Inside the Market’s roundup of some of today’s key analyst actions
Seeing “too much value to ignore,” Raymond James analyst Stephen Boland raised his rating for CI Financial Corp. (CIX-T) to “outperform” from “market perform” on Monday.
“The company achieved a material milestone recently by gaining the ability for the U.S. subsidiary to issue term debt directly to the market,” he said in a research note released before the bell. “The U.S. subsidiary also obtained a third-party credit rating for the purpose of issuing debt. This should allow those operations to resume acquisitions and position itself for an IPO.
“With the sell off in the stock after reporting on May 8 and evaluating the U.S. Wealth management results, we believe there is a value emergence occurring in the stock. Our concern had been the possible dilution for the common shareholder in the event of a U.S. IPO at possibly unattainable multiples. This concern has subsided in the past 2 quarters as the U.S. Wealth management EBITDA has grown materially in the past year (up 26 per cent), thereby reducing the dilution risk.”
Mr. Boland bumped his target for CI Financial shares to $21 from $20. The average target on the Street is $19.63, according to LSEG data.
Elsewhere, other analysts making target adjustments include:
* RBC’s Geoffrey Kwan to $18 from $20 with a “sector perform” rating.
“Q1/24 Adjusted EPS was slightly ahead of our forecast, but in line with consensus. Results were ahead of our forecast in Asset Management and U.S. Wealth, but below our forecast in Canada Wealth. CIX noted it is making progress integrating and organically growing its U.S. Wealth business, including organizing the company to facilitate a likely eventual IPO of the U.S. Wealth business. As the U.S. Wealth segment comprises just under 30 per cent of Adjusted EBITDA, the Asset Management business remains the key driver of earnings. While positive equity markets in Q1/24 was a positive development for CIX and peers, industry conditions remain challenging with substantial net redemptions. We view CIX’s shares as fairly valued,” said Mr. Kwan.
* BMO’s Tom MacKinnon to $17 from $19 with an “outperform” rating.
* CIBC’s Nik Priebe to $17 from $17.50 with a “neutral” rating.
* KBW’s Rob Lee to $21 from $22 with a “sector perform” rating.
* Jefferies’ John Aiken to $19 from $20 with a “buy” rating.
=====
In a separate note, Mr. Boland upgraded Chesswood Group Ltd. (CHW-T) to “market perform” from “underperform” with the expectation results will “slowly improve throughout the year” folllowing its first-quarter earnings release.
“This was another very challenging quarter due to elevated provisions and charge offs,” he said. “CHW reported 4Q23 EPS of a loss of $0.34 vs our estimate of a loss of $0.63 and a $1.80 loss last quarter. The lender continues to be plagued by several issues. The transportation segment remains challenged across the industry which is leading to elevated charge-offs. Also, the rapid rise in interest rates has compressed the margin the company can earn on older leases and loans.
“We spoke to management after the results were released and there is generally a positive outlook for 2024. Management believes profitability can return by the end of 2024 as the loan book matures and new loans are issued at higher rates thereby restoring the margin. In the meantime, the focus is on capital preservation by slowing originations and reducing the debt load which is a sound strategy, in our opinion.”
As the Toronto-based financial services company’s strategic review continues with its board reviewing options to maximize shareholder value, Mr. Boland warned it will be “difficult to attract a price near book value at this point” if its goal is for the company to be sold.
“Management has put in the foundations for a very attractive business with new revenue verticals (asset management, vehicle financing) that are still in the early stages of development,” he added. “We believe a more sound strategy is to let the business stabilize, return to profitability and trade at a more favourable multiple before a sale is contemplated. We are increasing our target and our rating is moving back up to Market Perform.”
His target rose to $7 from $5. The average is $7.63.
=====
After a “light” third quarter, Canaccord Genuity analyst Aravinda Galappatthige sees “rising” balance sheet risks for Wildbrain Ltd. (WILD-T), leading him to lower his recommendation for its shares to “hold” from “speculative buy” on Monday.
“We note that the convertible debentures ($140-million due September 2024) are falling due within five months,” he said. “In addition, the interest rate swap (US$165-million) that was set up in Q4/21 when rates were very low (and fixed the interest rate at 5.24 per cent) also matures at the end of F2024 (June 2024). Consequently, with the leverage ratio high at 4.97 times, we believe there is a considerable risk. Much depends on the success and timing of the non-core asset sale process.”
“With no meaningful update on non-core asset sales, and little disclosure around plans to redeem the $140-million convertible debenture, we see significant balance sheet risk at this point. We have cut our multiple for the content business from 9 times to 8 times EV/EBITDA 2025 to reflect the light Q3 result and still low visibility on the production and distribution front. We continue to value the TV segment at 4.5 times.”
On Thursday after the bell, the Halifax-based children’s entertainment company reported revenue of $100.1-milion, down 30 per cent year-over-year and well below the consensus estimate of $130.6-million “led by a near halving in the Content Creation and Audience Engagement segment.” Adjusted EBITDA slid 40.4 percent year-over-year to $19.6-million, also below the Street’s expectation ($26.1-million).
“Despite soft trends in production in recent quarters, management comments suggest an uptick in demand,” noted Mr. Galappatthige. “In fact, the company indicated an increase in staffing levels of late to accommodate new greenlights. It was also confirmed that 60 per cent of the F2025 slate is already greenlit. There is increased optimism around recent launches by Apple TV+ including a new Peanuts season as well as the August premiere of the Yo Gabba brand.”
The analyst continues to see global licensing as “key” to the company’s fortunes moving forward.
“The decline in licensing revenues was due to WildBrain CPLG, which faced headwinds in Europe,” he said. “Encouragingly, Peanuts is seeing consistent growth across the territories, including China and Asia Pacific, while remaining strong in North America. For Q4/24, we forecast a return to modest growth. Management commented that in addition to Peanuts, it sees good prospects around Strawberry Shortcake, which has secured new partnerships including for a new toy line that would be rolled out to 3,900 store locations (including 1,700 Walmart stores). Overtime, we expect Teletubbies (which is gaining traction in China) and Yo Gabba could be drivers of licensing growth, helping diversify beyond Peanuts.”
“The company continues to guide towards an 8–12-per-cent revenue decline and a 5–10-per-cent adj. EBITDA decline in F2024. Management does see the prospect of the production pipeline recovering in F2025 and F2026. Post-Q3/24, we have lowered our revenue expectation to negative 13 per cent and adj. EBITDA to negative 10 per cent for the year. We are also keenly tracking FCF. Our current forecast is for $25.9-million in F2024.”
With those reductions, Mr. Galappatthige cut his target for Wildbrain shares to $1 from $2, falling below the $1.87 average on the Street.
Elsewhere, National Bank Financial’s Adam Shine reduced his target to $1.20 from $1.40 with a “sector perform” rating.
====
While Raymond James analyst Steve Hansen continues to “admire” the long-term growth prospects for Decisive Dividend Corp. (DE-X), he downgraded its shares to “market perform” from “outperform” on Monday in response to weaker-than-expected first-quarter financial results and “accompanying commentary pointing to a slowdown in several key end-markets, including the hearth industry.”
The Kelowna, B.C.-based acquisition-oriented company, which focuses largely on manufacturing, reported quarterly adjusted EBITDA of $4-million, down 19 per cent year-over-year and well below both Mr. Hansen’s $6.9-million estimate and the Street’s expectation of $6.2-million due largely to lower-than-anticipated sales. EBITDA for its Finished Product segment dropped 37 per cent to $12-million, well below the analyst’s $4.8-million projection, while its Component Manufacturing business saw a rise of 14 per cent to $3-million, but that was also lower than Mr. Hansen’s forecast ($3.3-million).
“While Decisive continues to evaluate a strong pipeline of accretive M&A opportunities, management outlined a series of factors clouding its near-term outlook, including: 1) softening economic activity; 2) elevated interest rates; & 3) persistent inflation,” he said. “To this end, management indicated that many of its subsidiaries are experiencing a sharp slowdown in order activity, including: 1) Blaze King/ACR (warm weather, lower nat gas costs, backlog down more than 90 per cent); 2) Unicast (customer project/capex deferrals); 3) Capital I (customer capex deferrals); & 4) IHT (acute pork industry headwinds). Thankfully, robust order levels at Hawk, Northside, and MI provide a partial offset. Still, taken together, we feel it prudent to step to the sideline until better visibility emerges.”
Cutting his earnings per share estimates for 2024 and 2025 to 22 cents and 40 cents, respectively, from 74 cents and 91 cents, Mr. Hansen lowered his target for Decisive Dividend shares to $8.25 from $11.50. The average is $9.58.
Elsewhere, Canaccord Genuity’s Yuri Lynk downgraded Decisive Dividend to “hold” from “buy” with an $8 target, falling from $12.
“The company saw surprising revenue declines across several of its subsidiaries due t economic headwinds that began blowing in Q4/2023,” said Mr. Lynk. “Furthermore, some subsidiaries are experiencing operational inefficiencies due to the time it takes the freshly installed management to implement its growth strategy. The result was a $929k y/y decline in Q1/2024 EBITDA despite Decisive acquiring $10-million of annualized EBITDA after Q1/2023. Based on our assessment, this is not a one-quarter blip, and we believe 2024 EBITDA may be well below pro forma trailing twelve months levels with negative implications for the pace of dividend and acquisition growth.
“Decisive trades at 10.2 times EV/EBITDA (2024) versus peers at 9.9 times. We set our target by applying an 8.0 times multiple to our 2025 EBITDA estimate less our Q4/2024 net debt estimate, with our lower EBITDA estimate driving our updated price target. We recommend investors wait for a potential share price pullback that would drive a more attractive valuation or for clarity on a recovery in earnings.”
=====
National Bank Financial analyst John Shao is “moving to the sideline” on Pivotree Inc. (PVT-X), downgrading its shares to “sector perform” from “outperform” previously “based on a soft 2024 outlook as the tones of major retailers and consumer brands have become increasingly cautious.”
“That outlook essentially restricts the growth of IT budgets this year and thus could potentially extend the timeline of Pivotree’s growth reacceleration,” he added. “The ongoing transition away from the legacy managed services also means more heavy lifting needs to be done to overcome those growth headwinds.”
Before the bell on Friday, Pivotree, a Toronto-based cloud and data management services provider, reported first-quarter revenue of $20.9-million, missing the $22.1-million estimate from both Mr. Shao and the Street. Adjusted EBITDA of $0.2-million was higher than the analyst’s projection of a loss of $0.1-million but below the consensus forecast of $0.3-million.
Pointing to its “commitment to capital discipline,” Mr. Shao said: “On a year-over-year basis, the gross profit margin was maintained at 46 per cent while the total OpEx was down. As such, despite the declines on the top line, Q1 adj. EBITDA remained positive at $0.2-million and above our previously forecasted loss of $0.1-million. Looking forward, the Company remains committed to staying on a positive EBITDA. Operating cash flow was negative at $1.3-million due to unfavorable working capital movement, and we expect a reversal throughout the rest of the year.”
Despite the mixed results and his rating change, Mr. Shao emphasized he still sees Pivotree “well positioned to harvest long-term opportunities given its deep expertise in eCommerce, a base of enterprise customers, and a growing partnership ecosystem.”
“It’s also our view that Pivotree’s operating leverage potential should position the Company towards a quick rebound if the market recovers while its laser focus on capital discipline reduces the balance sheet risk,” he said.
“Those views are essentially unchanged. For now, the uncertainty is around when the market will recover, and when it recovers, the speed to convert a growing pipeline into growth and margin expansions. In the interim, we’re moving to the sideline during this recovery phase, and are waiting for a set of new catalysts (e.g., accelerated growth & pipeline conversion) to move the stock again. As for the quarter, Pivotree reported what we considered a mixed FQ1 with PS [Professional Services] recovery offset by declines in legacy MS [Managed Services] businesses. Adj. EBITDA was above our forecast due to its capital discipline.”
After reducing his full-year revenue projection, Mr. Shao cut his target for the company’s shares to $2 from $3. The average is currently $2.80.
Other analysts making target changes include:
* Paradigm Capital’s Daniel Rosenberg to $4 from $4.25 with a “buy” rating.
“Pivotree reported Q1 results that were slightly below expectations on the top line, due to continued declines in legacy services,” he said. “However, the company’s new managed & IP solutions (MIPS) showed momentum growing 38 per cent year-over-year. Cost optimizations helped offset impacts on profitability. Adjusted EBITDA remained positive despite the ongoing revenue contraction. Management expects lumpy quarters but is far more optimistic for 2025. The focus remains on scaling the MIPS segment. We think there is still work to be done to transition away from legacy services. Shares remain at value levels for those willing to see through the transition.”
* Canaccord Genuity’s Robert Young moved his target to $1.70 from $1.50, keeping a “hold” recommendation.
“We note the recent trend of downward revisions to guidance amongst tech names (DCBO, SHOP, etc.) that reflect higher caution based on shifting macro conditions,” said Mr. Young. “Despite this, management continues to highlight more optimistic conversations with customers now versus in 2023, particularly on SKU Build, Control Tower, and WMS. While a 16-per-cent top line decline year-over-year is a concern, Q1 marked the sixth consecutive positive Adj. EBITDA quarter at $0.2-million, with management continuing to signal positive Adj. EBITDA moving forward. We believe this underscores management’s ability to control costs and remain profitable while facing macro headwinds. While we see early indications of stabilization, we remain cautious given the continued weak top line and the uncertain timing of a recovery.”
=====
Ahead of second-quarter earnings season in Canada’s banking sector, Jefferies analyst John Aiken upgraded Royal Bank of Canada (RY-T) to “buy” from “hold” and increased his target to $157 from $136. The average on the Street is $144.34.
Mr. Aiken also made these target changes:
- Bank of Montreal (BMO-T, “buy”) to $142 from $136. Average: $133.85.
- Bank of Nova Scotia (BNS-T, “hold”) to $69 from $66. Average: $67.90.
- Canadian Imperial Bank of Commerce (CM-T, “buy”) to $77 from $76. Average: $68.36.
- Laurentian Bank of Canada (LB-T, “hold”) to $28 from $24. Average: $27.73.
=====
Following its “constructive” first-quarter results and recently announced disposition of non-core Saskatchewan assets for $600-million, Desjardins Securities analyst Chris MacCulloch reaffirmed Crescent Point Energy Corp. (CPG-T), now operating as Veren Inc., as his top pick in the small/mid-cap oil space.
“The company’s positive momentum continued in 1Q24 through strong operational performance and further advancement toward its $2.2-billion soft net debt target,” he said. “On the latter, progress was achieved through last week’s attractively priced $600-million disposition of its Battrum and Flat Lake assets, bringing the company within close reach of the $750-million disposition target outlined at the investor day presentation in late March. We expect the remainder to come from infrastructure transactions, potentially including assets acquired through the Hammerhead Energy acquisition, as previously hinted by management. However, we also would not be surprised to see some of the proceeds reinvested into the Montney, potentially through the addition of a fourth drilling rig, although this will be partially contingent upon further analysis on the impact of optimized drilling and completion design.”
Mr. MacCulloch sees Veren “well-positioned” to continue to trim its debt levels below the $2.2-billion target if development plans were to shift, noting “management highlighting on the conference call that it now sees $1.7-bilion as an ultimate floor, which we view as a 2026 event at current strip prices.”
“For reference, that debt level would provide considerable balance sheet flexibility to the extent that it implies 1.0 times D/CF at US$50/bbl WTI,” he said. “However, management also noted that it does not envision further acceleration of capital returns beyond the 75 per cent of FCF level (from 60 per cent currently) at that point, with a focus on pursuing other opportunities, including asset development, potential M&A and further debt reductions. One step at a time.”
He raised his target by $1 to $15, maintaining a “buy” rating. The average is $14.64.
In a separate note, Mr. MacCulloch raised his target for ARC Resources Ltd. (ARX-T) target to $30 from $29, maintaining a “buy” recommendation.
“Although we have adjusted our 2Q24 production forecast to account for planned maintenance activity, volumes are expected to ramp in 2H24 prior to the commissioning of Attachie Phase I. While acknowledging that the stock has outperformed, we still view ARC as one of the best-positioned names in the sector, including as a potential acquisition target,” he said.
=====
Scotia Capital analyst Ben Isaacson thinks the risk-reward proposition for Nutrien Ltd. (NTR-N, NTR-T) is currently “in favour” of a long position.
However, he warned it could be a “slow grind through the typical summer doldrums for the ferts.”
“With few macro-, commodity-, or company-specific catalysts unfolding in NTR’s favour, it’s understandable why those in the Value Trap camp are patting themselves on the back,” he said. They’ve been right, plain and simple.
“But, the set-up for 2H through ‘25 doesn’t look so bad, either. First, and once again, weather is negatively impacting the corn crop, which has seen futures lift to nearly $5/bu for Dec ‘24/25/26 vs. spot at marginal cost of $4.10 to $4.25/bu. Second, we think the potash market will tighten from now through ‘26/27, at least until BHP is halfway through its ramp. Third, while we certainly don’t like the long-term prospects for NA nitrogen, the balance of the year looks ok, both in terms of gas spread development and re: insufficient supply to keep up with demand growth. Fourth, on retail, the business is back on track, despite an overall challenged backdrop in Brazil, particularly for CP. Fifth, NTR has an opportunity to use its June 12 investor day as a meaningful stock catalyst - we run through what to expect below. This is the opportunity we see for NTR to close the value gap vs. remain a value trap.”
Ahead of its June 12 investor day, the analyst trimmed his target for Nutrien shares to US$66 from US$67, keeping a “sector outperform” rating. The average on the Street is US$68.22.
“We rank MOS [Mosaic Co.] ahead of NTR in 2H, which generally lines up with our preference for P > K > N [phosphorus, potassium and nitrogen] through 2H, as well as a bias for a little more wholesale/Brazil recovery torque over retail exposure at the bottom of the cycle,” said Mr. Isaacson. “That said, we continue to see good value in NTR in the $50s.”
=====
Citing valuation concerns with its shares up 85 per cent year-to-date (versus a 7-per-cent gain for the S&P/TSX), Stifel analyst Justin Keywood downgraded Cipher Pharmaceuticals Inc. (CPH-T) to “hold” from “buy” previously.
“We think the setup for capital deployment remains favorable with US$42-million cash ($2.36 per share, 1/5 market cap), but we struggle to price in a greater multiple with highly variable M&A timing,” he said.
“Cipher has highlighted a nail fungus product, MOB-015 with Phase III results in Jan. 2025 that could be a large organic contributor, but we see the base business as steady-to-declining in the interim.”
Following the release of stronger-than-anticipated quarterly results, Mr. Keywood raised his Street-low target to $9.50 from $8. The average is $13.25.
“We will continue to evaluate valuation-to-opportunity, but believe that, for now, more compelling opportunities exist elsewhere in the sector,” he said.
=====
In other analyst actions:
* In a research note titled Driving To The Rest Stop After Solid Run, CIBC World Market’s John Zamparo lowered Diversified Royalty Corp. (DIV-T) to “neutral” from “outperformer” with a $3 target (unchanged). The average on the Street is $3.93.
“The stock is up 23 per cent since its post-acquisition low from October and while we believe its attractive yield offers good downside protection, we see limited upside in the near term for the stock,” said Mr. Zamparo. “We expect results from Mr. Lube to probably exit the year in the high-single digits, while other royalties are facing challenges mostly related to lower consumer spending.”
* Canaccord Genuity’s Charlie Sharp initiated coverage of Valeura Energy Inc. (VLE-T) with a “buy” rating and $9.50 target. The average target is $9.95.
* BMO’s Tariq Saad reinstated coverage of Cardinal Energy Ltd. (CJ-T) with a “market perform” rating and $8 target. The average is $8.33.
“Cardinal is an intermediate producer with heavy and light/medium oil producing assets primarily in Alberta and Saskatchewan. We see the potential for future upside via the development of the company’s SAGD projects at Reford, which should add material free cash flow when fully developed and will complement Cardinal’s existing low decline rate. That said, Cardinal’s shares trade at a sizable premium, and we believe that some of its peers currently offer better relative value,” he said.
* Desjardins Securities’ Brent Stadler lowered his Algonquin Power & Utilities Corp. (AQN-N, AQN-T) target to US$5.25 from US$5.50 with a “hold” rating, while Wells Fargo’s Neil Kalton raised his target to US$8.50 from US$8 with an “overweight” rating. The average is US$7.21.
* CIBC’s Anita Soni cut her Allied Group Corp. (AAUC-T) target to $6.75 from $6.90 with an “outperformer” rating. The average is $8.03.
* Scotia’s Robert Hope raised his targets for Atco Ltd. (ACO.X-T, “sector perform”) to $43 from $41 and Canadian Utilities Ltd. (CU-T, “sector perform”) to $34 from $33. The averages are $46.21 and $34.58, respectively.
* Canaccord Genuity’s Dalton Baretto raised his targets for Arizona Sonoran Copper Co. Inc. (ASCU-T, “speculative buy”) to $2.75 from $2.50, Capstone Copper Corp. (CS-T, “buy”) to $14 from $13, Ero Copper Corp. (ERO-T, “buy”) to $36 from $34, Hudbay Minerals Inc. (HBM-T, “buy”) to $16 from $13, Ivanhoe Mines Ltd. (IVN-T, “buy”) to $24 from $22, Lundin Mining Corp. (LUN-T, “hold”) to $17.50 from $16.50 and Teck Resources Ltd. (TECK.B-T) to $80 from $75 . The averages are $3.01, $11.82, $32.56, $13.01 , $21.37, $16.73 and $71.38, respectively.
* RBC’s Greg Pardy trimmed his Baytex Energy Corp. (BTE-T) target to $6.50 from $7 with an “outperform” rating. The average is $6.39.
“Our constructive stance towards Baytex reflects its solid leadership and increased scale in the Eagle Ford following the Ranger deal. In our eyes, Baytex’s equity value has plenty of running room, but requires the company to make demonstrated progress on its free cash flow generation, net debt reduction and shareholder returns—which should become more apparent in the second-half. We are maintaining an Outperform recommendation on Baytex but trimming our oneyear target price,” he said.
* BMO’s Michael Markidis raised his Boardwalk REIT (BEI.UN-T) target to $85 from $84 with an “outperform” rating. The average is $85.94.
* CIBC’s Scott Fletcher raised his Calian Group Ltd. (CGY-T) target to $76 from $75 with an “outperformer” rating. The average is $77.38.
* BMO’s Thanos Moschopoulos raised his Constellation Software Inc. (CSU-T) target to $4,300 from $4,150 with an “outperform” rating. The average is $4,028.75.
“We remain Outperform on CSU and have raised our target price following Q1/24 results that were in line on revenue and a touch above on EBITDA. We modestly raised our FY2024/25 EBITDA estimates. CSU continues to demonstrate that it can sustain a healthy EBITDA/FCF growth rate despite its size, driven by its ongoing success with respect to capital deployment for M&A. We believe the stock’s valuation remains attractive given
CSU’s track record and our forecasts for growth,” said Mr. Moschopoulos.
* Scotia’s Mario Saric lowered his Crombie REIT (CRR.UN-T) target to $15.75 from $16 with a “sector outperform” rating. The average is $15.17.
* Canaccord Genuity’s Tania Armstrong-Whitworth lowered his target for Dentalcorp Holdings Ltd. (DNTL-T) to $10.25 from $10.50, remaining above the $9.82 average on the Street, with a “buy” rating. Other changes include: BMO’s Stephen MacLeod to $10 from $11 with an “outperform” rating and Desjardins Securities’ Gary Ho trimmed to $10.50 from $11.50 with a “buy” recommendation.
* Scotia’s Phil Hardie cut his Definity Financial Corp. (DFY-T) target to $51 from $52 with a “sector outperform” rating. Other changes include: Raymond James’ Stephen Boland to $52.50 from $46 with an “outperform” rating, BMO’s Tom MacKinnon to $48 from $44 with a “market perform” rating and Jefferies’ John Aiken to $43 from $44 with a “hold” rating. The average is $49.14.
“While the headline result fell short of expectations, underwriting income and core fundamentals were solid,” said Mr. Hardie. “We believe the bar was set relatively high given the recent stock performance and valuation, and we are not surprised to see the mixed result drive near-term volatility. That said, we saw nothing in the results that would make us question our outlook or key underlying investment thesis on the name. Operating EPS was below Street expectations; however, the majority of the miss was driven by lower-than-expected distribution income. Management maintained its prior full-year guidance for distribution income, giving us confidence the slower-than-expected start to the year was largely a seasonal influence not reflected in Street estimates. Three unambiguous positives included: 1) solid underwriting with a combined ratio of 94 per cent, 2) 2.5-per-cent sequential growth in BVPS, and 3) better than expected personal auto performance.”
* Needham’s Ryan MacDonald cut his Docebo Inc. (DCBO-Q, DCBO-T) target to US$45 from US$63 with a “buy” rating. Other changes include: Stifel’s Suthan Sukumar to US$60 from US$70 with a “buy” rating, Eight Capital’s Christian Sgro to US$60 from US$65 with a “buy” rating, CIBC’s Stephanie Price to US$53 from US$58 with an “outperformer” rating and National Bank’s Richard Tse to US$55 from US$65 with an “outperform” rating. The average is US$55.17.
“In our view, management’s visibility appears high on achieving the new full-yearguide given strength and durability in the core enterprise segment from a differentiated, high-ROI external learning offering. Growth remains the primary objective despite stronger operating leverage upside to-date and DCBO intends to re-invest in R&D/S&M to maintain momentum,” said Mr. Sukumar. “Larger enterprise/government deals, growing partner influence, new product launches, and a new pricing model remain as key sources of near-term upside, supporting our view for potential conservatism on the outlook. We continue to see DCBO as best-of-breed, supporting our thesis for revenue/margin upside as the company extends share gains in the enterprise and government segments. At 4 times C25 estimated revenues, risk-reward for this rule-of-40 disruptor appears compelling.”
* National Bank’s Zachary Evershed moved his Doman Building Materials Group Ltd. (DBM-T) target to $10.50 from $10, maintaining an “outperform” rating, while Raymond James’ Daryl Swetlishoff trimmed his target to $9.75 from $10.75 with a “strong buy” rating. The average is $10.21.
* CIBC’s Sumayya Syed raised her Dream Office REIT (D.UN-T) target to $19, above the $18.50 average, from $17 with a “neutral” rating. Other changes include: Desjardins Securities’ Lorne Kalmar to $18 from $17 with a “hold” recommendation and Canaccord Genuity’s Mark Rothschild to $16.75 from $15 with a “hold” rating.
* Jefferies’ Anthony Linton raised his Enbridge Inc. (ENB-T) target to $55 from $53 with a “buy” rating. Other changes include: BMO’s Ben Pham to $54 from $52 with a “market perform” rating, National Bank’s Patrick Kenny to $53 from $52 with a “sector perform” rating and Scotia’s Robert Hope to $54 from $50 with a “sector perform” rating. The average is $53.86.
“Enbridge had a solid start to the year with significant beats on Q1/24 EBITDA, EPS, and cash flow. Overall, Enbridge’s core systems continue to operate at high utilization, though we do note that some Q1 outperformance is not likely to carry on (i.e. monetization of tax credits). Our 2024 estimates increase to reflect the better-than-expected Q1, while our go-forward estimates move slightly higher to reflect strong utilization of its assets,” said Mr. Hope.
* CIBC’s Jamie Kubik reduced his target for Enerflex Ltd. (EFX-T) to US$6 from US$6.55. The average is $10.50 (Canadian).
* Scotia’s Jonathan Goldman cut his GDI Integrated Facility Services Inc. (GDI-T) target to $44 from $45.50 with a “sector perform” rating. Other changes include: Desjardins Securities’ Frederic Tremblay to $53 (Street high) from $52 with a “buy” rating and CIBC’s John Zamparo lowered his target to $38 from $39 with a “neutral” rating. The average is $42.75.
“Things that were going poorly will have wrapped up by 1H (cost overruns on fixed-price contracts in 1Q and the customer realignment in 2Q). Meanwhile, things that are going well should accelerate in 2Q and beyond. New business wins in Business Services USA have more than offset customer losses thus far, and margins should improve as the Atalian integration progresses. Technical Services margins were 5% ex challenged projects, in a seasonally weak quarter, and before considering price increases already implemented in the backlog (should flow through in 2H). Business Services Canada margins continued to normalize, but management believes they are sustainable at 100-200bp above pre-COVID levels (we model the bottom end of the range). The company announced two tuck-ins in the q, which we estimate should add $50 million in sales, and reaffirmed its target for $30 million working capital reduction this year. We expect the real estate monetization following the sale of Superior Solutions to occur near the end of the year,” said Mr. Goldman.
* Scotia’s Tanya Jakusconek moved her Iamgold Corp. (IAG-N, IMG-T) target to US$4.25 from US$3.75 with a “sector perform” rating, while National Bank’s Michael Parkin raised his target to $6.75 (Canadian) from $6.50 with a “sector perform” rating. The average is US$4.36.
* CIBC’s Hamir Patel cut his target for Interfor Corp. (IFP-T) to $22 from $24 with an “outperformer” rating. Other changes include: RBC’s Matthew McKellar to $27 from $28 with an “outperform” rating and Scotia’s Ben Isaacson to $26 from $29 with a “sector outperform” rating. The average is $26.67.
“As we approach mid-year, the macro-driven inflection points needed to improve IFP’s lumber outlook have been somewhat elusive,” said Mr. Isaacson. “This has reduced the probability of Fed rate cuts, increased U.S. 30-Year borrowing costs, and therefore dampened borrower enthusiasm to finance R&R, existing home purchases, and of course, new builds. Accordingly, IFP, CFP, and others continue to rightsize regional lumber production to lower anticipated demand, although the aggregate industry has been somewhat slow to respond. This is despite ‘cash margins hovering around break-even levels for most of North America’ for quite some time, according to IFP. Simply put, the channel correctly sees no urgency to restock, as there is no threat to buyers that lumber replacement values are moving higher. Accordingly, why commit what’s become more costly working capital?”
* National Bank’s Vishal Shreedhar raised his Lassonde Industries Inc. (LAS.A-T) target to $182 from $174 with an “outperform” rating. The average is $177.33.
* RBC’s Geoffrey Kwan lowered his Onex Corp. (ONEX-T) target to $115 from $119 with a “sector perform” rating. The average is $118.67.
* National Bank’s Don DeMarco increased his Pan American Silver Corp. (PAAS-T) target to $35.25 from $34.50 with an “outperform” rating. The average is $29.90.
* CIBC’s John Zamparo raised his Park Lawn Corp. (PLC-T) target to $21 from $20, below the $23.87 average, with a “neutral” rating.
* Jefferies’ Anthony Linton raised his Pembina Pipeline Corp. (PPL-T) target to $55 from $54 with a “buy” rating. Other changes include: Scotia’s Robert Hope to $55 from $52 with a “sector outperform” recommendation and National Bank’s Patrick Kenny to $51 from $50 with a “sector perform” rating. The average is $54.
* Canaccord Genuity’s Mark Rothschild increased his Plaza Retail REIT (PLZ.UN-T) target to $4.25 from $4 with a “buy” rating. The average is $4.17.
* National Bank’s Zachary Evershed raised his Rogers Sugar Inc. (RSI-T) target to $6.25 from $6 with a “sector perform” rating. Other changes include: BMO’s Stephen MacLeod to $7 from $6 with a “market perform” rating and Scotia’s George Doumet to $6.50 from $6 also with a “sector perform” rating. The average is $6.85.
“Q2 was a beat, driven by both segments,” said Mr. MacLeod. “Most notably, Sugar EBITDA increased year-over-year and was well above our estimate on robust margins (a portion of the strong growth is isolated to Q2). Maple results improved year-over-year and were above forecast. Incrementally improved 2024E outlook reflects continued Sugar margin strength, reflecting a stepup in the margin rate; partially offset by lower volumes. Maple recovery expected to continue. The stock reacted positively to the beat (up 9.9 per cent), and our revised higher estimates reflect improved Sugar margins in 2024E and 2025E.”
* CIBC’s Dean Wilkinson increased his Sienna Senior Living Inc. (SIA-T) target to $16 from $14 with a “neutral” rating, while Desjardins Securities’ Lorne Kalmar raised his target to $16.50 from $15.50 with a “buy” rating. The average is $15.33.
* RBC’s Darko Mihelic cut his Sun Life Financial Inc. (SLF-T) target to $76 from $77 with an “outperform” rating. Other changes include: BMO’s Tom MacKinnon to $79 from $80 with an “outperform” rating, Scotia’s Meny Grauman to $73 from $76 with a “sector outperform” rating and Evercore ISI’s Thomas Gallagher to $76 from $78 also with an “outperform” recommendation. The average is $75.92.
“In a sea of beats, Sun Life delivered a large (and rare) EPS miss that was severely punished by the market with the stock down 7 per cent on Friday,” said Mr. Grauman. “The key driver of the weakness came from the US segment (both stop-loss and dental), but all the other operating segments missed as well except for Asia. The real question is where do estimates and the multiple go from here, and while answer is clearly “lower”, that is mostly driven by conservatism as Management was very adamant that results would largely bounce back from here, except for US dental (and stop-loss where earnings have normalized). SLF is guiding to depressed dental earnings for at least another quarter before moderating in the second half of the year and hitting a run-rate of US$25-million per quarter by 2025 (versus earnings of US$6-million in Q1). While we believe that it will be challenging for the lifeco to hit its 18-per-cent-plis ROE target in 2024, it should still be able to come in at the top of the peer group. As a result, we don’t feel that a dramatic re-evaluation of the SLF’s peer-leading multiple is justified at this time, however we do see the valuation gap with MFC (our top pick; Sector Outperform) continuing to narrow.”
* CIBC’s Kevin Chiang cut his Transat AT Inc. (TRZ-T) target to $2.70 from $2.90, below the $3.04 average, with an “underperformer” recommendation, while National Bank’s Cameron Doerksen lowered his target to $2.25 from $3 with an “underperform” rating.
* Canaccord Genuity’s Doug Taylor moved his Vitalhub Corp. (VHI-T) to $8 from $7.50 with a “buy” rating. The average is $7.88.
* National Bank’s Shane Nagle raised his Wheaton Precious Metals Corp. (WPM-T) target to $85 from $80 with a “sector perform” rating. The average is $81.14.