Inside the Market’s roundup of some of today’s key analyst actions
An “inflection point is near” for Premium Brands Holdings Corp. (PBH-T), according to Ventum Capital Markets analyst Devin Schilling, emphasizing the majority of its major production capacity projects are now complete and sales are set to “ramp.”
“We view PBH as a best-in-class opportunity for generating long-term shareholder value with the Company’s record pace of investment into the U.S. market setting the stage for accelerating organic growth and margin expansion in 2025 and beyond,” he said. “With PBH trading at 9.8 times 2025 EV/EBITDA versus the five-year historical average of 11.0 times, we see the Company as undervalued based on historical multiples and set to reestablish its EV/EBITDA premium, relative to peers.”
Shares of the Vancouver-based specialty food company jumped 4.6 per cent on Friday, despite a broader market selloff, after the specialty foods company reported record fourth-quarter earnings ahead of expectations. The company also said it’s holding off on a dividend increase given the uncertainty around tariffs.
Premium Brands reported record revenue of $1.64-billion for the quarter ended Dec. 28, rising from $1.55-billion for the fourth quarter of 2023 and ahead of the Street’s expectations of $1.60-billion. Adjusted earnings came in at $46.3-million or $1.05 per share, ahead of expectations of 95 cents and up from $37.9-million or 85 cents per share a year ago.
“The quarter was driven by Specialty Foods’ core U.S. growth initiatives in protein and baked goods, which generated organic volume growth rates of 21.9 per cent and 22.4 per cent, respectively,” said Mr. Schilling. “Specialty Foods’ sandwich sales were relatively flat as volume growth in the club store channel and higher selling prices were offset by consumer demand-related challenges in the foodservice channel.”
“Our 2025 revenue estimate has increased by 4 per cent while our EBITDA estimate remains unchanged. We are introducing our 2026 revenue and EBITDA estimates of $8.2-billion and $820-milllion. We forecast 14-per-cent revenue growth in 2026, which is supported by the near-term growth coming from PBH’s pipeline of U.S. sales opportunities. We note that our forecasts do not include any acquisitions, which provides additional upside. PBH remains busy on several opportunities with six currently in the active negotiation stage.”
With his changes, Mr. Schilling increased his target for Premium Brands shares to $120 from $109 with a “buy” rating. The average target on the Street is $103.80.
“Our target is derived from a 10 times EV/EBITDA multiple on our 2026 estimates (previously 11 times 2025) which we view as appropriate given the heightened uncertainties related to the consumer backdrop and potential tariffs,” he explained. “PBH shares currently trade at 9.8 times and 8.1 times 2025 and 2026 EV/EBITDA, respectively. The shares currently trade more than one standard deviation below the five-year historical average of 11 times NTM [next 12-month] EV/EBITDA, but in line with the wider peer group. We believe a premium valuation is warranted given PBH’s track record of best-in-class value creation.”
Elsewhere, other analysts making target adjustments include:
* Desjardins Securities’ Chris Li to $93 from $95 with a “buy” rating.
“Despite management’s expectations for strong double-digit revenue and EBITDA growth this year, investors will likely take a wait-and-see approach given tariff uncertainties potentially impacting the consumer. While there are some cross-border business activities, management believes the direct impact of tariffs should be manageable. Despite expectations for solid FCF, PBH has opted not to increase the dividend until macro conditions improve. Better sales visibility and leverage reduction are key catalysts,” said Mr. Li.
* RBC’s Ryland Conrad to $98 from $97 with a “sector perform” rating.
“Despite the still challenged operating environment (value-seeking consumer behavior, poor lobster fisheries, sales headwinds for a major foodservice customer and tariff uncertainty), we believe management continues to execute on U.S. growth initiatives with significant capacity expansions, new customer wins and a healthy sales pipeline setting the foundation for the next phase of accelerated growth beginning in earnest in H2/25. While we remain on the sidelines given the still challenged operating/macro backdrop in combination with elevated leverage (4.5 times pro forma excluding leases), we continue to have confidence in management’s execution and see potential upside in the shares at 9.0 times FTM [forward 12-month] EV/EBITDA (versus a historical range of ~8x-16x) as U.S. initiatives continue to scale with any meaningful macro improvement being an incremental tailwind,” said Mr. Conrad.
* BMO’s Stephen Macleod to $100 from $94 with an “outperform” rating.
“Core U.S. sales growth initiatives continued to gain momentum in Q4, while sales with a key sandwich customer remained a headwind (up 9.5-per-cent excluding sandwich customer impact); growth expected to accelerate with late-Q2 and early-Q3 major U.S. product launches,” he said. “Tariff exposure ($500-600-million) is manageable, given cross-border manufacturing assets; but usual Q4 dividend increase forgone pending trade clarity.
“We see attractive risk/reward (9.3 times 2026 estimated EV/EBITDA) and expect 2025E sales acceleration to be positive for the stock.”
=====
TD Cowen analyst Derek Lessard sees K-Bro Linen Inc.’s (KBL-T) “trough-level” valuation as “unjustified,” pointing to its consistent results and outlook for the current year.
Shares of the Edmonton-based company rose 3.1 per cent on Friday after it reported revenue for its fourth quarter of 2024 rose 15.7 per cent year-over-year to $95.5-million driven by strength in its U.K. division and exceeding the Street’s expectation of $92.9-million. Adjusted EBITDA was up 16.6 per cent to $17.4-million, topping the consensus of $16.7-million.
Management said it continues to see “a positive outlook” for 2025, pointing to steady volume trends in both its healthcare and hospitality segments.
“Overall, we are encouraged by the solid Q4 results (revenue and EBITDA beat) as well as the healthy outlook in both Healthcare and Hospitality, supported by steady patient care demand and steady activity levels in both business and leisure travel,” said the analyst. “Also, we see numerous opportunities that are not included in our forecast, but could present additional upside to our estimates if materialized, including: 1) 0.5 percentage point margin improvement from the elimination of carbon tax in Canada; 2) new Healthcare contract bidding opportunities of $10-million/year over 2025-2026; and 3) a potential boost in domestic and European travel due to geopolitical tensions.
“Following Q4 conference call, we fine-tuned our model, resulting in no meaningful changes to our revenue/EBITDA estimates. Our 2025-26 EPS estimates declined by 4-5 per cent reflecting updated interest rate forecasts.”
With an update to his valuation, Mr. Lessard raised his target for K-Bro shares by $1 to $49, reiterating a “buy” recommendation. The average on the Street is $47.83.
“KBL is on solid footing given the normalized operating environment (and margin), steady demand in both Healthcare and Hospitality, and potential upside stemming from the elimination of the carbon tax, new bidding opportunities, and potential boost to domestic/European travel,” he said. “The shares are trading 10-year trough levels (7.1 times forward cons EBITDA), which we believe presents compelling value.”
Elsewhere, Acumen Capital’s Jim Byrne increased his target to $52 from $50 with a “buy” rating.
“We believe the shares are attractively valued at current levels given the long-term nature of the company’s contracts and stable cash flows,” said Mr. Byrne. “The outlook for healthcare revenue growth remains strong and while the current economic uncertainty could impact travel, the weaker Canadian dollar could positively impact tourism here. 2025 will see reduced capital spending and an increase in free cash flow as the company looks to pay down debt while retaining flexibility for further acquisitions.”
=====
After “ending the year on a strong note, with solid organic growth supported by FX and M&A,” Hammond Power Solutions Inc. (HPS.A-T) faces volatility in sales and earnings stemming from potential tariff threats on inputs and final products from both Canada and Mexico to the United States, warns National Bank Financial analyst Rupert Merer.
However, he noted Guelph, Ont.-based manufacturer of dry-type transformers thinks it can leverage its footprint across North America to moderate the impact of the trade dispute.
“The outlook for 2025E is uncertain, given changing policies on tariffs (which could impact margins, volume and pricing for sales to the U.S.) and uncertainty related to the growth in demand for power infrastructure,” said Mr. Merer. “Policies in the U.S. that slow the construction of new power assets (such as changes to the IRA) or lead to slower economic growth could dampen demand. However, for now, we believe that demand for custom products remains robust and the backlog remains healthy.
“We have updated our estimates and now forecast $883-million in revenue for 2025 (was $859-million). This represents 12-per-cent revenue growth year-over-year for 2025 (was 10 per cent), driven by M&A (3.4 per cent), FX (2.8 per cent), price (3.6 per cent) and organic volume growth (2.2 per cent). We believe that our forecasts could be conservative, with HPS ramping up capacity of its new custom product facility in Mexico later this year. We have also taken our margin forecast up by 44 bps to 31.8 per cent (was 31.3 per cent), based on healthy Q4 margins and potential for price increases this year. With that and with slight increases to our SG&A forecasts, our Adj. EBITDA forecast climbs to $141-million (was $138-million), but remains slightly below consensus at $145-million. Our adj EPS forecast climbs to $7.48 per share (was $6.83 per share), up 5 per cent year-over-year.”
Hammond shares rose 3.4 per cent on Friday after it reported fourth-quarter 2024 revenue of $209-million, up 12 per cent year-over-year an above both Mr. Merer’s $204-million estimate and the consensus forecast of $203-million. While gross margins were “solid,” adjusted EBITDA of $32.5-million fell narrowly below expectations ($35.1-million and $35.9-million, respectively) due largely to one-time costs. Excluding share-based compensation, earnings per share of $1.90 topped the analyst’s projection by 7 cents.
“With capacity expansion, HPS is poised to grow its market share,” said Mr. Merer. “With the majority of its $80-million capital program complete ($45-million invested), HPS has expanded its revenue capacity to $1.0-billion, with an additional $120-million of capacity expected to be complete by year-end via its new custom product facility in Mexico. Additional capacity reduces lead times and opens potential for new business wins, namely for larger (likely higher margin) projects. At build multiples of 1-2 times capex/EBITDA, we believe HPS is being very efficient in its capital use. Additionally, HPS could pursue opportunistic M&A in the power quality space to diversify its customer base and supply chain.”
“HPS is well-positioned to grow, with $34-million in cash, only $13-million in debt, more than $50-million/yr in FCF and a small dividend ($12-million/yr). We believe it could comfortably handle $175-200-million of debt (1.5 times EBITDA, at negative 0.2 times now), which would support organic growth and M&A.”
Citing “continued policy uncertainty”, Mr. Merer cut his target for Hammond shares to $140 from $170, maintaining an “outperform” recommendation. The average target is $152.
“With the uncertainty related to changing U.S. policies and less investor appetite for investing in energy transition and data-themed stocks, we are reducing our target multiple on HPS to 11 times forward EV/EBITDA (was 15 times), consistent with a long-term DCF with a discount rate of 9.5 per cent on our cash flow forecast (was 10 per cent),” he noted. “We dropped our market risk premium to 4.5 per cent from 5 per cent (consistent with the rest of our coverage), and saw some changes with our model updates for the quarter. Our 11x EV/EBITDA multiple is at the low-end of electrification peers, and we believe that our forecasts have some room for upside. With that, our target drops.”
Elsewhere, other analysts making adjustments include:
* Acumen Capital’s Jim Byrne to $148 from $160 with a “buy” rating.
“The fundamental drivers for electrification and demand from multiple sectors is set to drive growth for Hammond for several years to come. Our thesis is unchanged, and we believe the pullback in the shares represents a buying opportunity,” said Mr. Byrne.
* Canaccord Genuity’s Matthew Lee to $158 from $162 with a “buy” rating.
“Hammond reported Q4 results that were largely in line with expectations. In addition, the company offered its outlook for F25 amidst the current tariff uncertainty, highlighting the firm’s ability to navigate a wide swath of macroeconomic conditions while adding capacity where required. As of current, we expect any tariff impacts to be an industry-wide phenomenon with 80 per cent of U.S. transformers produced in Mexico. As such, we do not expect a meaningful change in competitive pressure or pricing, allowing Hammond to maintain both its revenue and margin trajectory over the medium term. We remain constructive on the name and believe that, despite the near-term noise, HPS is well on its way to deliver on its $1.1-billion revenue target by F28. We are encouraged by management’s willingness to harness its pristine balance sheet to invest organically and pursue additive M&A, which we view as a hedge to macro oscillations,” said Mr. Lee.
=====
RBC Dominion Securities analyst Pammi Bir thinks RioCan Real Estate Investment Trust’s (REI.UN-T) exposure to the Hudson’s Bay Co.’s bankruptcy is “manageable, though addressing the space will no doubt require time and capital.”
RioCan is both a landlord to the store chain and a partner through a joint venture established in 2015 that gave it a minority stake in some of the retailer’s real estate. Under the deal, RioCan agreed to invest $325-million in exchange for a stake in 10 freehold and leased Hudson’s Bay properties. Those include the downtown stores in Vancouver, Montreal, Calgary and Ottawa, and leased properties in malls including Yorkdale Shopping Centre and Scarborough Town Centre in Toronto, Carrefour Laval in Laval, Que., and Square One Shopping Centre in Mississauga. RioCan holds a 22-per-cent stake in the assets. The joint venture and RioCan each hold a 50-per-cent stake in two further properties. The companies also hold mortgages on those properties.
Thousands of Hudson’s Bay employees facing layoffs with company set to liquidate stores
“Addressing HBC space will require time and capital; REI’s equipped to handle it,” said Mr. Bir in a report titled HBC marks a setback, not a derailment. “As longer-term implications are uncertain for the three JV stores excluded from liquidation, our updated estimates assume they will close. We also assume the remaining 10 HBC properties are vacated by mid-2025. Acknowledging there are still many unknowns, we believe vacated stores will be re-leased, redeveloped, sold, or demolished. REI noted that retailers have expressed interest in several of the HBC locations, with our estimates reflecting some re-leasing in 2026.
“Nonetheless, we expect the process will require time and capital, and hence some modest near-term earnings erosion and an uptick in leverage. That said, we believe REI has the balance sheet and experience to navigate its way through, as evidenced by its ability to address larger tenant failures in the past (e.g. Target).”
Mr. Bir lowered his 2025 and 2026 funds from operations per unit estimates by 4 cents and 6 cents, respectively, to $1.87 and $1.80 to reflect the anticipated HBC closures and lower fee and interest income. He noted, excluding residential gains, his 2024-2026 compound annual growth rate (CAGR) forecast is 3 per cent, exceeding retail peers (2 per cent) and narrowly below the broader retail sector (4 per cent).
Pointing to lower values for HBC related assets and additional debt, he lowered his target for RioCan shares to $21 from $22, keeping an “outperform” rating. The average target is $21.63.
“Given REI’s experience and balance sheet capacity, we believe it’s well-positioned to see its way through with an ultimately stronger portfolio on the other side. With the units down 11 per cent since HBC’s CCAA filing on Mar-7 (vs. down 1 per cent for the TSX REIT index, down 2 per cent retail peers), we see current levels as excessively discounted,” he concluded.
Elsewhere, BMO’s Michael Markidis trimmed his target to $20 from $21.50 with an “outperform” rating.
“While a sell-off was warranted, the degree of relative under-performance is starting to feel overdone, in our view (the XRE is down 1.4 per cent over the same period),” he said.
In a separate note, Mr. Bir trimmed his Primaris REIT (PMZ.UN-T) target by $1 to $18 with an “outperform” rating, seeing it “well-prepared to absorb [a] modest hit from HBC.” The average is $18.38.
Andrew Willis: Richard Baker’s mastery of real estate deals wasn’t enough to save Hudson’s Bay
The retailer is Primaris’ 12th-largest tenant, representing 1.4 per cent on annual base rent.
“Given long-standing pressures on department stores and HBC’s store closures in recent years, PMZ is well-prepared with plans for each of its locations,” he said. “While there are still many unknowns, we expect a mix of redevelopment, re-leasing, dispositions, and demolition. In the near-term, after certain mitigation strategies but before potential implications from co-tenancy clauses, we estimate the annualized revenue hit at $7.5-million ($0.06/unit). PMZ noted that select retailers have expressed interest in some of its HBC space. In light of HBC’s low rents, we see the potential for value creation at select locations, albeit after some required time and capital. Importantly, PMZ has the necessary skillset, having repurposed former Target and Sears space, with target unlevered returns in the 8-11-per-cent range (e.g., former Sears box at Stone Road Mall in Guelph, ON was redeveloped at $24-million cost with 9-per-cent unlevered IRR).”
He added: “At current levels, we continue to see a heavily discounted entry to a name with a healthy growth profile, below average leverage, and strong track record of execution.”
=====
Dentalcorp Holdings Ltd. (DNTL-T) now has “another quarter of clean execution on the record,” according to Desjardins Securities analyst Gary Ho.
“DNTL reported an in-line 4Q and solid 2025 guidance, accompanied by an inaugural $0.025/share quarterly dividend,” he said. “While CDCP [Canadian Dental Care Plan] noise in early 1Q remains, patient volumes have improved lately while management showed confidence in driving 4-per-cent-plus SPRG [Same Practice Revenue Growth], 20 basis points-plus EBITDA margin expansion and 15-per-cent-plus pre-tax FCF/share growth for 2025 —continued execution on these metrics should drive valuation multiples higher over time.”
Shares of the Toronto-based company surge 4.3 per cent on Friday following the quarterly release, which included quarterly EBITDA of $73.9-million, falling in line with Mr. Ho’s $74.1-million expectation and ahead of the consensus projection of $73.1-million.
“2025 guidance calls for 10–11-per-cent revenue growth, 3–5-per-cent SPRG and 15-per-cent-plus pre-tax FCF/share growth,” he said. “We like the continued progress in EBITDA margin expansion (20 basis points or more expected this year).
“DNTL is pacing ahead of its acquisition target of $25-million-plus in acquired EBITDA this year, with $8-million expected in 1Q, 60 per cent by mid-2025 and 40 per cent in 2H. Management expects to resume its historical pace of $30-million-plus as soon as 2026 — we forecast $27-million in 2025 and $29-million in 2026.”
After raising his revenue and earnings expectations through 2026, Mr. Ho increased his target for Dentalcorp shares to $12.75 from $12, reiterating a “buy” rating. The average is currently $12.53.
“We view DNTL as a quality compounder given its (1) proven M&A playbook in a fragmented market; (2) organic growth outlook; (3) compelling financial profile with resilient top-line and FCF growth; and (4) recession-resistant attributes,” he said.
Other analysts making target changes include:
* CIBC’s Scott Fletcher to $13 from $11.50 with an “outperformer” recommendation.
“DNTL’s in-line Q4 results and 2025 guidance highlight the stability and predictability of its business model. We are increasingly positive on DNTL as a defensive option against the current backdrop given its entirely Canadian revenue base and lack of tariff/trade exposure,” said Mr. Fletcher.
* Canaccord Genuity’s Tania Armstrong-Whitworth to $12.50 from $12.50 with a “buy” rating.
=====
In other analyst actions:
* After revisions to the firm’s commodity forecast, BMO’s Phillip Jungwrith raised Ovintiv Inc. (OVV-N, OVV-T) to “outperform” from “market perform” with a US$57 target, rising from US$55. The average on the Street is US$59.18.
“·Ovintiv’s portfolio is more focused now than any time in its history, with core positions in the Midland and Montney,” he said. “Both assets generate attractive returns and operational performance has been strong. Ovintiv has line of sight on continued deleveraging, reaching $4.6-billion year-end 2025 net debt (less than 1.0 times), supporting a resumption of buybacks in 2Q.
“While valuation has historically been discounted, we think a greater case for re-rating now exists.”
* BMO’s Randy Ollenberger upgraded Peyto Exploration & Development Corp. (PEY-T) to “outperform” from “market perform” and raised his target by $1 to $19.50, exceeding the $18.90 average on the Street.
“The company’s extensive hedging program and peer-leading cost structure has allowed the company to fund its capital program, reduce debt, and maintain its healthy dividend despite the ongoing weakness in western Canada natural gas prices,” he said. “The company’s acquisition of the Repsol Deep Basin assets has been very successful, and allowed the company to deliver a 25-per-cent improvement in overall well productivity.
“Given its hedges, Peyto should reach its debt target by the end of 2025, which could support higher returns to shareholders.”
* Raymond James’ Brian MacArthur increased his Trilogy Metals Inc. (TMQ-T) target to $2.50 from $2 with a “market perform” rating. The average is $1.95.