Inside the Market’s roundup of some of today’s key analyst actions
While she expects 2025 will likely be “another year of tepid growth” for North American railway companies, TD Cowen analyst Cherilyn Radbourne raised her rating for Canadian National Railway Co. (CNR-T) to “buy” from “hold” on Monday.
“CPKC remains an investor favourite based on merger synergies, but we find it hard to say whether the stock is properly discounting the risk to U.S.-Mexico trade/Mexican FDI,” she said. “CN is trading at a more than 1 times multiple-point discount vs. its rail peers, despite normally commanding a premium, and will be lapping easy PY comps in 2025. Therefore, while it may still be early, we are upgrading CN.”
In a report released Monday, Ms. Radbourne warned the approaching fourth-quarter 2024 earnings season is likely to see weak results stemming from the port disruption and an earlier onset of winter.
“Volumes fell short of expectations at CN and CPKC, but the deficit was bigger at CN, which has a larger international intermodal franchise and a more northerly network,” she said. “Our revised Q4/24 EPS estimate for CN is 7 per cent below consensus, while our estimate for CPKC is in-line.
“International intermodal was by far the major source of industry volume growth in 2024. That trend is likely to persist in the near term, as volumes are pulled forward in anticipation of potential tariffs. Once that activity cools, it is unclear what will replace international intermodal as a growth driver
To “reflect a more subdued view of the macro backdrop, particularly in 2025,” Ms. Radbourne reduced her earnings per share projections for both companies through 2026. Her estimates are now 5-6 per cent below consensus for CN and 2-3 per cent below consensus for CPKC.
That led the analyst to cut her target price for CN shares to $170 from $175. The average on the Street is $174.81, according to LSEG data.
“CN, which normally trades at a premium to the group, is currently trading at a more than 1.0 times multiple-point discount,” said Ms. Radboune. “We believe this discount is rightly attracting investor interest, particularly given that CN will be lapping easy prior-year comparables in 2025. As such, while we expect weak Q4/24 results and cautious 2025 guidance, and it may still be early, we are upgrading the stock to BUY from Hold.”
For peer Canadian Pacific Kansas City Ltd. (CP-T), she maintained a “hold” rating and $120 target. The average is $127.03.
“We recognize that CPKC’s merger-based synergies offer the most obvious multi-year earnings growth trajectory in the group, which puts a floor under the stock,” said Ms. Radbourne. “That said, we find it hard to see how CPKC breaks out to new highs until there is better clarity regarding U.S.-Mexico trade relations under the second Trump presidency, and the trajectory of political/regulatory developments in Mexico, which we believe pose a risk to the rule of law and future foreign investment.”
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CIBC World Markets analyst Krista Friesen sees “a year of heightened uncertainty” ahead for Canadian companies in the auto sector.
“2025 is off to a challenging start for the auto industry amid heightened uncertainties, with President-elect Trump threatening tariffs and stating he will remove EV subsidies,” she said. “The industry also needs to keep a close eye on China as that country’s dominance in the auto industry continues to grow. On top of these issues, production is anticipated to be essentially flat, making growth challenging. With that said, we see some opportunities within our coverage.”
Reaffirming Linamar Corp. (LNR-T) as her top pick in the space, Ms. Friesen raised her target for its shares by $1 to $85 with an “outperformer” rating. The average target on the Street is $76.17.
“Despite a challenging macro backdrop, LNR remains our top pick amongst the auto suppliers given its low leverage, strong FCF generation, and now its ability to return cash to shareholders through its NCIB. Trading at 3.0 times 2026 consensus EBITDA, we also continue to highlight the valuation argument for the name,” she said.
Her other target adjustments are:
* AutoCanada Inc. (ACQ-T, “underperformer”) to $16 from $15. Average: $19.73.
Analyst: “While we appreciate that ACQ has given a firm target of $100-milion of annualized operational expense savings that it expects to achieve on a run-rate basis by the end of 2025, we believe there is still a lot of heavy lifting to be done to reach that $100-million target, and we continue to wait for further evidence that ACQ is on the right path.”
* Boyd Group Services Inc. (BYD-T, “outperformer”) to $272 from $252. Average: $263.38.
Analyst: “We see a compelling valuation argument for BYD trading at 9.0 times 2026 consensus EBITDA. Historically, 10.0 times has been a decent floor for the name. As we move through 2025, we expect to see an improvement in SSS growth partly due to the fact the company will be lapping tough comps. The company has also noted it is implementing margin-enhancement initiatives that should help drive margins closer to pre-pandemic levels.”
* Magna International Inc. (MGA-N/MG-T, “neutral”) to US$51 from US$46. Average: $49.93.
Analyst: “Looking at 2025, we do not see much to get excited about. We anticipate production in North America and Europe to be essentially flat, and while MGA’s margin-improvement initiatives should help, we still see margin below 6 per cent in 2025. On top of that, we see MGA entering 2025 with an elevated leverage profile, and its deleveraging initiatives being pushed out a few quarters as a result of its buyback.”
* Martinrea International Inc. (MRE-T, “outperformer”) to US$14.75 from US$14.50. Average: $15.33.
Analyst: “Similarly to LNR, despite the challenging set-up, we continue to be positive on MRE given shares are trading at 2.7 times 2026 consensus EBITDA, and the company continues to focus on returning cash to shareholders. We also believe that MRE’s predominantly North American exposure could bode well given the current political environment.”
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When Metro Inc. (MRU-T) reports its first-quarter 2025 financial results on Jan. 28, National Bank Financial analyst Vishal Shreedhar is expecting to see clear signs of an acceleration in earnings growth.
He’s currently projecting earnings per share of $1.09, falling in line with the Street’s forecast and up 7 cents from the same period a year ago. He attributes that 7.2-per-cent gain to positive same-store sales growth based on “resilient discount format performance and strength at Drug Retail” as well as store network growth, gross margin expansion, “slight” expense leverage and share repurchases.
Mr. Shreedhar predicts continued momentum for its food retail business, despite a tough year-over-year comparable, which he thinks reflects “continued growth in transactions (especially in discount, albeit the gap in growth versus conventional is narrowing) while basket is expected to remain stable.”
“We note the following trends in drug store: (i) Government data indicates lower influenza cases, likely hampering OTC sales, and (ii) We expect higher beauty sales reflecting solid consumer demand. Rx sssg is expected to be driven by Rx counts, professional services and specialty medication,” he adde.d
“MRU’s medium and long-term financial target, on an annualized basis, calls for: (i) 2-4-per-cent sales growth (NBF models 3.6 per cent year-over-year in F2025, in line with consensus); (ii) EBIT growth of 4-6 per cent (NBF models 8.7 per cent y/y); and (iii) 8-10-per-cent EPS growth (NBF models 10.9 per cent y/y vs. consensus at 10.2 per cent y/y).”
Following the completion of the transformation of its supply chain, Mr. Shreedhar is now anticipating improving EPS momentum through 2025, seeing gains in food retail as well as “better productivity from the new distribution centres, higher private label penetration, and opportunity for improvement in shrink, partly offset by the impacts of higher online sales (margin dilutive), higher penetration at discount banners, and investments in value to customers, among others (20 basis points y/y in gross margin expansion).”
Maintaining his “sector perform” rating for Metro shares, he raised his target to $94 from $89 based on improving growth prospects. The average target on the Street is $94.20.
“We believe Metro is a solid company which has delivered solid long-term returns; however, these attributes are adequately reflected in valuation. We expect earnings growth to resume in F2025, weighted towards H2,” he noted.
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While he expects the market will “continue to take a wait-and-see approach,” RBC Dominion Securities analyst Maurice Choy likes the recent steps taken by Tidewater Renewables Ltd. (LCFS-T), including the sale of its stake in the Rimrock Renewables Limited Partnership and the filing of a countervailing (anti-subsidy) and anti-dumping complaint that is aimed at improving its financial and business risk profiles.
On Jan. 10, the Calgary-based company announced the close of its sale in Romrock to an affiliate of Biocirc Group ApS for $7.8-million with proceeds to be used to reduce outstanding debt on its first lien senior credit facility. Four days early, it revealed it has filed a complaint with the Canada Border Services Agency, targeting “unfairly traded imports of renewable diesel from the United States that significantly undermine the Canadian industry.”
“More self-help efforts are likely, as the company’s ability to continue as a going concern remains a focus,” sai Mr. Choy. “We continue to see the benefits of Tidewater Renewables taking further self-help efforts to better support its financial position, and the Rimrock RNG stake sale is in line with this view. As we await the outcome of the company’s CBSA complaint, other asset dispositions may materialize (recognizing that the HDRD facility is the company’s only core asset per management), alongside the potential for corporate restructuring, alternative debt and equity financing, and refinancing arrangements.”
Keeping his “sector perform” rating for Tidewater shares, the analyst bumped his target to $5.50 from $5 to reflect the expectation for a lower net debt level at the end of 2025. The average is $3.95.
“We believe stock sentiment should improve if/when more self-help actions are taken, BC LCFS credit pricing sustainably recovers (note, December 2024 data has been encouraging), and favourable regulatory/policy outcomes materialize,” he concluded.
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After a strong 2024 for North American waste services stocks “as moderating topline growth easily exceeded cost inflation,” Citi analyst Bryan Burgmeier thinks 2025 “looks like another strong set-up with further margin expansion on-tap, ramping RNG production and early innings advanced recycling efforts.”
“Margin expansion could be the dominant theme in Waste again this year as decelerating inflation vs. firm pricing and lagging contracts generates a sizable net price spread and pushes the industry to all-time highs,” he said. “Attention will be on restricted pricing, particularly in 2H’25, as lagging indices may catch-up to underlying inflation trends. Our analysis points to a sizable spread potentially continuing well-above the pre-COVID avg. with a historical gap vs. headline CPI. Waste contracts are increasingly pivoted from headline CPI to more stable inputs such as CPI-WST or fixed escalators.”
“The group is trading below its historical premium vs. the S&P 500, potentially not reflecting macro tailwinds (higher-for-longer, corporate tax cuts), ongoing net price gains and growth beyond Solid Waste. Our top pick is [Republic Services Inc.] as we like the balance sheet optionality into an uncertain year. RSG could be the lead acquirer in ‘25 with the lowest net leverage (implying $2B+ dry powder), or if interest rates remain high, or the economy meaningfully worsens, prioritize debt paydown again this year and improve FCF conversion.”
In a report released Monday, he suggested macroeconomic conditions could favour the group over the next 12 months.
“An expected slowdown in global growth in ‘25, driven by the U.S. & China, could drive Waste stock outperformance. Citi views the U.S. economy as the biggest wildcard for ‘25, with a baseline assumption for 1.0-per-cent GDP driven by a softening labor market and still-soft housing, but considers an alternative scenario of 2.2-per-cent GDP after underestimating the last 2 years. If a mid-year recession causes a market correction, it could be favorable for Waste stocks. US waste stocks have outperformed in 11 of the 12 market corrections since the Global Financial Crisis given firm, pricing-led growth, and limited volume sensitivity. Further, a softening labor market could extend the net price spread benefitting Waste companies.”
Mr. Burgmeier also thinks renewable natural gas production will step “into the spotlight” across the sector in the year ahead, predicting production will “play a material role in ‘25 earnings growth with the construction of required facilities largely completed in ‘24.” However, he warned commodity prices could he a headwind with
“We estimate recycled commodity prices are down 13 per cent from 3Q’24 avg. to Jan ‘25 with a 33-per-cent drop in fiber, partly attributed to port strikes and softer end-demand; marking-to-market prices Waste companies could see a modest headwind to ‘25 year-over-year EBITDA growth (est. 40-50 basis points impact),” he said. “Citi expects OCC prices to tick up seasonally in 1Q’25 ($85/ton), peak in 2Q’25 ($100/ton) and ease modestly over the balance of the year; ultimately, 2025 avg. prices could be comparable to last year (up 1 per cent year-over-year to $95/ton) and the 10-yr avg. ($85/ton). If prices were to hold at current levels, an assumption that may be included in Waste companies’ ‘25 outlooks, on a quarterly basis, commodity prices could be flattish year-over-year in 1Q, down double-digits in 2Q and 3Q, and return to flattish in 4Q.”
Mr. Burgmeier raised his target for Waste Connections Inc. (WCN-N, WCN-T) by US$1 to US$196, keeping a “neutral” rating. The average on the Street is US$199.59.
“WCN is trading at a discount to its 5-year avg. (up 4.8 times vs. S&P 500; 5.9 times 5-year avg.) as topline growth has slowed slightly on vol rationalization and Solid Waste could M&A step-down from recently elevated levels ($2.2-billion vs. $665-million prior 5-year avg.),” he said.
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In a report titled We liked ASTL at $16, which means we love it at $11 and change, Stifel analyst Ian Gillies touted Algoma Steel Group Inc. (ASTL-T) as a “value-centric idea.”
“After a 29 per cent (S&P 500: down 2.4 per cent) draw down in Algoma’s share price from the recent high on November 7, 2024, we are reiterating our positive thesis on the stock,” he said. “The near-term outlook is certainly worse given continued weak steel prices into 1Q25E, but the key underpinnings of our thesis remain unchanged. The EAF transition is progressing as planned with hot metal expected by the end of 1Q25E. Meanwhile, we believe Algoma remains an attractive takeout candidate given that it trades at a 2.0 times EV/EBITDA discount to peers and a 65-per-cent discount compared to new build steel plant costs.
“We have lowered our target price to $21/ sh from $22/sh, but maintain our BUY rating. We think the stock could potentially be a double from here.”
Mr. Gillies updated his forecast for the Sault Ste. Marie, Ont.-based company to reflect its recently released fourth-quarter calendar 2024 EBITDA guidance of negative $55-65-million and the change of the company’s year-end to December 31 from March 31. His 2025 EBITDA expectation declined 32 per cent to $245-million due to lower pricing and production and “slightly” higher costs, while his 2026 estimate slid 2.1 per cent to $439-million.
“The medium term value case remains compelling as M&A makes more sense than building a new steel plant: We do not anticipate that tariffs will be a permanent fixture for North American steel, which would suggest that using the recent sell off as opportunity has merit,” he sai. “Algoma is currently trading at US$461/ton of productive capacity, compared to new build EAF costs of US$1,250-1,411/ton. The other compelling value argument that we lay out in the document is that Algoma trades at 75 per cent of identifiable assets, and that value is overstated given the optionality embedded in the business through its ownership of a 110 MW cogen plant and blast furnace #6, in addition to tax pools.
“If prices recover, FCF won’t be a mirage: Come 2026, FCF is forecast at $356-milion which is a very high EBITDA to FCF conversion ratio of 89 per cent. This FCF conversion ratio will be unsustainable (due to tax sheltering and w/c releases), but it is a near-term tailwind. On a fully cash taxable basis, EBITDA to FCF conversion would be closer to 65 per cent. Our 26E FCF translates to a significantly high FCF yield of 31.5 per cent, which we anticipate will be directed towards an NCIB rather than debt repayments.”
While he thinks its comparative valuation “continues to screen attractively.” Mr. Gillies cut his target to $21. The average is $19.58.
“In 2026E, Algoma is trading at 3.5 times EV/EBITDA compared to the peer group at 5.5 times,” he said. “We believe a peer discount is warranted, but a tightening continues to make sense in our view given the potential FCF generation. The other important consideration is that Cliffs is targeting US$120-million in synergies post its acquisition of Stelco. We would anticipate a potential purchaser of ASTL would also be looking to realize significant synergy potential which would further compress the EV/EBITDA multiple. If we assume $100-million of synergies, Algoma’s 2026E EV/EBITDA multiple would compress to 2.9 times.”
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Pointing to potential near-term political and economic uncertainty, Raymond James analyst Brad Sturges thinks the total return performance for Canada’s real estate investment trust sector is likely to be more weight to the second half of the year.
“We forecast average 2025E total returns in the 20-25-per-cent range, reflecting an average distribution yield of 5 per cent, average 2025E AFFO/unit growth of 6 per cent year-over-year, and a potential average P/AFFO multiple recovery in the 2-3 times range (equal an average unit price appreciation of 10-15 per cent),” he said.
After 2024 marked the third consecutive year of the underperformance for the sector, which is the longest steak in the last 25 years, Mr. Sturges thinks “defensive investment attributes, such as strong balance sheet metrics, increased NCIB and non-core asset sale activity, and the potential to generate above-average 2025E AFFO/unit growth year-over-year could be key factors for relative outperformance in 2025.”
“Looking ahead to this year, we expect that Canadian REIT/REOCs that offer both defensive investment attributes such as high credit-quality rental income streams and strong and/or improving balance sheet metrics, combined with the potential to generate above-average 2025E AFFO/unit growth could be key factors in delivering above-average total returns in 2025,” he said. “We also expect that event-driven strategic initiatives such as increased unit repurchases through active NCIB programs, and ongoing capital recycling efforts may augment total return performance in 2025. We are generally forecasting very modest refinancing headwinds for the majority of covered Canadian REIT/REOCs. Overall, we forecast NexLiving (up 22 per cent year-over-year), StorageVault (up 13 per cent YoY), Granite (up 12 per cent), and Flagship (up 11 per cent YoY) to generate above-average 2025E AFFO/unit growth YoY.
“Our preferred Canadian property sector rankings include: 1) retail shopping centres; 2) Canadian multifamily rental (MFR); 3) international residential; 4) industrial; 5) storage; and 6) office. ... Our Strong Buy rated stocks include Crombie, Killam, Granite, and Flagship. We also highlight Outperform rated stocks Automotive Properties (APR), Boardwalk, CAPREIT, Choice Properties (Choice), ERES, First Capital, and Primaris as preferred stocks.”
In a report released Monday, Mr. Sturges trimmed his targets for many of the REITs in his coverage universe, noting: “Mainly reflecting the net of: changes in forecasted SP-NOI growth assumptions; F/X assumption changes; 4Q24 NCIB activity; and recently announced and completed transaction activity, we are slightly decreasing our FFO/unit and AFFO/unit estimates by 1 per cent on average across our Canadian REIT/REOC coverage universe. Further, based on the negative total return performance to finish last year on a relatively lower note due to recent Canadian foreign immigration policy changes, and due to near-term Canadian economic uncertainty surrounding the potential introduction of U.S. tariffs by the incoming Trump Administration, we are broadly decreasing our price targets for Canadian REIT/REOCs under research coverage by 5 per cent on average, or equal to an 1 times 2025E AFFO multiple turn.”
He made one rating revision, upgrading Crombie REIT (CRR.UN-T) to “strong buy” from “outperform” previously.
“We believe that Crombie offers attractive defensive, longer duration cash flows from high credit-quality tenants,” he said. “Further, Crombie benefits from attractive exposure to the Canadian grocery-anchored real estate sector that features positive leasing demand and new supply dynamics, supporting future market retail rent growth prospects. We also believe that the REIT’s future NAV/unit and AFFO/unit growth prospects can be augmented by Crombie’s major and non-major value-creation activities, including the pursuit of development intensification entitlements within its existing Canadian urban land bank. Finally, Crombie trades at an above-average NAV discount of 22 per cent (or implied 7.2-per-cent cap rate), while paying an 6.7-per-cent distribution yield supported by an 80-per-cent 2025E AFFO payout ratio that could attract greater income-oriented investor interest.”
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After a meeting with chief executive officer Rich Kruger, RBC Dominion Securities analyst Greg Pardy thinks Suncor Energy Inc. (SU-T) is “firing on all cylinders these days — but more importantly — is not losing sight of the inherent risks associated with becoming complacent.”
“Our group discussion delved into the drivers of the company’s impressive turnaround, durability of the cultural changes which have taken root, and what to expect going forward,” he said.
“Suncor has undergone an evolution under the leadership of Rich Kruger that has revolved around clarifying and simplifying its game plan. These include refocusing on its base business and driving strong operational and financial performance. This has manifested in record annual average upstream production of 827,000 bbl/d in 2024 (2 per cent above the top-end of the company’s 770,000-810,000 bbl/d guidance) amid upgrader utilization of 98 per cent, in addition to refining utilization of 100 per cent throughout the year.”
Mr. Kruger noted several highlights from the session including a priority on multidimensional integration and institutionalizing operational improvements as well as the Calgary-based company’s “Three Pillars of Progress.”
“The three pillars which have contributed to Suncor’s progress over the past two years are as follows: (1) Leaner organization. Leadership overhaul and organizational refocus, including a head count reduction of some 2,300 above-field employees (more than 50 per cent above initial target of 1,500) driving around $600 million of annual average cost savings. (2) No one gets hurt. Standardization of work practices under its Operational Excellence Management System (OEMS) which implements a consistent system of how work is to be completed, which reduces variations in fieldwork and enables safe, efficient and costeffective operations.(3) One scorecard. A new performance evaluation system that holds all levels of the organization to a single scorecard consisting of eight metrics (two regarding safety, two on environmental performance, two on operational reliability, and two on shareholder experience), driving development and promotion of internal talent with increased compensation and opportunities for high performers,” he said.
Mr. Pardy reaffirmed an “outperform” rating and $66 target for Suncor shares. The average is $61.31.
“Suncor remains our favorite integrated in Canada and is on our Global Energy Best Ideas list,” he said.
“At current levels under futures pricing, Suncor is trading at a 2025 debt-adjusted cash flow multiple of 5.5 times (vs. our global major peer group avg. of 5.8 times) and a free cash flow yield (equity) of 10 per cent (vs. our peer group avg. of 8 per cent), and free cash flow yield (enterprise value) of 9 per cent (vs. our peers at 7 per cent). We believe the company should trade at an average valuation vis-à-vis our global major peer group given its impressive execution, physical upstream-downstream integration, free cash flow generation, solid balance sheet and handsome shareholder returns, partially offset by the need to address its Base Mine depletion down the road.”
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In other analyst actions:
* Piper Sandler’s Charles Neivert upgraded Nutrien Ltd. (NTR-N, NTR-T) to “overweight” from “underweight” with a US$58 target, rising from US$50, while JP Morgan’s Jeffrey Zekauskas raised his recommendation to “neutral” from “underweight” with a US$50 target, up from US$40. The average on the Street is US$58.51.
* KBW’s Kyle Voigt trimmed his target for Brookfield Asset Management Ltd. (BAM-N, BAM-T) to US$56 from US$57 with an “underperform” rating. The average is US$56.28.
* With the release of its 2025 outlook and a 9-per-cent year-over-year increase in its dividend, Canaccord Genuity’s Luke Hannan raised his Maple Leaf Foods Inc. (MFI-T) target to $32, exceeding the $30.20 average, from $30 with a “buy” rating.
“We’re viewing [Friday] morning’s series of announcements positively. Management putting a finer point on near-term profitability expectations (recall, for example, that for 2024 Maple Leaf’s guidance was that adjusted EBITDA would simply be up YoY) will likely put investors into one of two camps: 1) this expectation should be approached cautiously, considering the current state of the consumer and historical volatility in pork markets, which have driven past shortfalls vs. expectations, or 2) the fact that management is now sharpening its EBITDA expectations speaks to how visibility has improved in a number of areas within the business including, but not limited to, hog raising/processing margins given lower feed costs and capital projects delivering on their business cases. We fall into this latter camp, but can understand why investors fall into the former, and are hopeful management has built in some degree of conservatism into its expectations in order to deliver outperformance. Further, taking these actions regarding facility optimization/SG&A rationalization now puts both the pro forma Maple Leaf business and Canada Packers in better positions to succeed following the spinout later this year.
“Altogether, the above combined with cash flow growth that continues to improve and a reasonable valuation for the entire business as of today (6.7 times the floor of $634 million in EBITDA for 2025), we have adjusted our 2025 estimates and target price to account for management’s expectations, which leave our BUY rating unchanged.”
* Canaccord Genuity’s Matt Bottomley cut his Tilray Brands Inc. (TLRY-Q, TLRY-T) target by US$1 to US$3 with a “buy” rating. The average is US$2.02.
“Overall, FQ2 came in just under consensus expectations for the period, although the company was able to achieve moderate rebounds in a number of its operating segments (most notably in its international cannabis and recently expanded Bev/Alcohol segment),” he said.