Inside the Market’s roundup of some of today’s key analyst actions
Citi analyst Jon Tower is “not expecting much narrative shift” surrounding Restaurant Brands International Inc. (QSR-N, QSR-T) when it reports its second-quarter financial results on Aug. 7.
“QSR emerged from 1Q earnings with core-market top-line momentum, a reset multi-year unit growth outlook, and a leaner cost structure, all of which should have paved the way for a better balance of 2025; however, even at current multiples (an undemanding 16.5 times calendar 2026 EBITDA), we believe multiple expansion requires some combination of: (1) an improved narrative around global unit growth, and/or (2) increased comfort that QSR has the product/value/marketing firepower to steadily navigate a still choppy sales environment,” he said in a client note.
For the parent company of Tim Hortons and Burger King, Mr. Tower is now projecting earnings per share of 98 US cents, up from 86 US cents during the same period in fiscal 2024. The Street is expecting US$1.05, according to LSEG data.
“What the data says — (1) year-over-year BK U.S. footfall contraction improved quarter-over-quarter (to down 2.1 per cent vs. down 3.6 per cent in 1Q) and market share vs the Big 3 has mildly slipped year-to-date. (2) Canada LSR sales have remained relatively resilient through April (up high single digit percentage year-over-year) though unemployment trends have moved sequentially higher through May. (3) France’s (large market for BK Intl) services confidence index continues to trend lower, with June at recent lows. Unemployment has modestly improved as of May,” he said.
“Key topics/questions (1) How did sales track through the quarter and what dayparts/categories outperformed /underperformed vs. expectations/peers? (2) How have new beverage/equipment/food introductions at TH CAN (e.g., Frozen Quenchers, new espresso machines still rolling out) shifting consumption patterns/AUVs at the brand. Any signs of breakfast cannibalization as PM products have been added? (3) With the U.S. tariff situation still evolving, are there advantages TH CAN can exploit on securing coffee from major suppliers (e.g., Brazil)? (4) Updates on progress at BK China with respect to refranchising and/or improving operations/fundamentals. (5) Progress on BK U.S. remodels, returns and franchisee buy-in? PLK [Popeyes Louisiana Kitchen] Easy-to-Run kitchen roll-out updates/progress.”
After narrow increases to his full-year 2025 and 2026 EPS projections to (US$3.75 and US$4.25, respectively, from US$3.73 and US$4.20) based on foreign exchange considerations, Mr. Tower bumped his target for Restaurant Brands shares to US$76 from US$75, reiterating a “neutral” recommendation. The average on the Street is US$77.16.
“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 brand globally and solid comp growth at TH Canada,” he explained. “However, limited visibility into the economics of nascent businesses outside core markets (e.g., PLK International, TH International, FHS [Firehouse Subs]) 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.”
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In a research report released Monday titled Better than Feared But Not Yet Out of the Woods, RBC Dominion Securities analyst Drew McReynolds cautioned Canadian media companies provide few enticing opportunities for investors heading into second-quarter earnings season.
“Despite decent year-to-date performance as well as reasonably resilient advertising spend in Q2/25, we continue to see downside risk to our earnings estimates and share prices for most stocks in our diversified media coverage until better clarity emerges on the impacts of a new global tariff regime,” he said. “As H2/25 progresses, we would not be surprised to see some further softness in the advertising market as lingering tariff-induced uncertainty weighs on advertisers and advertising budgets. Should North America enter a recession in 2025-2026, we see few places to hide. But provided a less uncertain and more workable global tariff regime begins to emerge in H2/25 with the North American economy finding a firmer footing while avoiding a recession, we continue to recommend riding out the current volatility in the higher-quality names with respect to earnings resilience and/or balance sheets and FCF.”
Mr. McReynolds did emphasize advertising was more “resilient” that anticipated, however the focus across the industry is likely to remain the impact from U.S. tariffs moving forward.
“For the majority of companies in our diversified media coverage, most of the tariff impact is indirect in the form of a more challenging operating environment with respect to a likely slowdown in economic growth and/or higher inflation. In Q2/25, we expect most of the companies in our diversified media coverage with advertising exposure to experience some softness driven by the impact of tariff-induced uncertainty on advertisers and advertising spend. Having said this, we believe advertising overall has demonstrated reasonable resilience relative to what were most of the more negative tariff- induced scenarios exiting Q1/25. With H1/25 results not fully reflecting direct and/or indirect impact of tariffs, the focus this quarter will likely be management commentary on the H2/25 outlook, recent conversations with advertisers and Q3/25 pacing.
“Stocks in focus for Q2/25: In Q2/25, we expect Thomson Reuters to provide an update on the macro environment and the extent to which lingering tariff-induced uncertainty is negatively impacting net sales as well as some of the small cyclical revenue pockets. While we do not expect meaningful revisions to the 2025 and 2026 outlooks, we would not be surprised to see modest upward revisions given in-quarter management commentary around what remains solid underlying momentum. We expect Spin Master to provide an update on tariff impacts and ongoing mitigation measures as well as the extent to which retailers pulled back on seasonal orders in Q2/25 (and order expectations for H2/25) and extent to which consumers have altered buying behaviours. We continue to believe share price levels in the low-to-mid $20s imply a roughly 15-per-cent to 30-per-cent reduction in FTM [forward 12-month] EBITDA versus the mid-point of previously-provided 2025 guidance.”
After updating his forecast for companies in his coverage universe, Mr. McReynolds made one target revision, raising Thomson Reuters Corp. (TRI-N, TRI-T) to US$215 from US$185 with a “sector perform” rating. The average is currently US$195.40.
“Over the past five years, we believe Thomson Reuters has consistently delivered on rising expectations with respect to organic revenue growth acceleration and margin expansion,” he said. “While we stepped to the sidelines in August 2023 following a significant run-up in the stock that commenced in 2018, we have argued that multiple expansion from 23 times FTM EV/EBITDA at the time of our downgrade was fundamentally justified provided the company continued to deliver on growth and margin expectations and provided solid execution on the AI playbook with little change to the company’s narrative as an AI beneficiary. Although we believe emerging line-of-sight on >+8% consolidated organic revenue growth through 2026E justifies yet another increase in our target multiple, our focus is sizing up the growth and risk profile of the stock at these valuation levels, which for us, boils down to visibility over the next 3-5 years in three key areas: (i) the nature of TAM expansion as the rate of change within what has historically been predictable professional end-markets now begins to accelerate; (ii) the ability for Thomson Reuters to maintain an incumbent number one or two market position within this TAM across core segments as competition intensifies; and (iii) the potential for further margin expansion more than 40 per cent (more than 45 per cent for the Big 3) that can translate to accelerated EBITDA growth.”
“We have made changes to our forecasts to reflect a modest increase in both the organic revenue growth and EBITDA margin trajectories.”
For investors, Mr. McReynolds also said: “With the focus shifting to potential tariff impacts in H2/25, we continue to recommend riding out the current volatility in the higher quality names with respect to earnings resilience and/or balance sheets and FCF. Our best ideas are Cineplex , Transcontinental and Stingray.”
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While acknowledging investors have been focused on “turbulence” surrounding Colabor Group Inc.’s (GCL-T) from a recent cybersecurity incident and “what appears to be timing-related pressure on the balance sheet,” Desjardins Securities analyst Frederic Tremblay sees “calmer days ahead.”
“Operationally, we were pleased to learn that GCL has won a major account, we look forward to a full IT recovery shortly and we remain constructive on the strategic Alimplus acquisition,” he said. “With support from lenders and its internal cash flow generation, we believe that GCL should be able to navigate its balance sheet situation.”
On Friday, shares of the Quebec-based food wholesaler plummeted 13.7 per cent following the release of second-quarter results that fell below the Street’s expectations, including sales of $169.5-million, a gain of 5.1 per cent year-over-year but below the Street’s $176-million forecast. Adjusted EBITDA of $5.4-million was also under estimates ($7.9-million) due, in large part, to “less favourable” market conditions.
That release came following the disclosure on July 21 of a cybersecurity incident that impacted its internal IT systems.
“Only the legacy GCL operations were affected, not Alimplus,” noted Mr. Tremblay. “While the incident’s full impact is not yet known, the update provided on July 25 was somewhat encouraging as management highlighted actions that enabled GCL to serve certain customers (eg Alimplus lending a hand, orders processed manually), indicating that most of GCL’s systems/operations had been restored, and pointed to July 28–29 for a full recovery.
“Balance sheet—timing is everything. The acquisition of Alimplus contributed to leverage ending 2Q at 4.3 times. The financial position is also feeling the temporary effects of: (1) inventory increases for the busy summer season; (2) cybersecurity incident; and (3) Alimplus synergies to start being realized later than initially expected due to the delay in the closing of the acquisition. Therefore, GCL is in discussions with its financing partners as it appears that it will require additional funds and need to obtain amendments to its borrowing terms. That said, with support from lenders and its internal cash flow generation, we believe that GCL should be able to navigate this situation. We forecast leverage of 3.3 times at the end of 2026."
With a reduction to his full-year 2025 and 2026 estimates, Mr. Tremblay trimmed his target for its shares to $1.50 from $1.75. The average target is $1.81.
“Management expressed confidence that margins in 2H25 would be better than those delivered in 1H,” he noted. “Higher seasonal demand from restaurants, which is a high-margin category, is expected to contribute. Recall that Colabor’s exposure to the restaurant channel increased with the Alimplus acquisition. In addition, revenue and cost synergies from this acquisition should emerge toward the end of 2025. In the meantime, Colabor continues its efforts to improve the profitability of its large institutional contract renewed in December 2024.“
“We see value in GCL shares and reiterate our Buy rating.”
Elsewhere, Raymond James’ Michael Glen lowered his target to $1.50 from $1.80 with an “outperform” rating.
“We have made downward adjustments to our 2H forecast, with smaller adjustments on F2026 which see more synergies from the Alimplus transaction,” he said. “We continue to see a number of benefits from Alimplus, which accelerates growth in the province of Quebec, offers important revenue synergies, increases efficiency across facilities, and allows for route optimization and fleet synergies.”
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TD Cowen analyst Cherilyn Radbourne see improving sentiment towards North American alternative asset managers heading into earnings season “based on the prospect of increasing deal velocity.”
Also seeing “the growing likelihood of access to the 401(k) retirement channel [as] another potential catalyst,” she thinks Brookfield Asset Management Ltd. (BAM-N, BAM-T) is “very well-situated to participate in the vast need for capital to fund the infrastructure to support AI, as evidenced by its recent hydro framework agreement with Google.”
“The deal log jam finally appears poised to break,” said Ms. Radbourne. “BAM peer BX recently pointed to the prospect of lower ST interest rates, continued economic growth, progress on trade deals, and pent-up demand to transact as the ‘right recipe’ to reignite M&A/IPO activity. BAM has fared better vs. many of its peers during the recent deal drought, because its investments are focused on essential assets: power, infrastructure, real estate and critical business services, many of which are highly contracted/regulated, which tends to support more durable valuations/liquidity. That said, improving deal velocity should give industry fundraising a boost, just as BAM prepares to launch its next flagship PE fund later in the year, and should also benefit fund performance, although we do not expect carry to impact earnings until 2029 (6-7 years after spin-off).
“BAM and its peers have just started to tap the private wealth market and look positioned to gain access to the 401(k) retirement channel. BAM has four private wealth products in the market, which were generating inflows of ~$2bln/quarter as of Q1/25 and is preparing to launch a PE vehicle in the coming months. We see BAM’s focus on long-duration, inflation-indexed asset classes as well-suited to the needs of the broader retirement market.”
After modest tweaks to her forecast, Ms. Radbourne raised her target for Brookfield shares to a new high on the Street of US$75 from US$66 with a “buy” rating. The average is US$58.48.
“BAM is a leading pure-play alternative asset manager in a market that is consolidating around the largest players,” she noted. “That consolidation is particularly evident in infrastructure, renewable power, and energy transition investing, verticals in which we believe the company has a significant first-mover advantage and dominant franchise. BAM has a simple-to-understand balance sheet, with net cash and no insurance liabilities, and offers a healthy dividend yield.”
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RBC Dominion Securities analyst Ryland Conrad initiated coverage of Winnipeg-based retailer North West Company Inc. (NWC-T) with an “outperform” rating, touting its strong presence in “resilient markets with high barriers to entry.”
“The majority of NWC stores are in remote markets across Northern Canada and Alaska, characterized by: (i) more resilient demand relative to urban centres; (ii) high barriers to entry underpinned by logistical complexities, elevated construction costs and entrenched relationships with local communities; and (iii) limited competition,” he said. “These structural dynamics contribute to the company’s consistent track record of organic growth and above-average returns on capital despite operating a conservative balance sheet.
“Unique exposure to $80-billion in First Nations settlements. Over the next decade, $80-billion in settlement funding including $25-billion in direct compensation is expected to flow into First Nations communities across Canada. NWC is uniquely positioned to benefit with our proprietary RBC Elements analysis suggesting that the company serves more than 20 per cent of Canada’s First Nations population living on-reserve. While we factor in incremental revenues of more than $500-million from settlement compensation through 2027 (implying a 10 per cent in-market capture rate), we believe our forecast could prove conservative. In addition, the $55-billion in earmarked for infrastructure and service delivery (excluded from our forecast), provides a potential source of upside to our estimates.”
Emphasizing the current retail backdrop is hurt by “elevated macro uncertainty and a fluid trade environment,” Mr. Conrad said he favours stocks with “defensive attributes and/or idiosyncratic growth drivers.”
“In our view, NWC firmly checks both of those boxes,” he said.
“NWC is currently trading at 7.4 times FTM [forward 12-month] EV/EBITDA on a normalized basis (excluding settlement contributions), below the long-term average of 8.5 times. Including our assumed revenue uplift from settlement inflows, NWC is trading at 6.8 times FTM EV/EBITDA. In our view, the current discount is unjustified considering the quality of the core business against the backdrop of settlement-driven structural tailwinds, with room for a positive re-rating as visibility on settlement inflows improves.”
Also anticipating North West’s “Next 100″ program initiatives will continue to drive efficiencies and margin uplift, he set a target of $60 per share. The current average is $60.33.
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In other analyst actions:
* TD Cowen’s Brian Morrison raised his Canadian Tire Corp. Ltd. (CTC.A-T) target to $201 from $181 with a “buy” rating. The average is $176.80.
“Shares of Canadian Tire have appreciated materially post the Q1/25 release due to an improving financial outlook, the closure of its sale of Helly Hansen, and its accretive allocation of those proceeds detailed by its True North strategy,“ he said. ”We believe expectations are elevated coming into the Q2/25 release.”
“We believe there are tailwinds to CTC’s financial outlook, and significant upside to its current earnings profile over the mid-to-long term, supported by its initiatives within its True North strategy. We are taking this into account with our revised multiple/target price. We acknowledge that our return to target is now below our required 15-per-cent hurdle rate and will review our target/recommendation post the Q2/25 release.”
* Barclays’ Ian Rossouw bumped his First Quantum Minerals Ltd. (FM-T) target to $26 from $25.80, exceeding the $24.70 average, with a “buy” rating.
* TD Cowen’s Michael Van Aelst raised his George Weston Ltd. (WN-T) target to $313 from $308 with a “buy” rating. The average is $298.
“With the upside we see in Loblaw and Choice Properties, and WN returning significant capital to shareholders, we continue to view WN shares as attractive,” he said. “We have a preference to own Weston (approximately 20-per-cent expected total return) over Loblaw (14-per-cent expected total return) as we believe the holdco discount could contract from the current 14 per cent (vs. 13 per cent average) closer to the 10 per cent we use in our NAV calculation.”
* BMO’s Étienne Ricard raised his Goeasy Ltd. (GSY-T) target to $228 from $220 with an “outperform” rating. The average is $219.
“We anticipate GSY’s Q2 results to revolve around continued execution in achieving three-year forecasts and the potential for stability to net charge-offs/delinquencies,” he said. “While the stock’s valuation has normalized near historical averages from trough multiples over the span of a couple months, our forecasts provide for mid-teens earnings CAGR [compound annual growth rate] leading to 2027.”