Inside the Market’s roundup of some of today’s key analyst actions
Ahead of first-quarter earnings season for Canadian diversified financial companies, National Bank Financial analyst Jaeme Gloyn reaffirmed his “favourable” outlook for the Property and Casualty insurance sector, citing “persistent hard market conditions across most business lines and higher interest rates driving sustainably higher investment income.”
“While increasing vehicle theft, elevated catastrophe activity and inflationary pressures could potentially weigh on profitability, these risks support continued rate increases in the near-term and profitability long-term,” he added. “Moreover, we expect personal lines insurers Intact and Definity to show improved profitability as earned rates exceed inflation and both firms benefit from benign weather conditions,” he said. “Reflecting this favorable view, we expect IFC and DFY will deliver above consensus results in Q1-24 (approximately 6 per cent above).”
Accordingly, he raised his target prices for both companies’ shares in a report released late Monday. His changes are:
- Definity Financial Corp. (DFY-T, “outperform”) to $60 (Street-high) from $59. The average on the Street is $47.45.
- Intact Financial Corp. (IFC-T, “outperform”) to $247 from $245. Average: $237.
Mr. Gloyn also noted his top pick for 2024, Fairfax Financial Holdings Ltd. (FFH-T), has “performed well” year-to-date, rising 21 per cent versus a 2-per-cent gain for the TSX financials index and a 14-per-cent gain for its insurance peers.
“We expect continued outperformance through 2024 driven by three catalysts ... i) significantly increased operating income, ii) valuation re-rate, and iii) potential S&P/TSX 60 Index inclusion,” he said. “While we expect softer than consensus results in Q1-24, largely due to unrealized losses on fixed income assets, robust underwriting performance and outlook commentary will support our longer-term view.”
Mr. Gloyn increased his target for Fairfax shares to a Street-high of $2,100 from $2,000, keeping an “outperform” rating. The average is $1,844.76.
The analyst also raised his Trisura Group Ltd. (TSU-T) “up the pecking order” while maintaining a $65 target and “outperform” recommendation. The average is $54.88.
“We believe the story is significantly de-risked, setting up 2024 as solid recovery year,” he said. “Trading at approximately 16 times 2024 consensus EPS, we see TSU closing the valuation gap to specialty insurance peers that trade at an average 21 times. Therefore, we move TSU up to a clear #2 in our pecking order, behind only Fairfax. Notably, AM Best revised Trisura’s ‘Outlook’ to stable (from negative) and costs associated with the run-off program will move firmly in the rear-view mirror with Q1-24 results. This de-risking shifts focus to operating performance, where we forecast high-teens operating EPS, adjusted ROE, and low-twenty’s book value per share growth in 2024. Looking ahead, the recent acquisition of First Founders, and importantly, their treasury listing, provides a good set-up for double-digit growth in Surety as TSU penetrates the U.S. market. In addition, we expect TSU to continue to capitalize on its unique positioning to generate sustained more than 20-per-cent growth in Canadian fronting. While the 10-per-cent rise in share price since TSU reported Q4-23 results could limit upside in the quarter, valuation remains attractive in our view and we expect solid execution.”
Mr. Gloyn’s other target adjustments are:
- Goeasy Ltd. (GSY-T, “outperform”) to $210 from $195. Average: $208.33.
- TMX Group Ltd. (X-T, “sector perform”) to $40 from $37. Average: $38.
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In his earnings preview for diversified financial stocks, Scotia Capital analyst Phil Hardie said he sees “solid opportunities across the non-bank financial space,” pointing to an average one-year expected return of 26 per cent.
“The sector has outperformed the S&P/TSX Composite and S&P/TSX Financial indices by a wide margin over the past twelve months and year-to-date in 2024,” he said. “Stock performance has been uneven. This is not surprising because of the diverse range of companies and business models under our coverage but likely underscores the importance of stock selection given current market conditions.”
Pointing to “lingering uncertainties,” Mr. Hardie recommends investors take “a barbell approach” to investing in the space.
“We believe improved risk appetite and receding macro-related risks have broadened the opportunity set across our universe, however, given several lingering uncertainties, we recommend a barbell approach that balances defensive quality plays with attractive value opportunities,” he said. “we think effective stock selection will remain key to generating outperformance against the backdrop of a complicated investing environment. Our favoured segments remain P&C insurance and alternative asset managers. We are sensitive to valuation but are tilting our bias toward quality.
“Given the backdrop and lingering uncertainties, investors will likely be cautious about making big bets on stocks with a high degree of macro sensitivities or those relying on material multiple expansion to drive upside. We believe this will create a preference for stocks offering attractive returns with upside driven by a combination of growth in underlying earnings or book value, and dividend yields.”
Mr. Hardie made one rating change, upgrading Element Fleet Management Corp. (EFN-T) to “sector outperform” from “sector perform” with a $26 target (unchanged). The average on the Street is $27.33.
“The company has demonstrated solid earnings momentum with strong growth expected for 2024 and 2025, yet the stock price has weakened and lagged the S&P/TSX Index year-to-date and over the last six months,” he said. “We believe Element Fleet offers a relatively rare combination of resilience and attractive growth potential. We expect the combination of EPS growth and dividend yield to drive an almost 17-per-cent return over the next twelve months with modest multiple expansion likely to boost the total expected return to 24 per cent.”
He also made these target adjustments:
- CI Financial Corp. (CIX-T, “sector perform”) to $21 from $20. Average: $20.06.
- Definity Financial Corp. (DFY-T, “sector outperform”) to $52 from $51. Average: $47.55.
- Goeasy Ltd. (GSY-T, “sector perform”) to $190 from $183. Average: $210.78.
- IGM Financial Inc. (IGM-T, “sector perform”) to $45 from $44. Average: $42.
- Propel Holdings Inc. (PRL-T, “sector perform”) to $21 from $19. Average: $24.30.
- TMX Group Ltd. (X-T, “sector perform”) to $39 from $38. Average: $38.44.
“Fairfax Financial [”sector outperform” and $2,000 target] and Trisura Group [”sector outperform” and $59 target] remain our top picks for 2024,” said Mr. Hardie. “Fairfax has demonstrated resilience through the business cycle and turbulent financial markets, but we view it as a less defensive play than more traditional publicly listed insurers. At this stage of the market cycle, this likely provides an attractive balance: downside protection thanks to the relative resilience of insurance operations through a potential recession, and upside potential when markets recover. There have been significant changes at Fairfax that we believe investors have yet to fully recognize. Trisura remains our top small-cap idea. The stock has a strong track record of delivering outsized shareholder returns but came under pressure through most of 2023 as the stock went through a transitional re-rate as investors rebalanced risks related to managing a high-growth company with upside potential. Our investment thesis is playing out well with the company delivering solid operating results, avoiding negative surprises for investors. The stock has rebounded almost ~45% from its recent lows but we continue to see further upside potential. A.M. Best recently revised Trisura’s credit outlook back to where it stood prior to the Q4/22 write-down which sparked the sell-off in the stock. We believe this serves as an external validation point that the recent changes have improved Trisura’s Enterprise Risk Management capabilities, internal process, and governance which we expect to further underpin investor confidence. We expect a clean set of results characterized by robust earnings growth to drive solid investor returns over the coming twelve months.
He added: “Top ideas by investment style: Fairfax remains our top pick overall. For defensive quality, our top idea is Intact, and for small-cap growth, we like Trisura. We believe Element Fleet and Definity are attractive for GARP investors looking for mid-cap plays that balance resiliency and growth potential. Our other top value ideas include Onex, Brookfield Business Partners, and Guardian Capital. Power Corp is also on our radar given what we view as an unjustifiably wide NAV discount and attractive dividend yield. Our holdback relates to a relatively tepid consensus outlook for Great-West shares.”
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RBC Dominion Securities analyst Drew McReynolds is becoming “incrementally more positive” on the Canadian media sector, expecting first-quarter 2024 financial results to show sequential improvement following a challenging 2023.
“As 2024 progresses, we expect accelerating earnings growth driven by a gradual improvement in the operating environments (economy, advertising, content demand) and easier year-over-year comps. Valuation-wise, we continue to believe most FTM [forward 12-month] EV/EBITDA valuations provide attractive entry points assuming an economic hard landing is avoided. Our best ideas are VerticalScope, Cineplex and Transcontinental.”
In a research report released Tuesday, Mr. McReynolds predicted accelerating earnings growth will likely drive better stock performance at current valuations.
“Year-to-date, roughly half of the stocks in our broader media coverage are performing in line or better than the 5-per-cent total return for the S&P/TSX Composite with VerticalScope (up 60 per cent) and Stingray (up 20 per cent) leading the way. Following a relatively dismal 2022 and 2023 for most stocks in our media coverage, we believe improving stock performance should prove sustainable provided an economic hard landing is avoided in North America concurrent with a gradual strengthening of the advertising market that appears underway. While most content and distribution companies (WildBrain, Boat Rocker, Corus, Cineplex) have yet to fully recover from the lingering impacts of U.S. guild strikes in 2023, we expect 2024 to be a year of gradual normalization with the stocks eventually benefiting from a full earnings recovery in 2025.”
The analyst warned “visibility around the strength and sustainability of any advertising recovery remains limited reflecting a still-choppy Canadian advertising market as lingering macro uncertainty, inflation and shifts in consumer spending continue to impact a variety of advertising categories and overall advertising spend.” However, he thinks recent management commentary has pointed to the fourth quarter of fiscal 2023 has the likely trough for advertising “with early signs of a recovery emerging in Q1/24.”
After updating his forecasts for the group, Mr. McReynolds made a pair of target price adjustments to stocks in his coverage universe:
* Thomson Reuters Corp. (TRI-N/TRI-T, “sector perform”) to US$156 from US$153. The average on the Street is US$155.99, according to LSEG data.
“At current valuation (FTM EV/EBITDA of 24.6 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 2024-2026 period now taking centre stage,” he said. “While we remain patient for more timely and/or attractive accumulation points following the run-up in the shares over the past year, we believe current valuation levels (i.e., FTM EV/ EBITDA more than 20.0 times) are fundamentally justified provided: (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; (ii) solid execution on the GenAI playbook continues with little change to the current GenAI narrative including perceived opportunities and risks; and (iii) the valuation impact of interest rate expectations/bond yields at worst is neutral.”
* Stingray Group Inc. (RAY.A-T, “outperform”) to $10 from $9. Average: $9.25.
“Across a changing global music and video landscape, we believe management continues to execute on identifying and capitalizing on new growth opportunities pivoting to retail media, SVOD, FAST channels, and connected cars,” he said. “While macro uncertainty could increasingly weigh on advertising and be a continued headwind for radio, we believe these new opportunities provide attractive growth runways for the company longer term. Notwithstanding a hardlanding scenario for the economy, we expect these new growth runways combined with mid-30-per-cent adjusted EBITDA margins and 60-per-cent EBITDA-to-FCF conversion to deliver attractive FCF generation alongside steady NAV growth.”
For his top picks, his targets are:
* VerticalScope Holdings Inc. (FORA-T, “outperform”) at $14. Average: $10.68.
Analyst: “VerticalScope’s earnings have not been immune to macro and digital advertising headwinds that emerged in 2023. We continue to believe the pullback in the shares this cycle more than reflects the earnings impacts with sequential improvement in operating and financial performance now fully underway. Although some patience may still be required pending a more notable and sustained improvement in macro visibility, we believe such sequential improvement is likely to accelerate through 2024. Against this improving backdrop, we believe current valuation levels represent one of the most attractive buying opportunities in our coverage given solid execution, new product traction, accretive tuck-in M&A potential, and a highly profitable and FCF generative business model.”
* Cineplex Inc. (CGX-T, “outperform”) at $14. Average: $12.88.
Analyst: “In addition to a normalizing of box office, we believe a strengthened theatrical release window, added film supply from streaming platforms, healthy consumer demand, and renewed momentum within diversification businesses (location-based entertainment, media) have improved Cineplex’s earnings visibility. At an FTM EV/EBITDA multiple of 6.6 times versus Cinemark at 7.6 times and a historical range of 6.0–13.0 times, we continue to see value in the shares given Cineplex’s higher-growth and more diversified and differentiated asset mix and stronger competitive position relative to peers. Potential catalysts for the shares include stronger than forecast box office attendance, the return of Cineplex Media to 2019 levels and progress on de-levering following its recent refinancing.”
* Transcontinental Inc. (TCL.A-T, “outperform”) at $21. Average: $19.08.
Analyst: “Although cyclical headwinds continue to negatively impact both Packaging and Printing volumes, we expect ongoing cost efficiencies and an easing in destocking pressures to translate to renewed year-over-year EBITDA growth in F2024/F2025. In addition, we see a strengthening FCF outlook bolstered by EBITDA growth, declining capex and further working capital improvements. With the stock trading at 4.8 times FTM EV/EBITDA versus an average of 7.0 times for packaging peers, we continue to see value in the stock given management’s track record of solid execution, $2.00-2.25/share in normalized FCF and each 0.5 times increase in multiple equating to $3/share.”
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First-quarter earnings season for Canadian independent power producers is likely to be “another mixed bag for the group,” according to Desjardins Securities analyst Brent Stadler, who expects “a mostly positive tone” being set for the year ahead.
“On a total-return basis, our coverage stocks have underperformed the broader resource-heavy S&P/TSX Composite Index in the year to date by 13 per cent as treasury yields have moved quite a bit higher since the beginning of 2024 in response to the market’s expectations of rate cuts being pushed out (rate cuts could potentially start by the end of the year),” he said. “Our IPP coverage universe is generally sensitive to bond yields given its defensive nature and bond-like cash flow characteristics. While rates are in the driver’s seat and primarily affect valuations, we believe fundamentals and sectoral tailwinds remain and continue to gain momentum. We would highlight a positive environment for project returns given continued strong demand from both corporates and governments due to decarbonization objectives and energy security/independence initiatives, with more state-backed RFPs and corporate demand at record levels. Load growth is becoming a focal point of conversations and is being driven by many factors, such as electrification of the economy, onshoring manufacturing and AI/datacentres. Further, we believe a transition from El Niño could bring more favourable weather for the IPPs, which would likely be a positive tailwind for cash flows.
“Overall, we expect our coverage companies to remain relatively bullish on their outlooks on the quarterly calls. We do not expect any material capex increases or changes to project completion schedules and we expect to continue to hear that returns are elevated and reflect the current environment, which should drive solid cash flow growth. We continue to favour names with solid growth, optionality to fund pipelines and catalysts. We highlight BLX as our Top Pick and CPX as our preferred name, and we continue to see good value in INE’s operating portfolio; we maintain our Buy on NPI and EVGN.”
Mr. Stadler expects both Boralex Inc. (BLX-T) and Innergex Renewable Energy Inc. (INE-T) could “handily” beat the Street’s expectations (by approximately 5 per cent), while Algonquin Power and Utilities Corp. (AQN-T) could miss forecasts (by 10 per cent).
“While the pendulum on rates has swung to relatively higher levels, leading us to increase our discount rates by 50 basis points and trim our targets, we believe current valuations could prove to be attractive for those with a longer investment horizon,” he said.
His target changes are:
* Algonquin Power and Utilities Corp. (AQN-N/AQN-T, “hold”) to $5.50 (a Street-low) from $5.75. The average is US$7.29.
Analyst: “We forecast EPS of US$0.14, below (10 per cent) consensus of US$0.16. We expect higher interest expense (from rates and total debt), modestly unfavourable weather and limited growth to weigh on earnings. A resolution to the proposed renewables sales process could be forthcoming in the near term, but we believe the macro environment has potentially made a sale more challenging.”
* Brookfield Renewable Partners LP (BEP.UN-T, “hold”) to $37 from $39. Average: $39.06.
Analyst: “BEP is likely to communicate a positive outlook and that it continues to see strong opportunities to deploy capital at attractive risk-adjusted returns.”
* Boralex Inc. (BLX-T, “top pick”) to $42 from $44. Average: $38.60.
Analyst: “We forecast EBITDA of $213-million, ahead (5 per cent) of consensus of $203-million as we expect solid generation, project completions and strong pricing. BLX remains our top pick in the renewables space as we view it as a lower-risk play with best-in-class growth and catalysts on the horizon.”
* Capital Power Corp. (CPX-T, “buy”) to $49 from $51. Average: $43.09.
Analyst: “In our view, we are in the early innings of a gas resurgence as we enter the ‘reliability era’, which should be a tailwind for its gas-weighted portfolio. CPX remains a preferred name.”
* Innergex Renewable Energy Inc. (INE-T, “buy”) to $13 from $14. Average: $10.90.
Analyst: “We expect INE to provide some colour around upcoming RFPs, as well as a positive update on construction progress at the large Boswell Springs wind project; we see solid upside as weather patterns potentially transition from El Niño, which should bring more favourable weather.”
* Northland Power Inc. (NPI-T, “buy”) to $27 from $29. Average: $29.75.
Analyst: “We expect updates on construction progress (likely positive), some comments on recent leadership changes and possibly future growth opportunities.”
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Since National Bank Financial analyst Rupert Merer initiated coverage of Hammond Power Solutions Inc. (HPS.A-T) on April 9, its shares have dropped almost 14 per cent, however he continues to see a “long runway for growth” and thinks the Guelph, Ont.-based manufacturing company should “be favoured as a good way for investors to play re-shoring, electrification and accelerating data centre demand.”
Accordingly, following the release of in-line quarterly results and in response to the share price depreciation, he raised his recommendation to “outperform” from “sector perform” previously.
After the bell on Monday, Hammond reported first-quarter revenue of $191-million, up 11 per cent year-over-year and above both Mr. Merer’s $190-million estimate and the consensus projection of $188-million as it “continues to benefit from market tailwinds. Adjusted EBITDA of $31.0-million was narrowly lower than the analyst’s $31.8-million forecast but topped the Street’s expectation of $30-million.
“Growth should continue through 2024, but could slow as HPS is somewhat capacity constrained until it completes expansion investments,” said Mr. Merer.
“HPS previously announced production investments to take it to $900-million of revenue capacity by year-end (from $800-million now). With Q1 results, HPS highlighted strong demand driving small incremental plans for further equipment spending and its first price increase since 2022. The price increase should take hold in Q2E and support margins. To keep up with market growth at over 10 per cent per annum beyond 2025, we believe that HPS needs to invest about $40-million to $50-million per year. We will look for more colour on its growth plans, with a positive view on additional investments.”
Mr. Merer thinks Hammond currently sits in a favourable position to grow, pointing to a “strong” balance sheet, over $50-million per year in free cash flow and a “small” dividend obligation ($13-million per year).
“We believe it is comfortable at up to about $175-million in debt (less than 1.5 times EBITDA) which should support organic growth and potential for M&A to expand its power quality product lines,” he said.
The analyst maintained his target of $164 for Hammond shares. The average on the Street is $140.50.
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National Bank Financial analyst Dan Payne thinks it is important for investors to “appreciate” the current complexion of Athabasca Oil Corp. (ATH-T), “where it has established a very strong and streamlined base of operations in its thermal oil and light oil businesses, respectively, and each as supported by a strong financial foundation and capital structure.”
In a research report released Tuesday, he initiated coverage with a “sector perform” recommendation, calling it “a well-established oilsands development company, with an expanding emphasis on a complementary Duvernay growth vehicle.”
“With that, the company is anticipated to continue harvesting the deep value of its long-duration free cash flow (oil sands), while benefiting from the self-funded growth wedge (Duvernay Energy Corp.), and each in support of a magnification of shareholder returns,” said Mr. Payne. “The company is well stewarded by its solid management team, as led by Rob Broen (President & CEO) and Matt Taylor (CFO), in conjunction with its wellseasoned Board of Directors and management team.
“To reiterate its asset complexion, its focus remains oriented towards its established oil sands assets at Leismer and Hangingstone (30 mbbl/d [thousand barrels per day] of production with a multi-decade duration), while a newly formed private company Duvernay Energy Corp. (70-per-cent interest; 3 mboe/d with a 500- location inventory across 145 net sections) offers the increments of growth. As such, we expect significant long-duration free cash generated by its oilsands development (10-15-per-cent FCF yield) to be principally redirected towards buyback, and should augment the opportunistic growth profile of its Duvernay vehicle (50 per cent per annum stand-alone five-year plan), in support of that magnification of shareholder returns.”
Mr. Payne projects visible total return of 20-25 per cent per annum should be accrued by shareholders (vs. peers at 8 per cent), and a sum-of-the-parts valuation of its business units supports a fair value of $6.25 per share (versus its Monday closing price of $4.98).
“That context should find support from multiple thematic tailwinds, including a) Opportunistic Thermal Operating Profile (synergistic upside to compound value), b) Duvernay Energy Upside Through Growth & Optimization, plus c) Long-Term Option Value of Each, and d) WCS Differential Upside – in sum, those tailwinds could compound the value proposition towards $7.50 to $8.50 per share (or 50-per-cent upside to current trading), the potential of which (in association with continued strength in commodity pricing), characterizes it as a stand-out within the oilsands peer group and will ultimately underpin optimism within our thesis,” he said.
“At present, the stock trades at 4.6 times 2024 estimated EV/DACF [enterprise value to debt-adjusted cash flow], which is a discount to the thermal group at 5.7 times and in line with resource gas peers at 4.6 times, which we suggest is related to an increasing acknowledgement of its long duration & high-quantum free cash proposition, and remains validated by its magnified relative returns and the sum of the parts valuation.”
Mr. Payne set a target of $6.50 per share, touting further upside through “corporate execution of growth.” The average on the Street is currently $6.14.
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In other analyst actions:
* In response to a “sharp” share price gain thus far in 2024, Echelon Partners’ David Chrystal downgraded Firm Capital Apartment REIT (FCA.U-X) to “hold” from “speculative buy” with a US$4.25 target, down from US$4.50.
“FCA reported Q423 AFFO/unit of a loss of $0.3-million (a loss of $0.041/unit), compared to $0.15-million ($0.019/unit) in the prior-year period, and our negative $0.12-million estimate (negative $0.016/unit),” he said. “The variance to our forecast was attributable to higher-than-expected financing costs and a miss at the NOI line, largely given the rise in insurance costs. FCA continues to work through the sale of the majority of its portfolio, completing the sale of a property in Austin, TX during the quarter, and the sale of a joint venture asset in Maryland in January 2024. The majority of the remainder of the Trust’s portfolio is actively being marketed for sale. We continue to believe that management will execute on remaining asset sales, while there remains uncertainty regarding (1) asset pricing, (2) timing, (3) the use of proceeds and (4) the resulting corporate structure posttransactions.”
* In response to a first-quarter miss and “weak” guidance, ATB Capital Markets’ Tim Monachello trimmed his Ag Growth International Inc. (AFN-T) target to $81, below the $82 average, from $85 with an “outpeform” rating.
“While AFN’s H1/24 results are expected to be impacted by shifting Commercial project schedules and softness in US Farm activity, we believe AFN continues to benefit from longer-term structural tailwinds including product transfers, operational excellence initiatives, and deleveraging that we believe underpin its long-term value proposition for investors. Still, AFN shares could face pressure as investors weigh the implications of its weakened near-term outlook,” said Mr. Monachello.
* CIBC’s Anita Soni raised her Agnico Eagle Mines Ltd. (AEM-N, AEM-T) target to US$81 from US$80, keeping an “outperformer” recommendation. The average on the Street is US$76.48.
* Calling its first-quarter results an “encouraging start to the year,” National Bank’s Cameron Doerksen raised his Cargojet Inc. (CJT-T) target to $132 from $129 with a “sector perform” recommendation. Other changes include: TD Cowen’s Tim James to $162 from $157 with a “buy” rating and RBC’s Walter Spracklin to $182 (Street high) from $184, above the $149.17 average, with an “outperform” rating.
“The stand-out for us this quarter was CJT’s ability to deliver on volume growth despite competitors that saw meaningful declines. And although recent macro trends have caused management to be cautious, the team continues to believe midto high-single digit revenue growth is achievable. Moreover, cost initiatives have now been cemented — and operating leverage on increased volume looks very attractive. Pair that with the 15-20-per-cent available capacity in the existing fleet, and the setup for meaningful earnings growth in a volume recovery scenario is exceptional in our view. Reiterate CJT as our top idea,” said Mr. Spracklin.
* Canaccord Genuity’s Yuri Zoreda cut her Green Impact Partners Inc. (GIP-X) target to $9.50 from $12 with a “speculative buy” rating, while RBC’s Nelson Ng lowered his target to $9 from $14 with an “outperform” rating. The average is $9.88.
* In a first-quarter earnings preview, National Bank Financial’s Vishal Shreedhar increased his target for Premium Brands Holdings Corp. (PBH-T) by $1 to $110 with a “sector perform” rating. The average is $111.40.
“We project EBITDA growth of 4.5 per cent year-over-year, reflecting solid organic sales growth and margin expansion in Specialty Foods (SF); these factors are expected to be partly offset by softer performance in Premium Food Distribution (PFD),” he said.
“Over the medium term, we believe that PBH’s outlook will be supported by solid organic growth and EBITDA margin expansion (to 9.4 per cent in 2024 from 8.9 per cent in 2023). PBH currently trades at 10.5 times our NTM [next 12-month] EBITDA, lower than the five-year average of 13.5 times.”
* Reiterating his preference for Canadian life insurance companies over financials, CIBC’s Paul Holden increased his target for shares of Sun Life Financial Inc. (SLF-T) to $80 from $77, keeping an “outperformer” rating. The average is $76.69.
“The lifecos have been relative underperformers over the last quarter.,” he said. “We think there is an opportunity to lighten up on the banks and add lifeco exposure. Our reasoning is premised on: lifecos being beneficiaries of higher‑for-longer interest rates; less economic risk to earnings estimates; strong relative capital positions; better opportunities for organic growth in the current environment; and, reasonable valuation multiples. Further, we expect 13-per-cent year-over-year EPS growth, on average, for Q1, much higher than the EPS growth we are forecasting for the banks in a revenue-challenged environment.”
* RBC’s Luke Davis raised his Topaz Energy Corp. (TPZ-T) target to $27 from $26 with an “outperform” rating. The average is $27.54.
“Topaz delivered a solid in-line quarter, backstopped by strong activity in key regions. We believe management will continue to look for opportunities to grow the business inorganically, with the recent slowdown driven by continued capital discipline and focus on high-grading the current portfolio rather than a lack of options. In our view, Topaz remains well positioned; it remains on RBC’s Global Energy Best Ideas list,” said Mr. Davis.
* Peel Hunt’s Peter Mallin-Jones raised his Wheaton Precious Metals Corp. (WPM-T) target to $82 from $74. The average is $82.65.
David Leeder