Inside the Market’s roundup of some of today’s key analyst actions
Citi analyst Jon Tower thinks Restaurant Brands International Inc. (QSR-N, QSR-T) “served up key points of a bearish thesis” with its weaker-than-anticipated third-quarter financial results, pointing to “‘24 new store growth expectations moving lower (again), global comps softening more than expected, and question marks around the China business.”
“In the near term, we expect a reacceleration in BK U.S. business tied to the Million $ Whopper campaign to offer tailwinds to comps; however, beyond this there remains low visibility into unit growth reaccelerating into ‘25 and there is a higher risk of company capital being diverted back into the system (China),” he said. “Both of which likely keep longer-term investors sidelined.”
TSX-listed shares of Tim Hortons and Burger King parent company fell over 3 per cent on Tuesday as slowing global demand lingered. While revenue for the quarter grew 24.7 per cent year-over-year to US$2.29-billion, it fell short of the Street’s expectation of US$2.35-billion. Adjusted EBITDA of US$357-milllion was also well below the consensus projection of US$418.9-million.
“QSR again reduced its expectation for new store growth in ‘24, to approximately 3.5 per cent (from 4 per cent on 2Q call and 4.5 per cent in April),” said Mr. Tower. “China is a 100 basis points drag (300 stores) and outside China weaker growth (150 stores) has come from slower new unit growth vs an uptick in closures. This can be viewed positively (e.g., development pipelines pushed out), though, if franchisees are looking at this over a 10+year investment horizon, we’re uncertain what’s causing this delay (e.g., access to capital, macro uncertainty).
“We see a growing chance of QSR investing more capital into BK China. As an already 20-per-cent minority owner, we would not rule out QSR upping its stake in that market (1,587 stores at the start of ‘24) to better control the direction of the brand. QSR is still working with the current franchisee through alternatives, but ultimately it may take time to reignite BK NRG once a conclusion is reached.”
In response to “softer” same-store sales and unit growth, the analyst lowered his 2024 and 2025 earnings per share projections to US$3.36 and US$3.68, respectively, from US$3.47 and US$3.87. That led him to trim his target for Restaurant Brands shares to US$73 from US$77, keeping a “neutral” rating. The average target on the Street is US$83.02, according to LSEG data.
“The company has demonstrated an ability to improve franchisee profitability in core home markets across the portfolio and we expect this broadly continues, along with strong unit growth for Burger King International, ramping of PLK [Popeyes Louisiana Kitchen Inc.] brand globally and solid comp growth at TH Canada,” he said. “However, limited visibility into the economics of nascent businesses outside core markets (e.g., PLK INTL, TH INTL, FHS) means its difficult to underwrite NRG (new restaurant growth) returning to and sustaining at more than 5 per cent and layering this into valuation. At the same time, we see above average room for near- to medium-term estimate volatility related to the Burger King U.S. brand repositioning/reinvestment (including the integration of the TAST business) particularly as the competitive set struggles to drive traffic.”
Others making changes include:
* RBC’s Logan Reich to US$90 from US$95 with an “outperform” rating.
“QSR reported a mixed quarter,” said Mr. Reich. “Positively, the business is seeing an acceleration in October with consolidated comps tracking in the LSDs driven by BK, Intl, and PLK. Further, the company continues to demonstrate their ability to manage expenses in a challenging macro which could give investors confidence in some level of earnings support next year even if macro is worse than expected. Less positively, Q3 missed expectations on SSS across the board contributing to a 2.5-pe-cent revenue miss and the company sent termination notices to their BK China master franchisee and currently in progress on resolving that dispute.”
* CIBC’s Mark Petrie to US$86 from US$88 with an “outperformer” rating.
“Restaurant Brands leaned on operating leverage to drive an in-line earnings performance despite weaker-than-expected sales growth across brands and geographies. Tim’s Canada traffic is a highlight, but QSR will need more from its brands in the U.S. to sustain earnings momentum given waning SG&A tailwinds. We moderate our F2025 estimates to reflect softer-for-longer comps and a weaker unit growth outlook,” said Mr. Petrie.
* BoA Securities’ Sara Senatore to US$74 from US$77 with an “underperform” rating.
“While transaction growth remains negative in the Chicagoland stores that dominate the SSSG base (competitive intensity, slow economic growth), negative mix trends are moderating, and should improve further as PTLO rolls out kiosks through 4Q (we expect a double-digit ticket lift, consistent with peers, from add-ons). Our confidence in earnings is further bolstered by labor efficiencies and tight G&A (despite a step up in ad spend),” she said.
* Piper Sandler’s Brian Mullan to US$73 from US$75 with a “neutral” rating.
=====
In response to a “temporary operational lull” and a share price decline on Tuesday following “soft, but explainable” third-quarter results, National Bank Financial analyst Maxim Sytchev raised his recommendation for Colliers International Group Inc. (CIGI-Q, CIGI-T) to “outperform” from “sector perform” previously.
“We were overly tactical with the name, having wrongly downgraded the shares in Jan 2024 after the initial run-up in 2023 and expectations of less rate cuts; big surprise? Economy/transactional business having recovered faster than expected,” he said.
“CIGI is a long-term compounder and rates in general are likely to moderate, supporting the funding, building and financing of real estate assets; CIGI should benefit from that, similarly to what we heard from CBRE last week. Less cyclical parts of the business (engineering & asset management) represent 70 per cent of EBITDA (last 12 months) and these verticals command higher multiples (WSP/STN are in 15-17 times EV/EBITDA range). We see capital raising getting better in 2025 and margins should improve in transactional vertical as prior hiring spree will be amortized on a larger revenue base. We therefore see more upside than downside in the investment thesis and therefore going to Outperform.”
TSX-listed shares of the Toronto-based diversified professional services and investment management company slid 3.6 per cent on Tuesday after it reported net revenue for the quarter of US$1.179-billion, up 12 per cent year-over-year and in line with the Street’s projection of US$1.179-billion and Mr. Sytchev’s $1.176-billion estimate, which he attributed to “growth in all segments, and for the first time in 2 years for Capital Markets.” Adjusted earnings per share of US$1.32 came in weaker than anticipated (US$1.52 and US$1.55, respectively).
“Leasing and Capital Markets showed strong year-over-year topline growth at a respective 7 per cent and 17 per cent, but margins in the newly-created Real Estate Services vertical (which also includes Outsourcing) were flat on accelerated hiring of revenue-producers,” he said. “That said, further growth should bring notable margin expansion with management noting that incremental revenues in the two segments bring 20-per-cent EBITDA margins (Outsourcing margins are structurally lower), and operating leverage should shine through if expected growth materializes. Thematically, the global return to office dynamic remains underway while, despite some hesitation by buyers/sellers, the setup for industrial is also favourable given ongoing reshoring and continued growth in e-commerce. As rates around the world move lower following a period of historic tightening, market liquidity and transactional volumes should continue their recovery.
“While the roughly flat year-over-year topline (excl. acquisitions) in Engineering no doubt caught investors by surprise, management noted tough comps on a number of project completion last year and, more importantly, reiterated an organic growth target of 5 per cent to 8 per cent going forward. Given broadly similar commentary of global engineering consultants (including STN, WSP, SWEC, ARDS, ACM, etc.) on this front, we believe this is a realistic benchmark. As this “high quality” earnings stream (with multiple thematic tailwinds) continues to grow, investors should be more willing to attribute a higher multiple to the company as a whole.”
Making only modest estimate adjustments, Mr. Sytchev hiked his target for Colliers shares to US$168 from US$137. The average is US$162.
“We left our estimates relatively unchanged as we were already below what consensus was modelling before this quarter’s miss and we were also in line with the company’s updated guidance range for the year,” he said. “For 2025 we expect high single-digit organic growth from the recurring side of the business as well as in the non-recurring transactional side of the business which should benefit from an easier comparator.”
Elsewhere, other changes include:
* RBC’s Jimmy Shan to US$170 from US$174 with an “outperform” rating.
“Our positive operating outlook on CIGI is unchanged with CM recovery well underway and almost all other segments showing nice revenue growth. While IM was the main culprit for the lower AEBITDA and AEPS guide, the fundraising environment is improving and we see good earnings momentum for this segment in 2025. We also recently highlighted the value of its IM business in light of high multiples observed in public and private market,” said Mr. Shan.
* Scotia’s Himanshu Gupta to US$167.50 from US$155 with a “sector outperform” rating.
=====
As its organic revenue growth “continues to strengthen,” Thomson Reuters Corp. (TRI-N, TRI-T) is “meeting rising expectations,” said RBC Dominion Securities analyst Drew McReynolds following Tuesday’s release of third-quarter results that were “slightly” ahead of his forecast and a modest raise to its 2024 revenue growth guidance.
“At current valuation (FTM [forward 12-month] EV/EBITDA of 27.0 times), we believe the bar to deliver consolidated organic revenue growth in excess of 6 per cent has risen with the organic revenue growth trajectory over the 2025–26 period now taking centre stage,” he said.
“While we remain patient for more timely and/or attractive accumulation points, we believe the current valuation level (i.e., 25 times FTM EV/EBITDA) is fundamentally justified provided that: (i) management meets or exceeds a 7–8-per-cent organic revenue growth trajectory by 2026 without meaningful changes to the company’s current margin, capex, and FCF conversion profile; and (ii) solid execution on the GenAI playbook continues with little change to the current GenAI narrative including perceived opportunities and risks. With further upward revisions to 2024 organic revenue growth guidance that we believe sets the stage for 7–8-per-cent consolidated growth in 2025E and 2026E, Thomson Reuters continues to meet rising expectations.”
Mr. McReynolds now sees the Toronto-based information software and news provider on track to secure more than 7-per-cent consolidated growth as early as 2025.
“Management indicated that the 100 basis poins increase in consolidated and Big 3 organic revenue growth guidance for 2024 as the year has progressed comprises 40 bps of stronger performance from Corporates, 20 bps from Tax & Accounting Professionals, and 20 bps from Reuters News underpinned by GenAI-related revenues,” he said. “With an average annual price increase of 3.5 per cent year-over-year (unchanged), new sales and cross-sales momentum combined with a slightly higher retention rate have contributed to the uptick in Big 3 performance.
“Despite the higher 2024 guidance, management continues to position the business for faster growth in 2025, in part reflecting: (i) the Q4/24 divestiture of FindLaw (up to $410-million in net proceeds, $300-million in revenue, 38-per-cent EBITDA margin), which is expected to be 30 bps accretive to consolidated organic revenue growth on an annualized basis; and (ii) a modest year-over-year improvement for Legal Professionals (versus 7 per cent year-to-date). Other incremental notables: (i) GenAI product-enabled ACV penetration is 15 per cent as at Q3/24; and (ii) annualized AI-investment is $200-million (split between opex/capex).”
Maintaining a “sector perform” rating for Thomson Reuters shares, Mr. McReynolds raised his target to US$173 from US$171. The average target is US$170.33.
Elsewhere, others making changes include:
* Scotia’s Maher Yaghi to US$187 from US$182 with a “sector outperform” rating.
“TRI delivered another strong quarter,” said Mr. Yaghi. “Although margins were pressured due to an acceleration of GenAI investments and acquisition costs, we expect margins to start improving in Q4 within the legal and tax and accounting segments. We applaud management’s focus on disposing lower growth assets (ie: FindLaw) that no longer align with strategy while redeploying capital towards new products that complement the existing portfolio. Maintaining a pristine balance sheet while also prioritizing AI investments should lead to a higher TAM over time and upside to organic revenue growth targets in the medium to longer term. While the stock continues to trade at a premium to peers, we see a path for the stock’s multiple to expand ever further due to potential revenue acceleration from AI. Overall we remain bullish on the stock and maintain our Sector Outperform rating.”
* TD Cowen’s Vince Valentini to $250 from $235 with a “hold” rating.
“This company continues to execute very well in our view, and we see healthy runway for HSD revenue growth plus margin expansion,” said Mr. Valentini. “Unfortunately, the sale of a noncore business was dilutive to EPS, and it pushed the valuation multiple even higher (now 28.4 times 2024 estimated EBITDA), so even with a more generous TP methodology we cannot justify a buy rating.”
* Canaccord Genuity’s Aravinda Galapatthige to US$164 from US$157 with a “hold” rating.
“While we maintain our HOLD rating due to valuation, our target is up by $7.00 to $164.00/sh as we factor in upside to 2025 growth expectations, based on strong trends in the Big 3 segments and a formidable product pipeline. We continue to believe that in addition to high single-digit organic growth, M&A continues to play a meaningful role in setting up the longer-term trajectory for TRI,” he said.
* JP Morgan’s Andrew Steinerman to US$175 from US$164 with a “neutral” rating.
=====
Citing “uncertainty around the oversupply in the Alberta power market, which could lead to additional near-term CTG mothballs,” Desjardins Securities analyst Brent Stadler downgraded TransAlta Corp. (TA-T) to “hold” from “buy” previously.
“In light of this uncertainty, we view the stock as close to fully valued,” he said. “However, we remain bullish on the data centre opportunity in Alberta, which could drive upside to our NAV. Until there is an announcement, we are not ascribing value to the opportunity.”
The downgrade comes in the wake of the release of its third-quarter financial results that fell short of expectations on power generation but exceeded estimates on earnings and free cash flow.
“What we found positive. (1) The hydro segment results were solid and we bumped up our realized pricing expectations on the segment. (2) The opportunity set at Centralia sounds promising, with the potential to extend the useful life (already in our model) and add renewables; TA expects to communicate a plan in 1H25. (3) TA remains in active discussions with hyperscalers, which will benefit the portfolio if a contract is announced. (4) Potential for cost savings by temporarily mothballing Sundance Unit 6,” said Mr. Stadler.
“Why we are changing our rating. (1) Sundance Unit 6 retirement highlights risk with the coal-to-gas (CTG) units in the portfolio as they are potentially unprofitable in the current environment. It is unclear if the asset will come back or if more assets need to be mothballed (potentially Sheerness and Battle River 5 if included in the Heartland deal). (2) The Heartland acquisition potentially doubles down on these CTG units, as we view Battle River 5 and Sheerness as having almost similar breakeven metrics to Sundance Unit 6. (3) We were looking for more colour on capital allocation to growth compared with buybacks at current levels, which could come in 1H25. (4) Given the uncertainty with some assets in our NAV, we do not believe it is appropriate to make a significant reduction to our discount rate at this time, and therefore we view the stock as near fully valued at current levels at an 8.3-per-cent adjusted FCF yield vs U.S. peers at 8.0 per cent.”
While he raised his earnings expectations through fiscal 2026, Mr. Stadler kept a $15.50 target for TransAlta shares. The current average is $15.75.
“Given TA’s comments, we are ballparking a potential TA data centre announcement closer to mid-2025. We are moving to the sidelines to see how/if the supply/demand dynamic in the province affects its portfolio over the near term,” he concluded.
Other analysts making changes include:
* RBC’s Maurice Choy to $16 from $14 with an “outperform” rating.
“While we await the outcome of TransAlta’s ongoing discussions with multiple hyperscalers, we favourably view: (1) management’s position that it has “more optionality than anybody does in Alberta” when speaking about supporting data center load growth; (2) the uniqueness of TransAlta’s hydro fleet, which continued to deliver strong results (including via the ancillary services market); and (3) the company’s commitment to fulfilling its $150 million share buyback program in 2024 (76-per-cent complete) despite the recent strong share price performance, with its view that buybacks remain “a good deal” and help create value for shareholders,” said Mr. Choy.
* CIBC’s Mark Jarvi to $17 from $16.50 with an “outperformer” rating.
“Strong Q3 and YTD results have TA pushing toward the upper end of 2024 guidance ranges and strong FCF provides flexibility to support more buybacks and growth investments. TA continues to look to optimize its legacy thermal sites in Alberta and Washington State to meet the needs of growing power demand, potentially including datacentres,” said Mr. Jarvi.
* TD Cowen’s John Mould to $18 from $16 with a “buy” rating.
* National Bank’s Patrick Kenny to $16 from $15 with an “outperform” rating.
=====
Believing slowing fundamentals are “more than priced in,” TD Cowen analyst Jonathan Kelcher raised InterRent REIT (IIP.UN-T) to “buy” from “hold” previously.
“We view the decline in residential REIT trading prices post the immigration announcement as overdone,” he said. “Despite the expectation of softer fundamentals, we forecast mid-to-high single-digit SPNOI and AFFO/unit growth for IIP — in line to slightly ahead of peers. With the stock significantly underperforming peers year-to-date, we now view the valuation as attractive on both an absolute and relative basis.”
“With its year-to-date underperformance (down 14.3 per cent vs. 2.9-per-cent total return for Canadian peers), we view today’s valuation as attractive on both an absolute (28-per-cent discount to NAV and 5.2 per cent implied cap rate) and relative basis, with InterRent now trading largely in line with its peers on a forward multiple basis.”
Mr. Kelcher sees the Ottawa-based REIT “well-positioned to play defence.”
“Although market rent growth has held up well across the portfolio (including strength in Ottawa/Montreal and GTHA), management does expect moderating growth going forward on softer (although still favourable) fundamentals and the likely negative impact from last month’s sharply reduced Canadian immigration targets,” he said. “We believe management has multiple levers to pull to maintain mid-single-digit revenue growth, including a temporary shift to a higher occupancy model should industry conditions soften. We view 5-per-cent-plus revenue growth as very achievable in 2025. We forecast SPNOI growth of 9.5 per cent/5.2 per cent/6.7 per cent in 2024/2025/2026.”
The analyst reiterated a $14 target for InterRent units. The average is $14.20.
Meanwhile, CIBC’s Dean Wilkinson raised the stock to “outperformer” from “neutral” with a $15 target.
“IIP reported an in-line Q3/24, highlighted by the 13th consecutive year of a 5% or more distribution increase,” said Mr. Wilkinson. “We believe the recent weakness in the units has been caused by concerns over a curtailment of foreign students (and more broadly immigration levels going forward) which may have negatively impacted occupancy levels – however at 96.4 per cent, occupancy was up sequentially 20bps and 120bps year-over-year with average monthly rents increasing 7 per cent to $1,687. While the REIT did call out the recent immigration policy changes as something likely to have a modest impact on rental rates in the near term, it did note that its mark to market gap still sits at a very robust 27 per cent, achieving an ~11% lift on 1,279 leases during the quarter, representing 9.7 per cent of the portfolio.
Concurrent with the release of our inaugural 2026 estimates, we are upgrading InterRent Real Estate Investment Trust from Neutral to Outperformer. The upgrade is based on current underperformance, largely due, in our view, to punitive concerns of a decline in immigration (and accordingly demand), and the associated effects on future rental rate growth. At a steep 25-per-cent discount to NAV, paired with federal housing supply forecasts which fall well short of the 3.5MM requirement, the current unit price should serve to set up a more compelling risk/reward scenario.”
Conversely, Raymond James’ Brad Sturges lowered InterRent to “outperform” from “strong buy” with a $14 target, down from $15.
“The Canadian Federal Government’s announced policy changes with respect to lower permanent and non-permanent resident targets in the next 2 years could result in slower Canadian population growth year-over-year, and softer near-term Canadian MFR leasing conditions,” said Mr. Sturges. “Our new Outperform rating (prior: Strong Buy) for InterRent balances the combination of an expected moderation in Canadian MFR leasing demand fundamentals, and its near-term SP-NOI and AFFO/unit growth prospects, with the REIT’s deep NAV/unit discount valuation, and positive long-term underlying demand and supply fundamentals within its key Canadian urban MFR markets.”
Other changes include:
* RBC’s Jimmy Shan to $15 from $16.50 with an “outperform” rating.
“We have moderated our SP NOI growth expectation for 2025/2026 to 5 per cent (vs. 8.7 per cent in Q3) under the assumption of flat population growth over next two years and more slack in the rental market,” said Mr. Shan. “IIP took an uncharacteristically cautious tone on the call and as such, market sentiment is likely to stay cautious near term. That said, the lower expected growth appears priced in. IIP trades at a 26-per-cent discount to our NAV (5.2-per-cent implied cap) at a time when cap rates are stabilizing and interest rate expense is less of a headwind.”
* National Bank’s Matt Kornack to $14.50 from $15 with an “outperform” rating.
* Desjardins Securities’ Kyle Stanley to $14 from $15.50 with a “buy” rating.
=====
While he continues to see long-term opportunities for Fortis Inc. (FTS-T) following “solid” third-quarter results, Raymond James analyst Theo Genzebu lowered his recommendation for its shares to “market perform” from “outperform” in response to strong recent share price appreciation.
“Our constructive stance on Fortis is primarily a function of the company’s highly diversified regulated utility footprint and durable longer-term investment themes, such as the AI/data center growth opportunities within the company’s U.S. footprint and prudent capital expenditure program,” he said. “However, we acknowledge that these are longer-term opportunities and note that with recent strong share price performance, the stock currently trades at 18.4 times 2025 P/E, which is close to the midpoint of the historical 15.0–23.0 times trading range and within shooting distance of 52-week highs. We have balanced our recommendation accordingly.”
Mr. Genzebu’s target for Fortis shares remains $61. The average is $61.18.
“Central to our constructive view on Fortis are the company’s diversified NA footprint, solid 6-plus-per cent rate base growth, and growth upside stemming from exposure to durable investment themes. We also see encouraging regulatory developments, including the MISO Variance Analysis related to the Iowa ROFR and Arizona regulatory lag docket, as a positive for sentiment. That said, we balance these positive longer term opportunities with the recent strong performance in the stock,” he said.
Elsewhere, National Bank’s Patrick Kenny bumped his target to $63 from $62 with a “sector perform” rating.
“Fortis reported Q3/24 adj. EPS of $0.85, slightly ahead of our estimate and consensus at $0.82, while bumping up its 2024 capital budget to $5.2-billion (was $4.8-bilion) driven by the timing of the Eagle Mountain Pipeline project in B.C. as well as a higher assumed USD/CAD exchange rate,” said Mr. Kenny. “That said, the 2025-2029 capital plan of $26.0-billion remains unchanged, underpinning a five-year rate base CAGR of 6.5 per cent and annual dividend growth guidance of 4-6 per cent through 2029.”
=====
With the transformation of its supply chain completed, the focus of Metro Inc.’s (MRU-T) quarterly report on Nov. 20 will likely centre on its outlook for the 2025 fiscal year, according to National Bank analyst Vishal Shreedhar.
“Our expectation of continued momentum in food retail for MRU largely reflects, among other factors, strength in discount and higher online sales We expect solid trends at PJC [The Jean Coutu Group], reflecting strength in beauty (front-end) and professional services/specialty medication (Rx),” he said. “Metro announced Mr. François Thibault, EVP, CFO and Treasurer will be retiring next spring. We believe finding a replacement to Mr. Thibault will be key, particularly as there may be further executive turnover in the next few years (Eric La Flèche, President and CEO is 61, Carmen Fortino, EVP, national supply chain and procurement is ~6).
“We model a continued moderation in supply chain transition costs in Q4/F24 With the supply chain modernization now complete, we expect investor attention on MRU’s F2025 outlook. For F2025, NBF models: (i) 3 per cent in total revenue growth, in line with consensus; MRU’s long-term financial target is 2-4-per-cent growth, (ii) 8 per cent in EBIT growth vs. consensus at 7-per-cent growth; MRU’s long-term financial target is 4-6-per-cent growth, and (iii) 12 per cent in EPS growth vs. consensus at 10-per-cent growth; MRU’s long-term financial target is 8-10-per-cent growth.”
For the fourth quarter of its current fiscal year, Mr. Shreedhar is currently projecting earnings per share of $1, a penny higher than both the consensus projection on the Street and the result from the same period a year ago. He attributes that 1-per-cent year-over-year EPS growth reflects gross margin expansion, strength in discount/PJC, and share repurchases, partly offset by slight SG&A deleveraging, higher D&A, higher interest expense, and one fewer week in the quarter.
“Continued momentum in food retail [is] expected,” he said. “Our expectation of 2.4-per-cent same-store sales growth at food retail for MRU (on top of 6.8 per cent last year) largely reflects, among other factors, a strong discount format (40 per cent of MRU’s supermarket count, versus EMP at 10 per cent and L at 50 per cent) and higher online sales (largely reflecting third-party partnerships, and the deployment of click-and-collect at discount banners).
“Our proprietary review of customer data between Q4/F23 and Q4/F24 suggests improving customer perception of MRU, which we believe could place upward pressure in the medium-term sales performance. Contact us for more details on this analysis.”
Reiterating a “sector perform” rating for Metro shares, Mr. Shreedhar increased his target by $1 to $89. The average is $87.56.
“We believe Metro is a solid company which has delivered solid long-term returns; however, these attributes are adequately reflected in valuation,” he said. “Following a period of flattish EPS growth in F2024, we expect earnings growth to accelerate in F2025+.”
=====
In other analyst actions:
* Seeing “strong momentum” heading into 2025 and touting potential natural gas tailwinds, Wells Fargo’s Praneeth Satish upgraded Enbridge Inc. (ENB-T) to “equal-weight” from “under-weight” with a $57 target. The average is $58.30.
* Desjardins Securities’ Gary Ho moved his target for Alaris Equity Partners Income Trust (AD.UN-T) to $22.50 from $22 with a “buy” rating. The average is $22.45.
“AD’s common strategy has proven to be a success ($27.5-million common distributions in 3Q alone),” he said. “With $166-milllion of dry powder, AD has runway to deploy capital. The units trade at an attractive 20-per-cent discount to BVPU (vs five-year average of negative 11 per cent).”
* Desjardins Securities’ Brent Stadler trimmed his Algonquin Power & Utilities Corp. (AQN-N, AQN-T) target to US$4.75 from US$5.25 with a “hold” rating. The average is US$5.59.
“AQN’s 3Q results are likely to be noisy and we have reduced our estimates. Further, we have trimmed our 2025 and 2026 estimates to better reflect the expected recovery on the US$1b of prior investments. We continue to view the targeted 60–70-per-cent payout ratio as potentially achievable in 2027, implying EPS of US$0.40 at the midpoint. Investors should remain on the sidelines heading into year-end given the potential for downward estimate revisions, tax-loss selling and possible removal from the TSX 60,” he said.
* National Bank’s Rupert Merer trimmed his target for Ballard Power Systems Inc. (BLDP-Q, BLDP-T) to US$2.50 from US$3 with a “sector perform” rating, while CIBC’s Krista Friesen lowered his target to US$1.40 from US$1.60 with an “underperformer” rating. The average is US$2.42.
* TD Cowen’s Derek Lessard cut his Boyd Group Services Inc. (BYD-T) target to $270 from $300 with a “buy” rating. Other changes include: Raymond James’ Steve Hansen to $285 from $295 with a “strong buy” rating, Desjardins Securities’ Gary Ho to $260 from $270 with a “buy” rating, CIBC’s Krista Friesen to $252 from $268 with an “outperformer” rating, RBC’s Sabahat Khan to $277 from $280 with an “outperform” rating, National Bank’s Zachary Evershed to $245 from $270 with an “outperform” rating, ATB Capital Markets’ Chris Murray to $320 from $340 with a “buy” rating. The average is $267.85.
“Boyd reported Q3 results that were below RBC/consensus, reflecting weak industry/demand trends,” said Mr. Khan. “Looking ahead, Q4 is likely to also reflect negative SSS growth; however, we believe that Boyd should return to positive SSS growth in 2025 as the operating backdrop improves and prior year comps get easier (we are projecting sequential improvement throughout the year). Overall, we continue to believe that the company remains well positioned over the medium-term (our base case reflects a recovery in SSS growth and margins in 2025).”
* RBC’s Pammi Bir raised his BTB REIT (BTB.UN-T) target to $3.75 from $3.50. Other changes include: Canaccord Genuity’s Mark Rothschild to $3.75 from $3.50 with a “buy” rating and National Bank’s Matt Kornack to $3.50 from $3.45 with a “sector perform” rating. The average is $3.64.
“On the back of in line Q3 results, our view on BTB is largely intact,” said Mr. Bir. “While occupancy took a step back on a telegraphed industrial tenant bankruptcy, overall organic growth remains in strong shape. Moreover, we see the industrial vacancy as an opportunity to drive earnings and NAV growth. On the latter point, potential successful residential rezoning at a Montreal retail property could drive additional value upside. In short, we see valuation as well-supported.”
* Canaccord Genuity’s Matthew Lee raised his Cargojet Inc. (CJT-T) target to $165 from $160 with a “buy” rating. Other changes incude: ATB Capital Markets’ Chris Murray to $155 from $165 with an “outperform” rating and TD Cowen’s Tim James to $167 from $176 with a “buy” rating. The average is $162.
“While Q3 adj. EBITDA was only slightly shy of TD and cons., management acknowledged pending pilot wage pressure for 2025,” said Mr. James. “This should not be entirely surprising, although the market was clearly concerned (stock down 7 per cent Tuesday) and we factor in 40 basis points of compression in 2025 vs. 2024 to 33.6 per cent.”
* Eight Capital’s Ralph Profiti cut his Ero Copper Corp. (ERO-T) target to $34 from $40 with a “neutral” rating. Other changes include: Scotia’s Orest Wowkodaw to $34 from $37 with a “sector outperform” rating and CIBC’s Bryce Adams to $34 from $36 with an “outperformer” rating. The average is $35.71.
* National Bank’s Gabriel Dechaine moved his target for IA Financial Corp. Inc. (IAG-T) to $121 from $118 with a “sector perform” rating, while TD’s Mario Mendonca raised his target to $135 from $132 with a “buy” rating. The average is $121.50.
“Core EPS was well above estimates, supported by strong growth in Canada and WM, offset by weaker investment income and U.S. results (non-recurring expenses). Top-line momentum (including U.S. dealer services) remains strong across the company, growth in high ROE WM business and excess capital supports a meaningful increase in ROE guidance (expected at the February 1025 investor day),” said Mr. Mendonca.
* RBC’s Greg Pardy move his Imperial Oil Ltd. (IMO-T) target to $101 from $99 with a “sector perform” rating. The average is $101.34.
“Our constructive stance towards Imperial Oil reflects its long-life, low-decline upstream portfolio, cash flow diversification via its refining and chemical segments, pristine balance sheet, free cash flow generation, commitment to shareholder returns and solid operating performance. Modestly higher capital investment beyond its $1.7 billion budget this year has weighed on IMO’s market performance of late, but is not a big deal in our books,” said Mr. Pardy.
* National Bank’s Jaeme Gloyn raised his Intact Financial Corp. (IFC-T) target to $296 from $294 with an “outperform” rating. Others making changes include: TD Cowen’s Mario Mendonca to $300 from $293 with a “buy” rating and Raymond James’ Stephen Boland to $290 from $265 with an “outperform” rating. The average is $277.14.
“A very resilient quarter from Intact, given an impressive ROE of 16 per cent (last 12 months) despite huge catastrophe losses (22 percentage points) vs. street at 15 per cent and Q3-23 at 12 per cent,” said Mr. Gloyn. “The EPS beat was driven by excellent underwriting, excluding catastrophe losses, as the current year loss ratio of 55 per cent improved from 57 per cent in Q3-23. As a result, the combined of 104 per cent beat the street at 108 per cent, as all lines outperformed. Further demonstrating the underwriting strength, all lines delivered at least in-line current year loss ratio performance (except UK&I). Personal Property and Commercial Canada highlighted the quarter with 5 percentage point current-year loss ratio beats, each. BVPS surprisingly increased 3 per cent quarter-over-quarter (street down 1 per cent) to $90.60 (street $87.39). Overall, a robust quarter that supports the continued upward trajectory in the share price. Looking ahead, we believe IFC is well positioned to benefit from favourable conditions that persist in the P&C Insurance industry through 2025. We reiterate our view IFC merits a premium valuation given the track record of consistent execution to deliver 10-per-cent EPS growth and to outperform its competitors on ROE.”
* Eight Capital’s Ralph Profiti increased his Kinross Gold Corp. (K-T) target by $1 to $18 with a “buy” rating. The average is $16.94.
* TD Cowen’s Menno Hulshof bumped his MEG Energy Corp. (MEG-T) target to $36 from $35 with a “buy” rating. The average is $32.97.
“Q3/24 results featured a strong quarter of op. execution and delivery of RoC commitments, although headline results were right in line,” he said. “The transition to 100-per-cent return of FCF in Oct. (up from 50 per cent) and additional prod’n (new well pad online in Dec.) should drive an acceleration
of most KPIs into year-end, pointing to a strong finish. MEG remains our top-pick.”
* Scotia’s Orest Wowkodaw lowered his Labrador Iron Ore Royalty Corp. (LIF-T) target to $31 from $32 with a “sector perform” rating. The average is $32.67.
* RBC’s Irene Nattel bumped her Pet Valu Holdings Ltd. (PET-T) target to $35 from $34 with an “outperform” rating. Other changes include: CIBC’s Mark Petrie to $31 from $33 with an “outperformer” rating, ATB Capital Markets’ Chris Murray to $41 from $40 with an “outperform” rating, Raymond James’ Michael Glen to $34 from $36 with an “outperform” rating and TD Cowen’s Michael Van Aelst to $30 from $32 with a “buy” rating. The average is $32.55.
“Tightening of the 2024 outlook ranges toward the low ends of prior guidance despite solid and better than expected Q3 results implies Q4 margin and earnings compression as the company leans into value proposition and steps up marketing/promo spend,” said Ms. Nattel. “In our view, Pet Valu is appropriately managing the business to satisfy value-oriented consumer demand to drive traffic and protect/grow share. Valuation compression toward the bottom of the range on arguably transient NTM earnings weakness is overdone, in our view. Rolling forward valuation basis from Q1 to Q3/26 LTM to reflect the passage of time/normalizing backdrop.”
* RBC’s Darko Mihelic raised his Sun Life Financial Inc. (SLF-T) target to $82 from $78 with an “outperform” rating, while Desjardins Securities’ Doug Young bumped his target to $85 from $84 with a “buy” rating. The average is $83.15.
“SLF had a stronger than expected quarter with strength in the U.S. segment and better than anticipated U.S. dental results that had bounced back to a profit in Q3/24. We see a good setup for 2025 as SLF reprices dental premiums and the lifeco has solid capital which it is returning to shareholders via buybacks. We also believe the lifeco can improve on Asia results and look forward to its investor day next week,” said Mr. Mihelic.
* Scotia’s Orest Wowkodaw bumped his Teck Resources Ltd. (TECK.B-T) target to $75 from $74 with a “sector outperform” rating, while Raymond James’ Brian MacArthur moved his target to $75 from $74 with an “outperform” recommendation. The average is $74.07.
* RBC’s Michael Harvey increased his target for Topaz Energy Corp. (TPZ-T) to $32 from $30 with an “outperform” rating. The average is $31.46.
“Topaz delivered a solid quarter which featured in-line CFPS and royalty production, with the impact of lower gas prices offset by robust liquids pricing and increasing infrastructure contribution. Our bullish stance toward TPZ shares reflects tailwinds within the company’s core plays (Montney/Clearwater) and the potential for continued multiple expansion. Topaz resides on RBC’s Global Energy Best Ideas List,” said Mr. Harvey.
* National Bank’s Maxim Sytchev cut his Toromont Industries Ltd. (TIH-T) target to $132 from $135 with a “sector perform” rating. Other changes include: CIBC’s Jacob Bout to $127 from $128 with a “neutral” rating, Canaccord Genuity’s Yuri Lynk to $130 from $138 with a “buy” rating, Raymond James’ Steve Hansen to $122 from $132 with a “market perform” rating, Scotia’s Jonathan Goldman to $132 from $136 with a “sector perform” rating, RBC’s Sabahat Khan to $138 from $142 with an “outperform” rating. The average is $136.33.
“Toromont Industries Ltd. reported Q3 EBIT below consensus estimates, with the margin shortfall driven by the continued increase in the New Equipment sales mix (as new equipment supply continues to improve). Overall, the operating backdrop remains supportive, although there is a ‘normalization’ toward run-rate demand/pricing vs. the operating backdrop observed in 2021-2023,” said Mr. Khan.
* Scotia’s Jonathan Goldman dropped his Wajax Corp. (WJX-T) target to $24 from $29 with a “sector outperform” rating. The average is $23.75.
“The selloff makes sense to us – we independently lowered our target by a similar amount – as we think earnings power will be materially lower in the near-term,” he said. “That is due to a combination of lower IP/ERS/PS volumes as customers defer maintenance spend, increased competitive intensity, and outsized impacts to margins being sub-scale. Management is being proactive mitigating macro headwinds by reducing costs, but IP/ERS peers are saying conditions could remain choppy in the near-term.
“Shares trade at 7.7 times P/E on our 2025E and 0.87 times P/B. The fly-wheel will eventually work in reverse: improving macro, destocking, deleveraging, ERS M&A, etc. As one of the higher torque names in our universe, that should eventually accrue large gains to shareholders. But, following a string of misses (including two more than 10 per cent this year), we think shares will remain in the penalty box until management rebuilds credibility with investors and/or we see notable inflection in the macro. With recalibrated and more realistic expectations, and a 6.8-per-cent dividend yield, we could think of worse ways to wait it out.”
* National Bank’s Rupert Merer moved his target for 5N Plus Inc. (VNP-T) to $8.50 from $8 with an “outperform” rating, while Desjardins Securities’ Frederic Tremblay bumped his target to $8.75 from $8.50 with a “buy” rating. The average is $8.56.
“We view the current share price as a good entry point. Quarterly fluctuations aside, we are pleased with VNP being on track to exceed its previously disclosed full-year guidance in 2024. Doing so would reinforce our view that the unchanged 2025 guidance is conservative. Operationally, recent and upcoming capacity increases support VNP’s strong positioning in its core growth markets,” said Mr. Tremblay.