Inside the Market’s roundup of some of today’s key analyst actions
RBC Capital Markets analyst Tom Narayan is taking a cautious stance on North American auto parts manufacturers heading into second-quarter earnings season, despite U.S. seasonally adjusted annual vehicle sales coming in “well ahead” of estimates.
“We think elevated fuel prices could be incentivizing U.S. customers to switch to smaller compact vehicles (not necessarily EVs), which is disproportionately benefitting the Japanese OEMs as opposed to the D3,” he said in a client report. “Further, the U.S. declining to renew USMCA could further weigh on Ford and GM, though we think a bilateral deal with Mexico is still possible.
“For the U.S. suppliers, we think production in NA and Europe comes in above S&P Global’s estimates and largely offsets lower production levels in China. US Demand in particular has been resilient through H1/26 despite macro uncertainty in the Middle East, and we think certain suppliers could raise guidance in Q2/26. In China, revisions to the EV subsidy framework and a reduction in the EV purchase tax credit could negatively impact mass-market OEMs, where western suppliers have limited exposure. While raw materials costs have continued to increase, we remain confident that future cost increases can be passed along to the OEMs. That said, if higher oil prices adversely impact consumer confidence, we could see downside risk in H2/26.”
Ahead of the release of its financial report on July 31, Mr. Narayan trimmed his target for shares of Aurora, Ont.-based Magna International Inc. (MGA-N, MG-T) to US$57 from US$66, keeping a “sector perform” rating. The average target on the Street is $62.48, according to LSEG data.
“Our Q2/26 revenue of $10.6-billion and EBIT of $591-million are in line with consensus expectations ($10.6-billion and $586-million, respectively),” said Mr. Narayan. “Management expects Q2/26 margins to be flat year-over-year, implying 5.5-per-cent EBIT margins.
“Thoughts on ’26: Our ‘26 revenue estimate of $42.4-billion and EBIT estimate of $2.6-billion are both in line with consensus. Recall that management expects significant margin uplift in H2/26, which is expected to represent 57 per cent of FY ’26 EBIT. Margin expansion in the second half is primarily driven by ongoing operational efficiency improvements across the BE&S and Seating segments, though we could see customer recoveries providing additional support. While the company is well-hedged across its commodity exposures, we could see some margin pressure from increased freight/logistics costs. Throughout the year, we expect further divestitures of non-core assets.”
National Bank Financial analyst Maxim Sytchev is seeing “one of the most bifurcated periods ... in many years” for his Industrial Products coverage universe heading into second-quarter earnings season, emphasizing “the ‘long-AI trade’ has dramatically propped up construction, machinery and distribution names to the detriment of previously much larger asset-light consulting business models, creating a zero-sum dynamic.”
“As long as the former cohort ‘works’, the latter is likely to be range bound/used as a source of funds,” he added. “We track the likes of Salesforce/Booz Allen Hamilton for a sentiment uptick and so far there has been very little to cheer about as fears around disruption and meandering growth prospects compound the negative AI thematic. .... Dislocations can take longer to play out from a sentiment reset perspective, even for industries that continue to show positive financial momentum; the only ‘solution’ is accelerated growth (akin to CrowdStrike) but given material funds outflowing for military necessities, tax cuts, and healthcare, the prospects of an accelerated non-data centre infrastructure splurge appears unlikely in the U.S. (a big sentiment driver for engineers given material top line exposure for our coverage).”
Mr. Sytchev says he’s "more upbeat about the ‘picks and shovels’ of this AI revolution – namely, construction (ARE/BDT – both announced data centre backlog additions and sport a significant utilities/nuclear/defence skew), distribution/equipment (FTT/TIH/WJX/RBA as well as BDGI), and idiosyncratic positions such as ATS and GFL."
“So, what to do with one’s engineering positions?,” he added. “Feeling stuck at this point; depending on how OpenAI/Anthropic reception/access to capital goes, the latter might become a catalyst/turning point, but anything negative on that front would of course dent the prospects of construction/ distribution names.”
In a client report released before the bell, the analyst updated his valuation methodology across his coverage universe, resulting in a series of target price adjustments.
“The AI trade continues to bifurcate our coverage returns (hence great technicals for some, awful for others). GFL (and by extension SES) shares have caught a bid on recent privatization rumours, and we see more upside,” he explained. “We are also taking down target multiples for ATRL (ESR, offset by Nuclear increase), STN, TTEK, WSP and CIGI while boosting BDT and BDGI; ARE target moves up as well to reflect a stronger pro forma earnings profile. STN and RBA leaned into buybacks for the first time in a while, NOA and ATRL were active repurchasers while RUS and SJ have backed off (FTT moderated buybacks too).”
His changes are:
- AutoCanada Inc. (ACQ-T, “sector perform” ) to $21 from $22. The average on the Street is $23.50.
- Ag Growth International Inc. (AFN-T, “sector perform”) to $20 from $24. Average: $27.25.
- Aecon Group Inc. (ARE-T, “outperform”) to $65 from $59. Average: $55.
- Badger Infrastructure Solutions Ltd. (BDGI-T, “outperform”) to $103 from $74. Average: $94.57.
- Bird Construction Inc. (BDT-T, “outperform”) to $72 from $57. Average: $66.
- Colliers International Group Inc. (CIGI-Q/CIGI-T, “outperform”) to US$109 from US$143. Average: US$146.75.
- RB Global Inc. (RBA-N/RBA-T, “outperform”) to US$132 from US$130. Average: US$129.17.
- Russel Metals Inc. (RUS-T, “sector perform”) to $57 from $52. Average: $60.72.
- Stantec Inc. (STN-T, “outperform”) to $120 from $143. Average: $142.75.
- Tetra Tech Inc. (TTEK-Q, “outperform”) to US$35 from US$38. Average: US$41.50.
- WSP Global Inc. (WSP-T, “outperform”) to $207 from $272. Average: $301.13.
Mr. Sytchev also revealed his top ideas for investors entering earnings season: “GFL (extremely attractive risk-reward skew – we estimate 10 per cent down, 40-50-per-cent upside), RBA (more Automotive market share gains, CC&T business rebound), FTT (data centres being announced on construction / power side of things but not yet back-up power… it’s just a matter of time while improving take-away capacity in Canada is a structural positive), ATS (healthcare players should be major beneficiaries of the AI revolution as more products are being brought to market; management’s focus on margin improvements and driving value in the key Healthcare vertical are being under-appreciated; nuclear optionality is not being priced in at all)."
TD Securities analyst Aaron MacNeil is expecting “positive” near-term updates from Canadian Energy Services companies during earnings season, however he warns of “murky long-term visibility.”
“Canadian Energy Services stocks have retrenched in tandem with reduced oil prices after the U.S.-Iran peace deal. Despite recent flare-ups, our Washington Research Group expects continued de-escalation given the upcoming U.S. midterm elections,” he said. “To this end, we believe it is too early to rotate into drilling and completions names despite improving fundamentals. Enerflex remains our top pick.’
Mr. MacNeil is now assuming a 5-per-cent sequential step-up in U.S. Drilling Activity in the third quarter, which he expects “will hold through the end of 2027.”
“Crude oil prices remain elevated despite crude oil flows recommencing in the Strait of Hormuz,” he explained. “Given the combination of permanent energy infrastructure damage in the Middle East, low global storage levels, and the potential for a recommencement of Chinese crude oil imports at the pre-conflict rate, we expect that crude oil fundamentals will remain strong. That said, we also expect that producers will take a measured approach to growth.
“2026 and 2027 Canadian Rig Count Increases 3 per cent, with Further Clarity on Canadian E&P Capex Not Expected Until the Fall: Given the seasonality of Canadian drilling, we do not expect to have more clarity on potential drilling activities until the Q3/26 reporting period, which is typically when budgets are expanded, and/or capital is pulled forward. Our modest revisions now contemplate a 6 per cent and 3 per cent year-over-year increase in Canadian rig count in 2026 and 2027, respectively, which reflect prevailing capital-spending levels.”
After updating his forecast and introducing his estimates for fiscal 2028, Mr. MacNeil made these target adjustments:
- CES Energy Solutions Corp. (CEU-T, “hold”) to $18 from $19. The average is $21.
- Enerflex Ltd. (EFX-T, “buy”) to $43 from $45. Average: $48.11.
- Ensign Energy Services Inc. (ESI-T, “hold”) to $3.50 from $3.75. Average: $4.25.
- Precision Drilling Corp. (PD-T, “hold”) to $124 from $130. Average: $151.74.
- Pason Systems Inc. (PSI-T, “hold”) to $15 from $18. Average: $17.33.
- Trican Well Service Ltd. (TCW-T, “hold”) to $7.50 from $8. Average: $8.37.
“Sector valuations have pulled back: Our energy services names are currently trading at an average 2027E EV/EBITDA of 4.9 times, down 4 per cent from 5.1 times at the time of our Q1/26 preview,” he said. “This is understandable, in our view, after the sharp correction in crude prices, given historical correlations. However, we believe the sector broadly lacks catalysts in the near term, despite our view that Q2/26 business updates and outlook commentary will be constructive.”
“We continue to highlight Enerflex as our best idea, given the unique strength in its fundamental outlook resulting from its leverage to natural-gas production growth and strong relative value proposition, given prevailing peer valuations across contract compression and power end-markets.”
While acknowledging Nutrien Ltd. (NTR-N, NTR-T) and Methanex Corp. (MEOH-Q, MX-T) operate in different end markets, National Bank Financial analyst Ahmed Abdullah says they have a common near-term link in “the Strait of Hormuz / Middle East supply disruption, which has tightened trade flows and lifted pricing across methanol, nitrogen and related commodity markets.”
“The situation is volatile and constantly evolving; however, our thesis for both companies does not rest on peak pricing but rather stronger fundamentals across both companies,” he said.
In a client report released before the bell, Mr. Abdullah initiated coverage of both Canadian companies with “outperform” recommendations.
He called Nutrien, a Saskatoon-based crop inputs and services company, “an earnings-quality inflection story with improving financial flexibility and balanced-to-tight core markets.”
“As a scaled, vertically integrated crop-nutrient platform, NTR is earning its keep through better earnings quality rather than pure commodity-cycle leverage,” said the analyst. “First, NTR is pruning low-return capital and simplifying the portfolio (clean ammonia cancellation, equity stake exits, marginal nitrogen production capacity closures, and phosphate/Brazil retail reviews), delivering $200-million of annual cost savings, $600-million of lower capex and $900-million of divestiture proceeds. Second, upstream markets are balanced-to-tight: potash demand is testing supply-chain capacity as new supply remains slow and capital-intensive, while North American nitrogen benefits from a durable low-cost gas advantage amplified by Middle East disruptions. Third, capital returns are accelerating as cash flow and divestitures fund a growing dividend and 5-per-cent NCIB, with buybacks accretive at today’s discounted 6 times multiples.”
Mr. Abdullah set a US$76 for Nutrien shares. The average on the Street is $79.88.
He called Vancouver’s Methanex, which is the world’s largest producer of methanol, “a platform-upgrade and deleveraging story with a powerful near-term cash-flow catalyst.”
“Post Geismar 3 and OCI, MEOH is now larger, higher quality and more North America-weighted, with advantaged gas exposure, stronger operating leverage and a higher mid-cycle FCF base,” the analyst explained. “First, the asset mix has improved: North America now drives the majority of run-rate production and EBITDA, while idling weaker Trinidad capacity should further improve EBITDA/MT. Second, methanol fundamentals are supportive, with demand growth of 3-per-cent CAGR and effective supply additions falling short of expected demand, supporting better pricing long term. Third, the Strait of Hormuz disruption has created a windfall at the right time, lifting realized pricing and accelerating debt repayment, which should reduce refinancing risk around the 2027 bond and reopen the path to buybacks in 2H26.”
“With 45-per-cent total return potential and a 15-per-cent MC FCF yield, MEOH offers compelling upside, which we believe will manifest as the market better appreciates the cleaner asset base, faster deleveraging and renewed shareholder returns.”
Seeing its valuation as “too low for the improving quality of the story,” His US$70 target is under the average on the Street of US$72.
Mr. Abdullah emphasized: “One point to consider across both companies is that neither of our targets rest on today’s disrupted pricing persisting indefinitely. Our Nutrien target is anchored by mid-cycle EBITDA of $6.3-billion and net selling prices below current spot, while our Methanex target is grounded by $350/MT mid-cycle methanol price (below current prices). The Strait of Hormuz windfall accelerates each story, but it is not the story; both our theses are designed to work as prices normalize. The larger risk is therefore two-sided (and unusually live and ongoing as we assume coverage given the fluidity of the geopolitical situation). On one side, normalization could occur faster than we model; in the event trade flow normalize on a sustainable reopening of the strait, a faster inventory rebuild than expected could pull commodity pricing down towards (or briefly below) mid-cycle sooner than assumed. That would compress near-term earnings and could jeopardize the near-term cash tailwinds we have modelled across both names. On the other hand, the disruption could persist or re-escalate; while a prolonged disruption is a near-term positive for pricing, it raises the prospects of causing broader economic impacts that could start impacting demand. Therefore, near-term risk factors to monitor include the pace of trade flow normalization and the potential impact from renewed escalations across the Middle East as it relates to trade flows through the Strait of Hormuz.”
Ahead of earnings season for North American insurance providers, RBC Dominion Securities analyst Bart Dziarski thinks Canadian large account commercial and Ontario’s Personal Auto markets “continue to show softness in pricing.”
“That said, we believe investors are largely baking this dynamic into expectations and we’ve seen P&C stocks rally recently (notably DFY & IFC) which we attribute to broader inflation concerns, improving short rates, and an incremental rotation out of Canadian banks (up 30 per cent year-to-date).
“We have made minor modeling adjustments with the exception being IFC, where we updated Q2/26 estimates for IFC’s pre-released elevated CAT losses and large losses. We nudged our IFC target up as we nudged our target multiple up to 2.5 times.”
With his changes, Mr. Dziarski made these target adjustments for TSX-listed stocks:
- IGM Financial Inc. (IGM-T, “sector perform”) to $80 from $77. The average is $78.66.
- Intact Financial Corp. (IFC-T, “sector perform”) to $299 from $289. Average: $338.13.
- Power Corp. of Canada (POW-T, “outperform”) to $87 from $86. Average: $85.29.
- Sprott Inc. (SII-T, “outperform”) to $204 from $230. Average: $240.60.
“Our top ideas remain BN, ARES and BX within U.S. Alts, EFN [’outperform’ and $40 target] as our top growth pick and FFH [’outperform’ and $2,277 target] as our top value pick,”
In other analyst actions:
* Jefferies’ Samad Samana upgraded Shopify Inc. (SHOP-N, SHOP-T) to “buy” from “hold” and increased his target to US$160, exceeding the US$157.50 average on the Street, from US$140.
" “As we wrote in March, we see SHOP as uniquely positioned to become the infrastructure layer for agentic commerce and the ‘agent enablement’ toolkit for merchants,” he said. “In our view, this positions SHOP to capture incremental GMV, drive higher merchant stickiness, and expand its role upstream in discovery over time as agents intermediate more of the buyer journey. We see agentic commerce as a modest GMV tailwind over the next several years.
“SHOP announced changes to partner commissions starting in August 2026. In effect, SHOP is tying earnouts directly to the value created on the platform. Our takeaways include: (1) partners have a greater incentive to sign larger merchants; (2) partners will likely invest more in post-launch merchant success; (3) additional offerings like B2B, POS, and Shopify Components are more in focus; (4) the changes encourage partners to stay focused on new logo acquisition and cross-selling rather than relying on an annuity-like revenue stream; and (5) the long-term unit economics from partner-driven deals will improve as the commission stream is capped. While any change brings risk, we view this as a long-term positive for both growth and margins.”
* In a report titled More than generic: Canada’s pharma champion, Canaccord Genuity’s Tania Armstrong-Whitworth initiated coverage of Apotex Health Corp. (APTX-T) with a “buy” rating and $42 target, exceeding the $39.72 average.
“Historically recognized as a conventional generics manufacturer, the company has been transforming its business mix toward higher-growth and higher-margin specialty generics, branded pharmaceuticals, biosimilars, and consumer health products,” she said. “Supported by one of Canada’s largest pharmaceutical manufacturing infrastructures, a global commercial platform, and an innovation engine that combines internal R&D, business development, and M&A, we believe APTX is well positioned to deliver durable growth, margin expansion, and attractive FCF generation over the coming years. As one of the only institutional-scale healthcare companies publicly listed in Canada, we believe APTX deserves a scarcity valuation premium relative to global generic pharmaceutical peers.”
* Evercore ISI’s Thomas Gallagher downgraded Sun Life Financial Inc. (SLF-T) to “in line” from “outperform” previously with a $111 target, which is above the $104.86 average, from $102.
“We downgrade our rating on SLF from Outperform to In Line following strong year-to-date performance in the share price, combined with mixed fundamental trends and some new issues to watch for in its attractive Asian business,” he said. “With more work still to be done in the U.S. on both dental and stop loss, continued outflows in MFS, and some potential uncertainty in Asia regarding the MCV business, we see limited upside to both forward EPS vs. consensus and valuation, particularly when considering SOTP across geographies. We still see SLF being a high-quality franchise within the sector with limited risks on legacy liabilities and its investment portfolio, and that the fundamentals should remain in-tact in Canada. But on the other hand, the ongoing transition in the U.S. across stop loss and dental businesses, persistent flow headwinds from MFS, and some potential regulatory uncertainty in Asia over the MCV market lead us to us to move to the sidelines on the stock for now.”
* After Friday’s release of weaker-than-anticipated quarterly results and the announcement of a plan to close 68 restaurants, RBC’s Irene Nattel lowered her target for MTY Food Group Inc. (MTY-T) to $41 from $46 with a “sector perform” rating. Other changes include: Scotia’s John Zamparo to $40 from $45 with a “sector perform” rating, Raymond James’ Michael Glen to $40 from $45 with a “market perform” rating, TD Cowen’s Cheryl Zhang to $38 from $42 with a “hold” rating, Acumen Capital’s Nick Corcoran to $48 from $50 with a “buy” rating and National Bank’s Vishal Shreedhar to $43 from $49 with an “outperform” rating. The average is $47.50.
“Q2/26 results were below our forecast in a still challenging operating environment. While the closure of 68 corporate locations will pressure organic revenue growth in the near-term, we believe it is a logical step toward improving network quality and profitability longer-term. Following a modest trimming of our target multiple, and estimate revisions to reflect a lower revenue trajectory partially offset by higher corporate margins, our price target decreases,” said Ms. Nattel.
* In response to a second-quarter miss and seeing a “ho-hum” market, National Bank’s Zachary Evershed cut his Richelieu Hardware Ltd. (RCH-T) target to $38 from $41 with a “sector perform” rating. The average is $42.
“Confidence in achieving the previously outlined 11-per-cent EBITDA margin target for 2026e seems to be waning as management again mentioned the need for a more vigorous market to lift margins,” said Mr. Evershed. “As for this quarter, the main story behind the y/y compression in margins is tariffs being passed through to protect gross profit dollars, seeing gross margin subject to some slippage. On the bright side, management indicated that the recent Q2 acquisitions are already EBITDA-generating and are not expected to dilute EBITDA margins. On the slower-than-expected recovery and presence of tariffs, we trim our H2 EBITDA margin forecast to 11.7 per cent (was 11.8 per cent), though we still anticipate adherence to historical seasonality of a stronger H2 margin profile.”
* Following Strathcona Resources Ltd.’s (SCR-T) announcement last week of first steam at its Meota Central project in Saskatchewan and tour of its Lloydminster thermal operations for investors and analysts, National Bank’s Travis Wood raised his Street-high target by $1 to $67, keeping an “outperform” rating. The average is $54.33.
“Beyond the near-term production uplift, we believe the greater significance of Meota Central lies in what it demonstrates about Strathcona’s ability to execute thermal developments. The project represents the fifth major Saskatchewan thermal facility developed by the current Lloydminster thermal team and, in our view, the successful execution of Meota Central reinforces our confidence in the company’s ability to deliver the series of thermal projects underpinning its long-term growth plan,” said Mr. Wood.
“Importantly, given the modular characteristics of a central processing facility (CPF), Meota Central was designed with future growth optionality in mind. The existing facility has sufficient space and infrastructure to support an approximately 25-per-cent capacity expansion through the addition of another steam generator and related equipment, enabling a largely plug-and-play expansion if and when management elects to proceed. This scalability highlights another advantage of the modular approach (more details below) and provides further flexibility to optimize capital deployment across the thermal portfolio.”