believe is an improved Company with better margins, better growth options, and a better FCF profile on an absolute and a per share basis, while the deal being accretive on an EV/EBITDA basis as well,” said Mr. Arif. “We believe the weakness is related to ROCC shareholders, who will own 37 per cent of the proforma share count, hitting the bid and not necessarily wanting to own a larger diversified Canadian producer relative to the U.S. focused single basin play that Ranger Oil was. Additionally, some existing Baytex shareholders could be surprised and disappointed on the acquisition given Baytex’s previous strategic focus on debt reduction as a path to improving FCF returns. While some market participants might wonder if this is a start of a larger acquisition driven growth strategy, we would note that the deal is accretive and not often do we see large acquisitions that both improve asset quality while being accretive also on an EV/EBITDA basis.”
He maintained an $8 target for Baytex shares. The average is $8.02.
Elsewhere, TD Securities’ Menno Hulshof raised his rating to “buy” from “hold” with a $7 target, while Elsewhere, Raymond James’ Jeremy McCrea lowered his recommendation to “market perform” from “outperform” and cut his target to $5.50 from $8.
“Over the last few years, Baytex had seen one of the largest corporate turnarounds in the sector. Leverage had declined, well economics greatly improved, and the company’s multiple began to rise as shareholder friendly initiatives and ‘value added’ growth was taking place,” Mr. McCrea said. “Unfortunately, in our opinion, the Ranger transaction has changed this momentum. From a higher level, we find three key themes that ultimately lead to corporate challenges: 1) high debt; 2) variable or lower quality assets; and 3) high base ‘cashflow’ declines. On the surface, none of these individual factors would be a cause for concern but when combining these three items together (at their current levels), management will likely need to show exceptional execution. ... We believe that there is much more risk to the name going forward – especially as it starts with a multiple re-rate.”
“Ultimately, we would argue Baytex is not a better company after this transaction. That said, we suspect the company felt their inventory in core plays wasn’t sufficient, and thus needed to do an acquisition (which implies the prior multiple may have been too high). Overall, we expect that investors will be asking if the transaction needed to be as large, and if more work could have been done on organic exploration? We believe this is likely why the share price fell as much as it did [Tuesday] (down 9 per cent vs. XEG: down 1 per cent) and why we believe there’s potentially further downside.”
Others making target adjustments include:
* National Bank’s Dan Payne to $8.50 from $7.75 with a “sector perform” rating.
“BTE announced the acquisition of a scalable asset in the Eagle Ford, transforming its complexion through expanded exposure to high-returns in the U.S., and proving accretion and de-leveraging in support of reinstatement of a dividend, while further execution should validate augmented shareholder value; BTE is poised for a 11-per-cent return profile (vs. peers 25 per cent) on leverage of 0.9 times (vs. peers 0.4 times), while trading at a 2023 estimated EV/DACF of 3.2 times (vs. peers 3.0 times).”
* Stifel’s Cody Kwong to $7 from $8 with a “hold” rating.
“This purchase fashions the Company with operated position in the Eagle Ford that meaningfully increases the scale and scope of this core focus region for the company ahead,” said Mr. Kwong. “Not only does this acquisition effectively double BTE’s enterprise value and production, it also comes with a commitment to increase its returns to shareholders via increased buybacks and the introduction of a modest dividend. We maintain our HOLD ranking with a reduced target price of $7.00 per share as our estimates show the transaction to be modestly dilutive (on a per share, debt adjusted basis), while taking on elevated financial risk for assets that have a return profile similar to its pre-existing inventory.”
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Despite MEG Energy Corp. (MEG-T) reporting largely in-line fourth-quarter financial and production results, National Bank Financial analyst Travis Wood lowered his recommendation for its stock to “sector perform” from “outperform” on valuation concerns.
“With a solid operational quarter under its belt and an otherwise uneventful close to 2022, we believe MEG remains uniquely positioned to capitalize on the structurally improving WCS backdrop (prompt WCS diff has tightened by US$10 per barrel year-to-date),” he said. “However, MEG has been a material outperformer relative to the group year-to-date, up 19 per cent vs. XEG 0 per cent. As we consider our forecast for lower sequential volumes through 1H/23 following the top decile year-to-date price appreciation, we believe the current valuation of MEG represents fair value. MEG currently trades at a premium valuation of 4.6 times 2023 estimated EV/DACF [enterprise value to debt-adjusted cash flow] compared to its peers at 3.9 times.
“We are downgrading MEG to Sector Perform (from Outperform) on valuation, and we consider our unchanged $26.00 target price as fair value given our current commodity price assumptions.”
After the bell on Wednesday, the Calgary-based oil sands producer reported cash flow per share of $1.34, down 17 per cent from the third quarter but up 52 per cent year-over-year and just 2 cents below the forecast of Mr. Wood and the Street. Record fourth-quarter bitumen production of 111,805 barrels per day also fell in line with projections (112,000 barrels and 110,000 barrels, respectively).
“Volumes were up 9 per cent sequentially (up 10 per cent year-over-year) as a result of strong performance post turnaround and the deployment of enhanced completion designs,” the analyst said. “Given the relatively low apportionment on the Enbridge Mainline (5 per cent in 2022), MEG sold about 66 per cent of its volumes to the USGC in the year, in line with our 65-per-cent forecast ... Cash flow of $401-million helped fund $106-million in capital spending, implying a payout ratio of 26 per cent and FCF of $295-million.”
After making “very minor” adjustments to his long-term assumptions, Mr. Wood maintained a $26 target for MEG shares. The current average on the Street is $24.08.
Elsewhere, Desjardins Securities’ Chris MacCulloch bumped his target to $25 from $24 with a “hold” rating.
“Strong operational performance and an improved macro outlook have propelled the stock to a 14-per-cent year-to-date gain, the second-best performance within the Desjardins E&P coverage universe,” he said. “Although we highlight the considerable torque to narrowing WCS differentials and rising oil prices, we maintain our Hold rating given the limited potential return vs our revised target.”
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While Methanex Corp. (MEOH-Q, MX-T) recently posted a higher monthly reference price for North America, RBC Dominion Securities analyst Nelson Ng said he will “remain on the sidelines until there is better clarity on the outlook for the global economy,” pointing to “recessionary uncertainties” and the “high sensitivity” of the company’s cash flows.
“Methanex recently released its North American, Asian Pacific, and China non-discounted methanol reference prices for March at $595 per ton (up from $575/MT), $430/MT (unchanged), and $395/MT (unchanged), respectively,” he said “Methanex European non-discounted reference price is set on a quarterly basis, and is currently set at €478/MT for Q1/23.
“We note that Methanex’s North American reference price continues to be at a significant premium (approximately 63 per cent) to the North American spot price (illiquid market), while the China reference price is at a 33-per-cent premium to the spot price. As a result, we believe there is a potential that the company’s realized price will have a larger-than-normal discount to the posted prices (management guided towards a 20-per-cent discount). The discount is typically larger during periods where methanol prices decline. On a regional basis, Methanex sells about 25-30 per cent of its methanol into the North American market, 20 per cent into the European market, 30-35 per cent into China’s market and about 20 per cent into other Asia Pacific markets (namely South Korea and Japan).”
To reflect its reference prices for March and the CMA’s updated methanol price forecast, Mr. Ng raised his 2023 and 2024 adjusted EBIDA projections to US$676-million and US$704-million, respectively, from US$629-million and US$678-million.
“We note that Methanex’s financial results are significantly impacted by the price of methanol,” he warned. “For every $50/MT increase/decrease in methanol prices, we estimate that Adjusted EBITDA could increase/decrease by $250-million (excluding Geismar 3 contribution).”
With those increases, Mr. Ng increased his target for Methanex shares to US$55 from US$50 with a “sector perform” rating. The average is US$54.
“We see rising recessionary uncertainties, which could negatively impact near-term and longer-term methanol prices,” he said. “However, we believe the shares are suitable for investors that have a more constructive view on the economy (i.e., soft landing/minor recession) and expect natural gas prices to remain elevated, which should support methanol prices.
“Methanex is the industry leader. Methanex has facilities on four continents, which allows it to optimize production and sales to serve its global customers. The company’s facilities generally sit at the lower half of the cost curve, which also provides a competitive advantage. For 2023, 85 per cent of North American gas needs are hedged, and 100 per cent of the gas needs in the rest of the world are contracted.”
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RBC Dominion Securities analyst Greg Pardy added Suncor Energy Inc. (SU-T) to the firm’s “Global Energy Best Ideas” list on Wednesday.
The list consists of 24 companies that highlight the firm’s “highest conviction names across the global energy sector at the time of their addition into the list.”
“We believe that Suncor has thread the needle with its hiring of Rich Kruger as its new President & CEO while retaining interim-CEO Kris Smith as its new CFO,” Mr. Pardy said. “We anticipate that Suncor will demonstrate improving operational performance over the coming months which should support relative market outperformance.”
Mr. Pardy has an “outperform” rating and $55 target for Suncor, which was the only addition of the month, replacing HF Sinclair Corp. (DINO-N). The average is $53.89.
Other TSX-listed stocks remaining on the list are:
- Arc Resources Ltd. (ARX-T) with an “outperform” rating and $26 target. Average: $23.53.
- Canadian Natural Resources Ltd. (CNQ-T) with an “outperform” rating and $89 target. Average: $91.90.
- Enerplus Corp. (ERF-T) with an “outperform” rating and US$21 target. Average: $24.27 (Canadian).
- Pembina Pipeline Corp. (PPL-T) with an “outperform” rating and $58 target. Average: $52.19.
- Superior Plus Corp. (SPB-T) with an “outperform” rating and $15 target. Average: $12.82.
- Tamarack Valley Energy Ltd. (TVE-T) with an “outperform” rating and $7 target. Average: $6.96.
- Topaz Energy Corp. (TPZ-T) with an “outperform” rating and $28 target. Average: $28.63.
- Tourmaline Oil Corp. (TOU-T) with an “outperform” rating and $89 target. Average: $92.53.
“In February, the RBC Global Energy Best Ideas List was down 2.6 per cent compared to the iShares S&P Global Energy Sector ETF (IXC) down 4.9 per cent and a hybrid benchmark (75-per-cent IXC, 25-per-cent JXI – iShares Global Utilities ETF) down 4.9 per cent,” the firm said. “Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 133.5 per cent compared to the S&P Global Energy Sector ETF up 24.6 per cent.”
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In other analyst actions:
* Canaccord Genuity’s Michael Fairbairn upgraded Argonaut Gold Inc. (AR-T) to “speculative buy” from “hold” with a 65-cent target, up from 60 cents. The average is 94 cents.
“Q4 was a tough quarter for Argonaut,” he said. “It saw the company increase its expected cost to complete (‘EAC’) for Magino from $920-million to now $980-million, record an US$136-million non-cash impairment charge, miss on its full-year cost guidance, and release somewhat soft 2023 production & cost guidance. Having said this, the stock was down 21 per cent on the day, which we view as an overreaction, and it now trades at just 0.32 times NAV, far below peers at 0.52 times. In addition, we see multiple reasons to be constructive on Argonaut as 2023 progresses. The Magino build is nearing completion with first gold expected in May, the funding gap appears to have been filled, Richard Young has been onboarded as the new CEO bringing extensive C-suite experience, and he appears to be focused on profits over production across Argonaut’s portfolio. While risk remains as Magino ramps up (driving our SPECULATIVE BUY rating), we believe that the risk/reward ratio skews towards the latter and that AR is poised to re-rate from its currently depressed levels.”
* In a research note titled Multiple Opportunities for Lift, Raymond James’ Michael Glen initiated coverage of Savaria Corp. (SIS-T) with an “outperform” ratig and $21 target. The average is $21.07.
* BMO’s Michael Markidis initiated coverage of Dream Industrial REIT (DIR.UN-T) with an “outperform” rating and $17 target, above the $16.89 average.
“Our positive stance is based on the REIT’s majority weighting to strong industrial markets in Canada, significant runway for above-average organic growth, and access to private capital,” he said. “Debt repricing risk is elevated over the medium term and there is a potential offbalance sheet liability related to the external asset management structure. These concerns are more than adequately priced into the stock, in our view.”
* Calling it “an undervalued opportunity with significant re-rating potential,” Eight Capital’s Felix Shafigullin initiated coverage of AbraSilver Resource Corp. (ABRA-X) with a “buy” rating and 65-cent target. The average is 55 cents.
“We view AbraSilveras an attractive opportunity to gain exposure to a prospective high-grade silver-gold asset in a jurisdiction supportive of mining,” he said.
* National Bank’s Matt Kornack increased his BTB REIT (BTB.UN-T) target to $4.15 from $4 with a “sector perform” rating, while Canaccord Genuity’s Mark Rothschild bumped his target to $4.25 from $4 with a “buy” rating. The average is $4.18.
* Raymond James’ Daryl Swetlishoff reduced his Canfor Corp. (CFP-T) target to $34 from $35.50 with a “strong buy” rating. The average is $32.17.
* Mr. Swetlishoff also cut his target for Canfor Pulp Products Inc. (CFX-T) to $4.75 from $5 with an “outperform” rating. while Scotia’s Benoit Laprade reduced his target to $6 from $6.50 with a “sector perform” rating. The average is $5.50.
* CIBC’s John Zamparo cut his target for Cronos Group Inc. (CRON-Q, CRON-T) to US$3, below the US$3.76 average, from US$3.50 with an “outperformer” rating. Other changes include: Raymond James’ Rahul Sarugaser to US$3 from US$7 with an “outperform” rating and Canaccord Genuity’s Matt Bottomley to $4.25 from $4.75 with a “buy” rating.
* Mr. Zamparo bumped his Park Lawn Corp. (PLC-T) target to $28, below the $34.63 average, from $27 with a “neutral” rating.
* RBC’s Geoffrey Kwan raised his target for First National Financial Corp. (FN-T) to $40 from $39 with a “sector perform” rating. The average is $36.50.
“We have a slightly positive view regarding Q4/22 results as EPS was ahead of our forecast and consensus, mortgages under administration (MUA) was in line with our forecast, while originations were only slightly below our forecast,” he said. “We prefer FN as a defensive name amongst our housing/mortgage coverage given that its earnings are less sensitive vs. peers in a weaker origination market as FN’s earnings are primarily driven by mortgage servicing revenues from FN’s $130-billion MUA book + net interest income from FN’s $37-billion-plus book of securitized insured mortgages, which combined provide strong support for the dividend.”
* Canaccord Genuity’s Matt Bottomley lowered his Green Thumb Industries Inc. (GTII-CN) target to $26 from $27 with a “buy” rating, while Eight Capital’s Ty Collin cut his target to $25 from $36 with a “buy” rating. The average is $28.57.
“GTII has been talking about cash flow since before it was cool, and Q4 results lived up to the talk,” said Mr. Collin. “Impressive operating cash flow demonstrates a clear pathway to generating positive FCF in 2023, and shows once again why we view GTII as a best-in-class operator and our top pick. We see GTII as one of few MSOs that can self-fund and stand on its own two feet, and believe that showing sustained cash generation is a key step to driving an eventual re-rate and separation from the crowd.”
* TD Securities’ Greg Barnes raised his Lundin Mining Corp. (LUN-T) target to $9.50 from $8.50 with a “hold” rating. The average is $9.67.
* CIBC’s Bryce Adams lowered his target for Osisko Mining Inc. (OSK-T) to $5 from $5.25, keeping an “outperformer” recommendation. The average is $5.19.
* Following in-line fourth-quarter results, RBC’s Greg Pardy trimmed his Ovintiv Inc. (OVV-N, OVV-T) target to US$57 from US$58 with a “sector perform” rating, while National Bank’s Travis Wood reduced his target to US$66 from US$68 with an “outperform” rating. The average is US$64.71.
“With its formula-driven shareholder returns model in motion, Ovintiv’s buybacks should glide higher in the quarters to come, but we would also like to see its balance sheet deleverage faster,” said Mr. Pardy.
“At current levels, Ovintiv admittedly appears inexpensive, trading at a 2023E debt-adjusted cash flow multiple of 2.1 times (vs. our North American Senior E&P peer group avg. of 3.8 times) and a 32-per-cent free cash flow yield (vs. our peer group avg. of 18 per cent). We believe the company should trade at a discount vis-à-vis our peer group given its solid execution capability, strengthening balance sheet and rising shareholder returns, partly offset by its unconventional strategic moves at times.”
* National Bank’s Don DeMarco trimmed his Pan American Silver Corp. (PAAS-T) target to $32 from $32.50 with an “outperform” rating. The average is $29.73.
* RBC’s Irene Nattel moved her Pet Valu Holdings Ltd. (PET-T) target to $50 from $46 with an “outperform” rating. The average is $46.33.
“Forecasting EBITDA up 7 per cent to $57.0-million and EPS up 2 per cent to $0.42 when Pet Valu reports Q4 on March 7,” she said. “Forecasts in-line with consensus $57.3-million/$0.43 respectively, with the majority of estimates clustered in a tight range reflecting updated 2022 guidance issued in conjunction with Q3 results in November. Outlook solid although momentum moderating on tough comps, normalizing adoption rates, inflation and rising rates.”
* National Bank’s Michael Parkin lowered SSR Mining Inc. (SSRM-T) target to $22.50 from $23 with a “sector perform” rating. The average is $21.30.
* IA Capital Markets’ Naji Baydoun bumped his Supremex Inc. (SXP-T) target to $10 from $9.50 with a “buy” rating. The average is $9.58.
“On the envelope side, SXP has stabilized its business and optimized its asset base to serve U.S. clients; coupled with pricing power in Canada, the Company has improved its envelope profitability and is gaining market share to help offset volume declines,” he said. “In packaging, the focus remains on utilizing excess capacity to pursue growth opportunities in the key folding carton and ecommerce verticals. On the M&A front, the recently completed acquisitions have the potential to generate significant incremental revenue and EBITDA for SXP once fully integrated (we estimate 5-10-per-cent upside to run-rate expectations). Overall, we view the recent pullback in the stock as an attractive buying opportunity for investors given (1) the significant upside potential (more than 100 per cent by our calculations), and (2) limited downside risks (5 per cent by our estimate) that we see in the shares.”
* RBC’s Luke Davis cut his Topaz Energy Corp. (TPZ-T) target to $28, below the $28.63 average, from $30 with an “outperform” rating.
* CIBC’s Mohamed Sidibe reduced his target for Victoria Gold Corp. (VGCX-T) to $10 from $14 with a “neutral” rating. The average is $16.25.
David Leeder