Inside the Market’s roundup of some of today’s key analyst actions
CIBC World Markets analyst Todd Coupland sees Celestica Inc.’s (CLS-N, CLS-T) “improved visibility” being confirmed by better-than-expected fourth-quarter results and a “more robust” 2025 outlook, leading him to upgrade its shares to an “outperformer” rating from “neutral” previously.
“The company expects demand and business momentum to remain strong through 2026,” he added. “Celestica also announced two new 1.6-terabyte (1.6T) switching program wins, following its first 1.6T program win in Q3.”
On Thursday, TSX-listed shares of the Canadian designer and manufacturer of hardware and supply-chain solutions jumped 13.4 per cent, rebounding from a steep sell-off earlier in the week triggered by concerns over China’s DeepSeek AI model, after it reported revenue of US$2.55-billion and adjusted earnings per share of US$1.11, both exceeing the Street’s expectations (US$2.53-bilion and US$1.05). It’s guidance for the first quarter and full-year 2025 also topped projections at US$2.55-billion and US$10.7-billion and US$1.11 and US$4.75 (versus US$2.41-billion and US$10.4-billion and US$1 and US$4.42).
“Celestica’s hyperscaler exposure for GEN-AI is the most important growth driver for its CCS [Connectivity & Cloud Solutions] unit,” said Mr. Coupland. “The company expects its recent program wins will further position it as a leading provider of AI data centre (DC) solutions. Our 2025Eand 2026 forecast is based on three factors: Communications revenue growth with existing and new customers, decelerating Enterprise revenue with a recovery in H2/25, and muted ATS revenue. Margins are assumed to increase.”
Mr. Coupland said his thesis for Celestica is based on several factors, including an acceleration in hyperscaler spending on data centre hardware by 40 per cent by 2027 with an acceleation based on DeepSeek’s open-source, capital-light model as well as a re-acceleration in the visibility surrounding revenue and EPS leverage tied to growth.
“In our view, Celestica should trade at a premium blended valuation to EMS peers (FLEX and JBL) and close to Networking peers (ANET, Accton, CSCO, and PSTG) given its leading competitive position in the networking market,” he said.
Mr. Coupland’s target for Celestica shares jumped to US$150 from US$68. The average on the Street is US$127.50, according to LSEG data.
Elsewhere, other analysts making target adjustments include:
* RBC Dominion Securities’ Paul Treiber to US$140 from US$115 with an “outperform” rating.
“Celestica reported a solid beat and raise,” he said. “More important than Q4 and FY25 guidance, in our view, is Celestica’s disclosure that it won two new large programs. These wins improve visibility to Celestica seeing continued solid growth through 2026 and 2027. Moreover, the wins affirm Celestica’s strong positioning, market share gains and shift to a higher quality business model (i.e. HPS/ODM).”
* TD Cowen’s Daniel Chan to US$130 from US$107 with a “buy” rating.
“We are most impressed by the quality of new wins announced,” he said. “The 1.6T win supports our view of Celestica’s leadership position in hyperscale networking. We believe the HPS full rack AI win is with a GenAI leader across multiple domains, broadening Celestica’s service offerings and customer base. Momentum building into 2026 and beyond.”
* Canaccord Genuity’s Robert Young to US$138 from US$110 with a “buy” rating.
“While CLS shares have seen meaningful multiple expansion in 2024, we highlight the ongoing shift in mix from legacy, low margin EMS towards higher growth, higher margin, stickier ODM revenue with high design content. As well, we see Celestica being chosen increasingly as a full rack integrator with differentiated services wrapped around. This shift is propelling Celestica up the value stack as the company applies its own IP and design. Following our upward estimate revisions to align with Q1 and F2025 guidance, our target price rises,” said Mr. Young.
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Desjardins Securities analyst Benoit Poirier thinks the “worst is over” for Canadian National Railway Co. (CNR-T), however he cautions a “conservative approach [is] warranted” following weaker-than-anticipated fourth-quarter 2024 results.
CN’s chief executive says she’s optimistic for 2025 despite tariff threats
“Our 2025 estimates remain conservative given the sensitivity of the guidance to international intermodal (with the tariff overhang, we believe U.S.-bound freight will not necessarily be eager to quickly return to Canada),” he said. “We also include a margin of safety for potential disruptions similar to what CN has faced over the last two years. We now forecast 11.5-per-cent EPS growth, driven by 3.1-per-cent RTM [revenue ton mile] growth, 1.8-per-cent yield growth, 250 basis points of OR [operating ratio] expansion and a 2.4-per-cent reduction in average share count.”
After the bell on Thursday, CN reported quarterly revenue of $4.248-billion, relatively in line with the Street’s expectation of $4.361-billion. Adjusted fully diluted earnings per share of $1.82 fell 9 cents under the consensus forecast and the railway’s operating ratio deteriorated beyond estimates.
“Lower starting point means EPS guidance of 10–15 per cent is relatively in line with market expectations,” said Mr. Poirier.” CN is targeting 10–15-per-cent EPS growth in 2025, but this is based on a lower starting point than what the market was expecting (4Q EPS missed by C$0.11). If 4Q was in line, the new guidance would imply 8–13-per-cent EPS growth for 2025. The midpoint of the new guidance is $7.99, slightly below consensus of $8.07. CN is targeting RTM growth in the low to mid-single digits, with the single biggest contribution from international intermodal as CN laps 2024 disruptions and tries to regain lost US-bound freight through the West Coast. CN intends to recapture around 200 basis points on its OR vs last year for oneoff events.”
The analyst also noted CN’s capital expenditure target for 2025 came in lower than the Street was projecting “despite labour/material inflation and weaker loonie headwind.”
“CN continues to manage NCIB to its 2.5 times target,” he added. “For 2025, CN plans to spend $3.4-billion on capex, which is lower than consensus of $3.6-billion. CN also announced the approval of a new NCIB that permits it to purchase up to 20m shares. We now model CN repurchasing 15m shares in 2025, which is equivalent to $2.3-billlion (below last year’s $2.6-billion). Consequently, we forecast that CN will end the year with leverage just below its target at 2.4 times.”
After reducing his revenue and earnings expectations through fiscal 2027, Mr. Poirier lowered his target for CN shares to $176 from $180 with a “buy” rating. The average is $172.77.
Elsewhere, other analysts making target adjustments include:
* RBC Dominion Securities’ Walter Spracklin to $171 from $174 with an “outperform” rating.
“CN reported a weak Q4, however not overly unexpected,” said Mr. Spracklin. “More important is that the guide nicely bracketed consensus, which is key, as we know management wanted to set deliverable targets for 2025 - and given that objective, we therefore view the guide as very encouraging. Key is that delivering on this guidance in 2025 will now be paramount; and we believe CN is capable of doing that. If achieved, which we think it will, we see a meaningful re-rate in the shares - which is core to our positive view.”
* Scotia’s Konark Gupta to $176 from $178 with a “sector outperform” rating.
“CNR missed reduced expectations due to uncontrollable challenges in November-December,” he said. “However, we think the bar was low and 2025 guidance, at mid-point, came roughly in line with the Street. We believe the guidance appropriately reflects ‘realistic’ downside/upside scenarios for potential tariffs and increasingly unpredictable weather events. This year is lapping easy comps (multiple events last year), CNR-specific initiatives are ramping up, and the company is regaining operating leverage through internal efforts. Further, buybacks could accelerate this year as CNR reduced capex outlook and the leverage ratio remains near targeted 2.5 times. We modestly trimmed our 2025-2027 EPS outlook while improving our FCF outlook. CNR is attractively trading at 19 times/17 times P/E on 2025E/2026E, in line with U.S. rails vs. a historical premium of 2 times. While we acknowledge that CNR missed 2024 guidance that was cut twice, its 2025 outlook is more favourable than U.S. peers.
* Stifel’s Benjamin Nolan to US$125 from US$120 with a “buy” rating.
“CN reported 4Q results that were okay but not great, which has generally been the story for the company for several years,” said Mr. Nolan. “Management gave guidance for 10-15-per-cent EPS growth despite challenging comps in areas like grain and the potential for tariffs. While we do think there is room for earnings growth following a year packed with disruptive factors, we do think at least the higher end of the guidance range is aspirational. However, given the decline in share price over the past year on a relative and absolute basis, we believe the bar is low for a catch-up trade.”
* National Bank’s Cameron Doerksen to $176 from $178 with an “outperform” rating.
“We remain hopeful for a better 2025 for CN Rail, but concede that the company may need to show solid execution in the coming quarters if the stock is to move meaningfully higher,” he said.
* ATB Capital Markets’ Chris Murray to $161 from $165 with a “sector perform” rating.
“While CN guided to healthy growth in 2025 and maintained its longer-term targets, the Company reported weak Q4 results with macro conditions pressuring key freight types, and we remain cautious on management’s ability to deliver the guide,” he said. “Valuations also remain challenging, in our view, with shares trading at a not inexpensive 19.0 times 2025 estimated EPS.”
* TD Cowen’s Cherilyn Radbourne to $171 from $170 with a “buy” rating.
“CN’s Q4/24 results were disappointing, but investor interest is largely predicated on the potential for CN to generate better 2025 earnings growth vs. most of the peers, based on easy PY [prior year] comps, combined with the anomaly of CN trading at a discount vs. the group. We believe that favourable set-up still prevails, supporting our Buy rating, but we would rather have seen CN guide more conservatively,” she said.
* JP Morgan’s Brian Ossenbeck to $174 from $179 with an “overweight” rating.
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National Bank Financial analyst Vishal Shreedhar expects to see “solid” year-over-year growth from Canadian Tire Corp. Ltd. (CTC.A-T) when it reports fourth-quarter 2024 results on Feb. 13, pointing to easy comparables to the same period in the previous year as well as the positive impact of “accommodative” weather.
“We expect positive sssg [same-store sales growth] across the banners,” he said. Management indicated early trends in Q4/24 were improving. Our review of StatsCan data (until Nov. 2024) indicates that retail sales in Q4/24 weighted to: (i) CTR declined 1.5 per cent year-over-year (improving sequentially from down 2.8 per cent), (ii) Mark’s was flattish year-over-year (versus 0.6 per cent last quarter) and (iii) SportChek declined 6.0 per cent year-over-year (sequentially similar),” he said. “Our data suggests that Dec. 2024 was a strong month for retail in general (StatsCan Dec. data unavailable).
“We believe CTC will outperform the market, due in part to cycling easy compares (CTR sssg was down 6.8 per cent, SportChek sssg was down 6.4 per cent and Mark’s sssg was down 7.2 per cent). Our analysis of weather data indicates that Q4/24 was colder year-over-year, particularly in Dec. 2024, which we view to be favourable. Similarly, we believe snowfall in Q4/24 increased year-over-year.”
Expressing “cautious optimism,” Mr. Shreedhar earnings per share to jump “significantly” higher to $4.62 for the quarter from $3.38 in the last fiscal year and well above the Street’s forecast ot $4.27. He attributes that gain to “positive sssg at all banners, Retail gross margin expansion, SG&A leverage, full consolidation of CTFS (1 month) and share repurchases over the last 12 months, partly offset by a higher tax rate year-over-year (we model 26.0 per cent vs. 25.1 per cent last year).”
“We understand that the difference in performance between essential and discretionary is narrowing, which could be an early signal of increasing consumer strength,” said Mr. Shreedhar. “Moreover, we note the Bank of Canada indicated that “economic activity is gaining momentum as past interest rate cuts work their way through the economy ... The pickup in household spending is starting to broaden to other consumer items and is projected to strengthen further”.
“Partly offsetting factors include a significant mortgage renewal (the Bank of Canada suggested that 60 per cent of outstanding mortgages are expected to renew over the next two years; November 2024 speech) and pressured consumer confidence.”
Maintaining his “sector perform” recommendation, the analyst raised his target to $176 from $171. The current average on the Street is
“Given soft consumer demand and uneven operating performance, we see more attractive opportunities elsewhere in our coverage universe. That said, green shoots appear to be emerging,” he concluded.
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In a research report released Friday titled Brick By Brick The Story Builds On, National Bank Financial analyst Ahmed Abdullah initiated coverage of Leon’s Furniture Ltd. (LNF-T) with an “outperform” rating, touting its position as the country’s largest home retailer with “dominant market share that’s poised to grow” and seeing its strategy to surface real estate value provides significant optionality.”
“LFL boasts an impressive coast-to-coast presence with around 300 stores that are supplemented by six regional standalone distribution centres (DC),” he said. “The Company’s brand banner portfolio is highly recognized across the Canadian marketplace (namely Leon’s and The Brick) which communicates a certain level of quality and reliability to consumers. LFL’s ecosystem of product offerings (e.g., insurance, financing, warranty, after-sales service, etc.) around its core business also adds value to consumers when compared with other retailers. With roughly $3 billion in total system-wide sales, LFL has a 15 per cent market share that is expected to grow. That is due to scale and distribution capabilities becoming an increasingly important factor for success in the industry.”
“While our target does not include the REIT IPO plans given limited details and timing uncertainty, we cannot ignore the upside optionality that LFL shares offer as it works on surfacing the value of its real estate. We estimate that the potential value of LFL’s real estate portfolio could fall somewhere between $1.0 billion to $1.3 billion. LFL owns a portfolio of real estate that includes 51 properties sitting on a total land space of 430 acres (18.7 million square feet of total land) across Canada with 5.6 million square feet of retail/office/industrial space in use.”
Mr. Abdullah also sees a “growing degree” of operational leverage poised to accelerate earnings growth for the Toronto-based company as its shift its retail strategy “from a decentralized model to a centralized approach across its footprint.”
“The shift is in tune with consumer behaviour as online shopping expands, but more importantly, it offers SG&A cost savings that allows for margin enhancement for LFL driven by supply chain optimization,” he said. “Given the solid track record of retail execution, we expect LFL to deliver on its centralization strategy that will drive a growing degree of operating leverage and accelerating earnings growth as adjusted EBITDA margins expand.”
With an “attractive EV/EBITDA valuation with an appealing risk/reward profile,” Mr. Abdullah set a target of $34 per share, which sits 50 cents under the average on the Street.
“While there are no direct comparables for LFL in Canada, we compiled a list of peers that includes Canadian retailers and U.S. furniture retailers, amongst others,” he explained. “LFL is currently trading at the bottom with EV/EBITDA trading multiples of 5.5 times 2025 estimates and 5.0 times 2026E (Canadian Retailers 9 times and U.S. Furniture Retailers 11 times), all while boasting strong fundamental metrics vs. peers.
“Since 2004, LFL shares traded at a NTM [next 12-month] average EV/EBITDA of 6.9 times, and 6.7 times if we consider the average since 2014. We view the current discount vs. historical multiples as unwarranted and upside exists from a valuation perspective that should drive LNF shares higher.”
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In other analyst actions:
* In response to Thursday’s announcement of a $136-million acquisition of a retirement residence in Monday, Scotia’s Himanshu Gupta bumped his Chartwell Retirement Residences (CSH.UN-T) target to $18 from $17.50 with a “sector outperform” rating. The average target is $18.28.
* Desjardins Securities’ Gary Ho cut his target for Fiera Capital Corp. (FSZ-T) to $9, under the $9.33 average on the Street, from $10.25 with a “hold” rating.
“FSZ reported preliminary December AUM [assets under management] of $167.1-billion, up 1.0 per cent quarter-over-quarter and right in line with our estimate of $167.1-billion,” he said. “We have factored in strong market moves in 4Q while also increasing our net outflow assumptions (including the $5.5-billion lost mandate in 1Q25), resulting in lower 2025–26 estimates. Despite the compelling 11-per-cent dividend yield and solid private alt growth, continued outflows remain an overhang on the story.”
* Following lower-than-expected fourth-quarter 2024 results, Stifel’s Martin Landry cut his Flow Beverage Corp. (FLOW-T) to 20 cents from 25 cents with a “hold” rating. The average is $1.10.
“FLOW reported Q4FY24 results with revenues of $11.8-million, up 22 per cent year-over-year, but lower than our expectations and consensus of $14-million,” he said. “Adjusted EBITDA came in at negative $2.7-million, worse than our expectation of negative $1-million. During the quarter, Flow contracted additional debt which brought net debt levels at $41-million, up from $23-million last year. A significant portion of this debt ($24-million) is short-term, putting pressure on management to find alternative financing solutions to bridge until the company’s operations generate positive cash flows. Management introduced a FY25 guidance calling for revenues of $72-82-million, and adjusted EBITDA of $6-11 million. Our forecasts are lower given management’s mitigated track record of achieving their guidance. We are maintaining our HOLD rating and lower our price target to $0.20. We are concerned with the rising debt levels and delays to achieve positive EBITDA.”
* Canaccord Genuity’s Tania Armstrong-Whitworth raised her HLS Therapeutics Inc. (HLS-T) target to $4.25 from $3.50 with a “hold” rating. The average is $6.05.
* As his bullish thesis “continues to play,” BMO’s Joel Jackson raised his Methanex Corp. (MEOH-Q, MX-T) target to US$65, above the US$63.06 average, from US$60 with an “outperform” rating.
“Methanol is tight, the OCI deal seems accretive, consensus estimates are rising, and MEOH is operating well (ex deteriorated gas conditions in New Zealand). Above-consensus 2025E estimates remain generally intact with tweaks, but we are becoming more comfortable pro forma postOCI FCF is $10 per share, as opposed to $9, even assuming methanol prices fall from $400/ t realized (i.e. spot) to more mid-cycle averages (i.e. $350/t),” he said.
* Raymond James’ Steven Li lowered his Real Matters Inc. (REAL-T) target by $1 to $8 with an “outperform” rating, while ATB Capital Markets’ Martin Toner raised his target to $12 from $11 with an “outperform” rating.. The average is $8.36.
“F1Q25 results came in below consensus. Given U.S. mortgage rates continue to hover 6.9 per cent and the ‘higher for longer’ view, we are resetting our forecasts lower. We now factor in one rate cut (2 prior). Our target price also moves lower as a result,” Mr. Li said.
* Following Thursday’s quarterly release, Canaccord Genuity’s Aravinda Galappatthige cut his Rogers Communications Inc. (RCI.B-T) target to $42 from $46 with a “hold” rating. Other changes include: Scotia’s Maher Yaghi to $58 from $64 with a “sector outperform” rating, BMO’s Tim Casey to $55 from $65 with an “outperform” rating and JP Morgan’s Sebastiano Petti to $57 from $63 with an “overweight” rating. The average is $56.64.
“Rogers reported in-line Q4 results [Thursday], highlighting a more moderate wireless loading environment and sustained high competitive intensity as we had expected,” said Mr. Yaghi. “The company saw strong EBITDA growth, largely helped by cost reductions which led to margin improvements in both wireless and cable segments. The company provided a F2025 outlook which includes 1.5-per-cent growth at the midpoint for both service revenue and EBITDA, in line with our and the Street’s expectations heading into the quarter. We think this is achievable even with continued trends of normalized population growth and an ongoing competitive pricing environment. What causes concern for us is the delay in closing of the backhaul transaction, which we estimate should help reduce leverage by 0.7x. No meaningful updates were provided on that today and until we get more clarity on this, we may continue to see pressure on the stock. We have slightly revised our estimates down and have lowered our target to $58 due to a lowered medium-term growth outlook in our DCF.”
* Several analysts resumed coverage of Spartan Delta Corp. (SDE-T) after coming off research restriction following the close of its recently announced equity financing, in support of accelerated development & value expansion within the Duvernay. They include: Desjardins Securities’ Chris MacCulloch with a $5.25 target, up from $5, and a “buy” rating; ATB Capital Markets’ Patrick O’Rourke with a $4.75 target, up from $4.25 with a “sector perform” rating; Scotia’s Cameron Bean with a $7.50 target from $6 with a “sector outperform” rating; National Bank’s Dan Payne with a $7 target, up from $6, and an “outperform” rating and TD Cown’s Aaron Bilkoski with a $5.50 target and “buy” rating.
“The W.G. Duvernay should be one of the most topical plays in the WCSB in 2025,” said Mr. Bilkoski. “It has several well capitalized operators active spending nearly $1-billion of capital in aggregate. While it’s still relatively early, we believe SDE has demonstrated the quality of this oil/condensate rich-play, and its ability to execute. We estimate the potential value of the Duvernay/share dwarfs SDE’s current share price.”