Inside the Market’s roundup of some of today’s key analyst actions
Citing rising risks and concerns around industry fundamentals that continue to pressure the stock, National Bank Financial’s Adam Shine lowered his recommendation for Telus Corp. (T-T) to “sector perform” from “outperform” previously.
In a series of research reports released Friday, the equity analyst argued changes to Canada’s immigration policies have added a “key” risk for all telecommunications companies entering 2025, leading him to update his valuations across the sector and prompt his downgrade for the Vancouver-based company.
“Since Shaw/Freedom deals closed 4/3/23, Telus stock has dropped about 22 per cent and nearly $9-billion of market cap has been lost ($0.4-billion per month) amid steadily rising investor concerns regarding how wireless competition has evolved with ballooning data buckets and falling prices that have pressured ARPU [average revenue per user & service revs growth and seemingly undermined industry economics,” he added.
“Despite much talk this year, changing immigration policy becomes more real post-2024 and adds to risk in terms of future volumes (subscriber loading expectations may need to be revisited) and how this will further affect weakening 2023-2024 price trend. Complementing penetration gains in wireless in recent years has been population growth above more normalized 1 per cent due to materially stepped-up immigration. Changes to the latter, however, are expected to result in Canada’s population contracting 0.2 per cent in 2025 and 2026 before returning to projected 0.8-per-cent growth in 2027.”
Mr. Shine also thinks Telus was “positioned as outlier as CRTC asked to review Big 3 TPIA [third-party internet access] fibre access.”
“When CRTC announced its 11/6/23 interim decision on TPIA access to telco fibre networks in ON/QC, we thought it erred in not restricting access only by smaller/regional players,” he said. “This was repeated in its 8/13/24 final national decision. On 11/6/24, Federal Cabinet asked CRTC to reconsider whether Big 3 should be given TPIA fibre access. Since then, Bell, Rogers, Quebecor, Cogeco, Eastlink and others have all taken the position that Big 3 shouldn’t be able to resell each other’s networks, with Bell/Rogers stating that this access would impact future network investments. Telus, with a smaller incumbent footprint than Bell/Rogers, has asked a federal court to quash the Cabinet’s order.”
While he maintained his forecast for Telus, Mr. Shine cut his valuation multiple based on “evolving competitive pressures, especially in wireless, and elevated risks associated with immigration changes post-2024,” leading him to cut his target for its shares to $22 from $24. The average target on the Street is $24.25, according to LSEG data.
Concurrently, the analyst made these other target adjustments:
* BCE Inc. (BCE-T) to $37 from $41 with a “sector perform” rating. Average: $42.56.
Analyst: “It remains to be seen how Ziply Fiber buy will pan out, but risks are real as U.S. telecom competition intensifies. Canadian competitive dynamics triggered estimate revisions through 2024 and this could continue into next year. Though BCE has pointed to an unchanged dividend in 2025 and new 2-per-cent DRIP discount will help partly fund its U.S. acquisition and reduce payout by 30 per cent, investor questions persist as to future of dividend post-2025. A cut of at least 25 per cent in 2026 would help address this lingering issue and allow DRIP discount to be eliminated along with related dilution.”
* Cogeco Communications Inc. (CCA-T) to $85 from $84 with an “outperform” rating ahead of its Jan. 13 financial release. Average: $79.25.
Analyst: “The prior two quarters saw Adj. EBITDA beat consensus due to efficiencies by nearly 4 per cent in 3Q (also some corporate cost timing) and just under 3 per cent in 4Q. We see the company’s new CEO (since March) looking to continue to under-promise and over-deliver.”
* Rogers Communications Inc. (RCI.B-T) to $62 from $67 with an “outperform” rating. Average: $66.50.
Analyst: “In recent notes, we began including the consolidation of MLSE post-2024, as Rogers will see its stake double to 75 per cent after its purchase of Bell’s interest closes possibly in fall 2025. In the absence of disclosures from MLSE, we’ve been relying on estimates put together by Forbes which had projected revenues from Maple Leafs, Raptors and Toronto FC aggregating to US$655-million (Sportico was higher at US$738-million). We’re not changing our top-line estimates for MLSE, but we’re increasingly of the view that the aggregated EBITDA figure of US$190-million from Forbes is way too high. We conservatively halved our MLSE EBITDA estimates.”
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Empire Co. Ltd.’s (EMP.A-T) “accelerating” same-store sales gains is “a favourable indication” of further growth to come, according to National Bank Financial analyst Vishal Shreedhar, who is emphasizing “gradually improving” consumer sentiment.
“EMP noted market share gains across formats,” he said. “Market conditions continued to gradually improve; the sssg gap between conventional and discount narrowed further, which is encouraging for the outlook.
“The year-over-year comparisons for gross margin rate improvements (space productivity, supply chain initiatives and shrink reduction, among others) will be tougher going forward; NBF models 25 basis points growth y/y excl. fuel in H2/F25. The growth in SG&A rate is expected to moderate (NBF models 10 bps lower y/y in H2/F25 from 60 bps higher y/y in H1/F25) due to operating leverage. Our EPS estimates are revised slightly higher: F2025 goes to $3.01 from $2.99 and F2026 goes to $3.30 from $3.22.”
Shares of the Nova Scotia-based company, which owns Sobeys, Safeway, FreshCo, Farm Boy, Longo’s and other grocery banners across the country, jumped 5.2 per cent on Thursday after it reported second-quarter fiscal 2025 earnings per share of 73 cents, rising 2 cents from the same period a year ago and exceeding both Mr. Shreedhar’s 69-cent estimate and the consensus forecast of 66 cents. Same-store sales growth, excluding fuel, was also better than anticipated (1.8 per cent versus the analyst’s 1.3-per-cent projection).
“We hold a positive view on Q2/F25 results, reflecting better than expected sssg and good Food Retail EBITDA growth; this is in the context of low valuation vs. peers,” he said. “A higher than expected share of earnings from investments and other income added 6 cents to EPS vs. NBF, suggesting that the EPS beat was aided by transient factors.”
“Looking forward, we believe EMP has opportunity related to ongoing improvement initiatives, inexpensive valuation and easy compares, partly offset by structural differences versus peers including an elevated mix of conventional stores and less pharmacy exposure. We consider the value gap versus peers to be noteworthy; however, we believe the gap will remain pronounced until EMP delivers similar growth versus peers (EMP has started showing signs of improved growth).”
Reiterating his investment thesis and “sector perform” recommendation for Empire shares, Mr. Shreedhar increased his target to $49 from $46. The average target on the Street is $47.75.
Other analysts making target changes include:
* Scotia’s John Zamparo to $47 from $44 with a “sector perform” rating.
“We consider FQ2 a solid enough result for EMP, but believe the stock’s move is as much a reaction to yesterday’s rate cut combined with Empire’s portfolio as it was a good SSS number (though at 1.8 per cent, one that’s still below CPI). Backing out other income/investments, which was the majority of the beat, EPS grew 8.7 per cent, a healthy figure. We view all the grocers to be well positioned in 2025 as we expect food-at-home will keep taking share, and EMP’s investments in conversions and renovations are paying off. We’ve increased our P/E multiple a half-turn to 15 times to reflect improved performance and operating environmen,” he said.
* TD Cowen’s Michael Van Aelst to $48 from $44 with a “hold” rating.
“EMP greatly underperformed year-to-date and valuation gap is huge, so comments of consumer health gradually improving and 80bp sequential SSS improvement was enough to move shares higher,” he said. “We see consumer ‘getting less bad’ as easier comps cycled, not improving. EPS beat was timing related (on both opex & equity/other income) so believe 5-per-cent lift reflected short covering and investors feeling too underweight.”
* RBC’s Irene Nattel to $50 from $46 with a “sector perform” rating.
“Q2/F25 results were a tick above forecast as consumer value-seeking behaviour stabilizes. EMP continues to execute on its strategy to maximize revenues in full-service despite broader consumer movement to discount banners/ channels, while growing its discount presence. Green shoots in market conditions encouraging, but we maintain our view that any shifts in consumer behaviour in favour of EMP’s positioning that skews to full-service will be modest, gradual and protracted,” said Ms. Nattel.
* Desjardins Securities’ Chris Li to $50 from $47 with a “buy” rating.
“2Q reflected continued signs of improved consumer behaviour, aided by normalizing inflation and interest rates. While the recovery will be gradual and non-linear, stabilizing market conditions, continuing good margin management, cost containment and share buybacks should support 8-per-cent EPS growth this year (after two years of muted growth). This is a key catalyst for valuation improvement given EMP’s steep discount to peers. Near-term volatility is likely as macros remain uncertain. Patience is required,” said Mr. Li.
* BMO’s Tamy Chen to $48 from $44 with a “market perform” rating.
“EMP’s relative valuation discount has narrowed from a 7-8 times gap in the summer to 5-6 times now, we believe largely from this improvement in SSS. We wonder if a good part of this SSS catch-up trade has already played out. Our H2/F25E SSS has moved incrementally higher, but we hesitate to assume much higher rates into F2026E at this time,” she said.
* CIBC’s Mark Petrie to $55 from $47 with an “outperformer” rating.
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With investors punishing Imperial Oil Ltd. (IMO-T) for its 2025 guidance release on Thursday over “elevated capex to facilitate modest growth projects,” Desjardins Securities analyst Chris MacCulloch thinks the 6.7-per-cent sell-off was “overdone.”
“IMO outlined a $1.9–2.1-billion capital budget which materially outpaced consensus expectations ($1.75-billlion) and our previous assumption ($1.7-billion), reflecting an acceleration of growth and increased sustaining capex,” he said. “The latter was a notable point of contention on the conference call to the extent that sustaining costs have risen significantly over the past three years to $1.3–1.4-billion (from $1.1-billion), although management did not elaborate as to key root causes beyond inflationary pressures and the expanded production base. Upstream guidance was set at 433–456 mboe/d, the mid-point of which closely aligned with the Street (441 mboe/d) and our previous forecast (444 mboe/d). Meanwhile, downstream throughputs were pegged at 405–415 mbbl/d, which was significantly above our prior estimate (398 mbbl/d). Elevated refining volumes were partially a reflection of limited turnaround activity, which supported a reduction in associated costs to $111-million (vs our previous estimate of $230-million).
“Although details were limited ahead of a planned investor day next April, IMO outlined several cost-optimization initiatives at Kearl, including an acceleration of overburden removal, new tailings infrastructure, and the acquisition of new shovels and hauling equipment to facilitate growth in mine production capacity to more than 300 mbbl/ d. Additionally, the company also identified opportunities to accelerate infill drilling at Cold Lake.”
Despite the harsh reaction from the Street, Mr. MacCulloch made a “comparatively limited” target price cut to Imperial shares to $98 from $100, keeping a “hold” rating based on a perceived narrow return potential. The average is $101.59.
“Increased capex will diminish FCF for share buybacks and a potential SIB, though the company remains committed to its disciplined capital allocation framework,” he added.
Elsewhere, other changes include:
* Raymond James’ Michael Barth to $104 from $101.50 with a “market perform” rating.
“IMO released 2025 guidance and the stock was down nearly 7 per cent on the day, despite what we thought was actually a net positive update,” said Mr. Barth. “The focus seemed to largely be on higher-than-expected capital expenditures, but we note that the capex increase also comes with a more constructive medium-term outlook on both total production and unit opex. After adjusting estimates, our target actually increases modestly. Despite what we view as a serious overreaction on the day, our revised target is still just 7 per cent above the current share price (using strip pricing). IMO does plan to hold an investor day in mid-April, which could come with more positive/concrete color on opex and production growth beyond 2025, but until then, we continue to believe there are better risk-adjusted ideas across our coverage universe and reiterate our Market Perform rating.”
* TD Cowen’s Menno Hulshof to $96 from $93, maintaining a “hold” rating.
“Higher-than-expected capex in 2025, and through 2029 (vs. 2023 Investor Day), appears to be the #1 source of investor pushback, and explains the majority of today’s share price underperformance, in our view. However, we note that the FCF profile has also increased within its revised outlook, and when combined with a still peer-leading reinvestment ratio, we consider the market reaction overblown,” he said.
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In a separate note, acknowledging its downstream manufacturing segment faces near-term headwinds “in view of collapsing Midwest crack spreads,” Mr. MacCulloch said he was “impressed” by Cenovus Energy Inc.’s (CVE-T) improvement in upstream cash costs and” continue highlighting strong growth visibility moving into 2026, which should significantly enhance FCF upon completion of the three-year investment cycle.”
Like its peer Imperial, shares of Cenovus slid just over 1 per cent on Thursday following the premarket release of its guidance for the year-ahead. While investor reaction wasn’t favourable, the analyst made “positive” estimate revisions.
“CVE outlined a $4.6–5.0-billion capital budget, the mid-point of which closely aligned with consensus ($4.8-billion) and our assumption ($4.9-billion), which included $3.2-billion of sustaining capital and $1.4–1.8-billlion of growth capex to advance numerous major upstream projecst,” he said. “Upstream production was pegged at 805–845 mboe/d, the mid-point of which closely aligned with the Street (822 mboe/d) and our prior forecast (826 mboe/d), while cash costs came in $0.50/boe below our expectation, the latter of which supported positive revisions to our estimates. Meanwhile, downstream throughput guidance was set at 650–685 mbbl/d (93-per-cent utilization), which was above our prior forecast (657 mbbl/d), reflecting continued improvements to operational reliability. Notably, downstream opex also came in slightly below expectations, although we have largely retained our conservative underlying assumptions in view of recent performance challenges.
“At the project level, the company plans to deploy $600–700-million of capital toward oil sands growth, including further optimization and enhanced sulphur recovery at Foster Creek, the drilling of new pads at Sunrise and the acceleration of conventional heavy oil drilling activity. With respect to West White Rose, the topsides and concrete gravity structure will be floated and installed at the field next year, with drilling poised to commence in late 2025.”
Reiterating a “buy” recommendation for Cenovus shares, Mr. MacCulloch increased his target to $30.50 from $30. The average is $31.67.
Elsewhere, other changes include:
* Raymond James’ Michael Barth to $33 from $32 with an “outperform” rating.
“CVE released 2025 guidance [Thursday] morning that we largely view as a non-event,” he said. “Upstream production, Downstream throughput and other guidance items were all in-line with our latest estimates. We continue to have the view that the market is paying nothing for the Downstream business today, and heavily discounting a fantastic Upstream business relative to peers; patient investors should be rewarded as production growth materializes, capex rolls off, and downstream reliability improvements persist. After making a handful of minor estimates changes, our target price increases.”
* TD Cowen’s Menno Hulshof to $29 from $31 with a “buy” rating.
“2025 upstream production and capex guidance were in-line. U.S. downstream refinery utilization is expected to increase 2 per cent year-over-year given lower forecast turnaround impacts, plus lower cash opex. While positive, Chicago crack spread fundamentals also need to strengthen. CVE’s best-in-class PPS and FCFPS growth track is intact, with Narrows Lake leading the charge (first oil still anticipated by mid-year),” he said.
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CIBC World Markets analyst Krista Friesen made a series of target price increases to Canadian engineering and construction companies after assuming coverage on Friday.
“The end-market exposure of each of the companies is a critical factor for us when thinking about each company’s outlook for 2025,” she said. “While we see positive trends across the various end-markets, we highlight ATRL’s and ARE’s exposure to nuclear. We see significant growth opportunities for both companies given the current nuclear renaissance, and the global transition to net zero. With that said, looking more broadly at the construction space as a whole we see a number of government funding initiatives globally and regulatory changes driving increased spending.
“Geographic Exposure: The top geographic exposures for our companies are the U.S., Canada and Europe. While there is an increased level of uncertainty in the U.S. with a new administration coming to power in January, we continue to view the U.S. as the best area for growth in 2025. A notable amount of the funds under various spending acts has already been allocated, and we are of the view that ultimately these funds will not be clawed back. We are also seeing solid private investment in the space, particularly as it relates to EV battery plants and data centers.”
Her changes included:
* Aecon Group Inc. (ARE-T, “outperformer”) to $35 from $29. The average target is $30.64.
Analyst: “Over the past year there have been a number of positive developments in the ARE story, including the company nearing the completion of its legacy fixed-price contracts, movement towards a more stable margin profile, and growth in the Nuclear and Power businesses. As we look to 2025, we expect completion of the legacy fixed-price contracts, which should remove an overhang on the story, and an increased focus on growth opportunities within nuclear and power through ARE’s partnership with Oaktree. While ARE’s share price is up 104 per cent year to date, we foresee continued upside potential.”
* AtkinsRéalis Group Inc. (ATRL-T, “outperformer”) to $90 from $80. Average: is $83.67.
Analyst: “As we look out to 2025 and the next three years for ATRL, we see significant opportunity for the company, whether it be in nuclear, divesting of non-core businesses, or achieving the Investor Day targets it presented in June of this past year.”
* Badger Infrastructure Solutions Ltd. (BDGI-T, “outperformer”) to $52 from $49. Average: $48.75.
Analyst: “We roll over our BDGI model to 2026 and increase our price target.”
* Bird Construction Inc. (BDT-T, “neutral”) to $34 from $29.50. Average: $35.38.
Analyst: “The company’s shares are up over 100%, its combined backlog hit a record $7.9B in Q3, and it hosted a successful Investor Day in October at which it announced solid targets. As introduced in its 2025-2027 Strategic Plan, BDT will focus on key strategic end-markets, which should help drive double-digit revenue growth, and margin expansion. We believe current macro trends support BDT’s goals, and when combined with the company’s ‘One Bird’ strategy, and operational excellence initiatives, we expect BDT to achieve its targets. However, we think the rest of the market also believes that BDT will achieve its targets, resulting in shares which are pricing in perfect execution and a supportive macro environment over the next three years.”
* Stantec Inc. (STN-T, “outperformer”) to $134 from $121.50. Average: $132.55.
Analyst: “Our investment thesis for STN is predicated largely on that which separates it from its peer group: i.e., the company’s exposure and leading position in Water, and its outsized exposure to the U.S. In terms of potential catalysts, in addition to benefiting from its end‑market and geographic exposure, we believe the company is well positioned to execute on M&A in the near term and also well on its way to achieving the financial targets it outlined at its Investor Day in 2023.”
* WSP Global Inc. (WSP-T, “outperformer”) to $280 from $264. Average: $237.57.
Analyst: “As we look out to 2025 our investment thesis for WSP largely centers on what we believe are three key catalyst opportunities for the company: the integration of the POWER Engineers acquisition and potential earnings upside; the company’s Investor Day scheduled for February; and the potential for more M&A.”
Ms. Friesen added: While we have an Outperformer rating on each of the engineering names, our pecking order in the space is WSP, followed by ATRL, and STN. Within the Construction names we have Outperformer ratings on ARE and BDGI, and a Neutral rating on BDT. Among the Construction names our pecking order is BDGI followed by ARE and BDT.”
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In other analyst actions:
* Following Thursday’s announcement of $204-million acquisition offer from Agnico Eagle Mines Ltd. (AEM-T), CIBC’s Bryce Adams cut his O3 Mining Inc. (OIII-X) to “tender” from “outperformer” and lowered his target to $1.67 from $3.70. The average is $2.49.
“We expect the deal to be approved and to go close in early 2025.,” he said.
* CIBC’s Cosmos Chiu lowered his OceanaGold Corp. (OGC-T) target to $5.75, below the $5.86 average, from $6 with an “outperformer” rating.
“OceanaGold published a Pre-feasibility Study (PFS) on the Waihi District, which is its first comprehensive technical report for the Waihi District since 2020. At a $2,400/oz gold price assumption, the PFS now values the asset at $621 million, including the Wharekirauponga (WKP) Underground located 10 kilometres north of Waihi,” he said.
* Following “soft” 2025 guidance, BMO’s Ben Pham cut his target for Pembina Pipeline Corp. (PPL-T) to $59 from $61 with an “outperform” rating, while Raymond James’ Michael Barth lowered his target to $61 from $62 with an “outperform” rating.. The average is $61.60.
“We are maintaining our Outperform rating on PPL shares, but lowering our target ... and shifting shares out of our Top 5 Best Ideas roster,” he said. “Long-term growth (4-6-per-cent fee-based adj. EBITDA/sh through 2026) and relative valuation remains attractive (11 times EBITDA vs. 11.5 times KEY and 12 times ENB/TRP) but 2025 EBITDA guide was a tad soft (3 per cent below consensus) and we believe the CER review of Alliance tolls could weigh on shares in the near-term, esp. following the recent unfavorable recontracting outcome on the Cochin pipe.”
* In a 2025 outlook for Canadian energy infrastructure stocks, ATB Capital Markets’ Nate Heywood raised his targets for Secure Energy Services Inc. (SES-T) to $20 from $18 and TransAlta Corp. (TA-T) to $22 from $18 with “outperform” ratings for both. The averages are $17.68 and $16.23, respectively.
“The year ahead should bring transformational changes to the energy landscape in Canada with LNG Canada entering service, the potential for data center development and the continued ramp-up of TMX,” said Mr. Heywood. “With improved egress and market optionality, we expect the pricing response will spur development across the WCSB and lead to year-over-year volume growth in the mid-single-digit range. While this will support high utilization of existing energy infrastructure assets, we also anticipate targeted capex deployment toward brownfield projects that improve connectivity and attractive investment multiples (5-8x) to elevate cash flows across the entire midstream value chain. Balance sheet positioning will continue to differentiate investment preferences and remains a core priority for a number of names under coverage (ALA, PKI, SOBO, TRP). Given the value creation in 2024, we anticipate share repurchases will remain active as an alternative cash flow lever, with GEI, KEY, PKI, SES, SPB and TA likely to execute under their respective NCIBs. The natural gas trade, driven by LNG and power demand, is expected to provide catalysts for IPPs, utilities and transmission pipeline operators. Our highest conviction names in the year ahead are ALA, ENB, SES and TA.”
* Raymond James’ Michael Barth lowered his Suncor Energy Inc. (SU-T) target to $55 from $56 with a “market perform” rating. The average is $61.93.
“SU released 2025 guidance that was largely consistent with consensus expectations, and only modestly below our previous estimates,” said Mr. Barth. “Production, refining throughput, and capex expectations appeared more-or-less par for the course, but unit cost guidance at Fort Hills did come in higher than we expected. On balance, our estimates come down slightly and our target falls to $55.00/share ($56.00/share prior). With SU more-or-less trading at our target, we continue to see better risk-adjusted returns elsewhere in our coverage universe and reiterate our Market Perform rating.”
* CIBC’s Kevin Chiang raised his Transat AT Inc. (TRZ-T) target to $1.80 from $1.45 with an “underperformer” rating, while TD Cowen’s Tim James increased his target to $2.25 from $2 with a “hold” recommendation. The average is $1.76.
“Disciplined competitive environment suggests stronger-than-previously expected F25 yield environment while non-recurring cash flows benefit b/s. Financial leverage, narrow margins and P&W engine issues expected to limit short-term share price upside,” said Mr. James.
* In response to a fourth-quarter earnings beat, National Bank’s Adam Shine raised his Transcontinental Inc. (TCL.A-T) target to $23 from $21 with an “outperform” rating. Other changes include: BMO’s Stephen MacLeod to $20 from $18 with a “market perform” rating, Scotia’s Maher Yaghi to $22 from $19.50 with a “sector outperform” rating and RBC’s Drew McReynolds to $24 from $23 with an “outperform” rating. The average is $21.67.
“Despite cyclical and structural headwinds, we believe Transcontinental is successfully transitioning from legacy commercial printing to packaging and retail services with a return to EBITDA growth in F2024 bolstered by cost efficiencies,” said Mr. McReynolds. “We forecast solid FCF generation in F2025 ($2.25/share) driven by moderating capex and further working capital improvements. With the stock trading at 5.1 times FTM [forward 12-month] EV/EBITDA versus an average of 7.2 times for packaging peers (each 0.5 times increase in multiple equates to $2.50/share), we continue to see value in the shares particularly given management’s track record of solid execution and strong balance sheet (net debt/EBITDA of 1.2 times in F2025E.”
* CIBC’s Scott Fletcher hiked his target for Well Health Technologies Corp. (WELL-T) to $7 from $5.25 with a “neutral” rating, while RBC’s Douglas Miehm increased his target to $7 from $6 with an “outperform” rating. The average is $8.20.
“WELL announced a private equity placement of $50.4-million at WELLSTAR (previously WPS), valuing it at a pre-financing EV of $285-million, above our $214-million valuation for the SaaS business in our SOTP [sum-of-the-parts],” said Mr. Miehm. “Management anticipates to spinout WELLSTAR in 2025 and reiterated its intention of maintaining the majority of the economic and voting interest in WELLSTAR. Separately, we note the news of ELNA Medical entering creditor protection (here) underscores the challenges in operating clinics in Canada, where WELL has demonstrated continued success and has built capabilities in turning around loss-making clinics.”