Inside the Market’s roundup of some of today’s key analyst actions
Ahead of the start of another earnings season for Canadian banks, Scotia Capital analyst Meny Grauman advises investors to “focus a little less on the results themselves and much more on management commentary about the path ahead.”
“Canadian bank stocks are up an average of 9 per cent since Q3 reporting season led by BMO and BNS which are up 18 per cent and 17 per cent respectively, over that time period. All this is happening despite a continuing deterioration in credit fundamentals and still sluggish loan growth, which begs the question: is the market setting itself up for disappointment?,” he said.
“We don’t think so, and it’s not because we are more optimistic about the near-term outlook for the banks. In fact, as our Q4 EPS estimates attest, we are forecasting a pretty sluggish wrap up to the year-end. Instead, our optimism for the stocks continues to be fueled by growing optimism for the future, especially in F2026 when we expect accelerating revenue growth to combine with loan loss recoveries to drive accelerating EPS growth and higher bank ROEs. Markets are always forward-looking, but at turning points in the credit cycle bank stocks tend to be even less tethered to current performance as investors look beyond the peak in PCL ratios and towards a much improved operating environment. We believe that this is exactly where we are right now, and that means that the current rally is less about what the banks report in Q4, and more about their outlooks for next year and beyond across a number of different variables including loan growth, capital markets revenues and PCLs.”
Mr. Grauman is currently forecasting core earnings per share for the sector of $2.12 in the fourth quarter, rising 7 per cent year-over-year but down 6 per cent sequentially. On a PTPP basis, he’s projecting earnings will rise 10 per cent from the same period a year ago “primarily reflecting better expense management.”
“As we think about the big picture outlook for Canadian banks we continue to focus on macroeconomics and capital,” he said. “The macro outlook for Canadian banks is getting a little more complicated thanks to the Trump win, but overall we believe that a booming US economy will lift Canada as well. Meanwhile, on the capital side we have more confidence that the announced one-year pause on the ratcheting up of the capital floor will become permanent, and we may even see further favorable changes here as well given that the US is highly unlikely to implement the Basel III reforms. Overall, we continue to forecast sluggish earnings growth for the group in the final quarter of F2024, but see a material improvement later in F2025, with additional upside in F2026. On average, the group is now trading at 12.2 times consensus F2025 EPS which is above the average historical range for the group, but it is trading at a much more average multiple of 11.1 times based on consensus F2026 EPS. With the market looking ahead to F2026, we believe that this is the relevant benchmark, which suggests that these stocks still have more room to run despite a strong year.”
“Heading into the quarter we like the setup for CM, RY and maybe surprisingly to some TD, and are most cautious on BMO and EQB. TD heads into reporting season with very low expectations and maximum negativity creating a low bar for a better than expected result which in our view will include some underlying momentum in Canada (ex. the pre-announced CAT loss in its P&C insurance unit) and relative stability in the US when it comes to both loan and deposit balances. Any constructive forward guidance would be a big plus, and is clearly not being factored into the bank’s current valuation. Given its pending acquisition by NA, CWB is also in a unique position where results are unlikely to drive material moves in the stock either up or down barring any significant change in the underlying health of the business. That said credit was worse than expected in Q3, and although we expect it to normalize in Q4, it will be under the spotlight when the bank reports year-end results.”
After updating his valuations for Canadian bank stocks to fall in line with his 2026 forecast, Mr. Grauman made these target adjustments:
- Bank of Montreal (BMO-T, “sector perform”) to $147 from $112. The average target on the Street is $129.53.
- Canadian Imperial Bank of Commerce (CM-T, “sector outperform”) to $108 from $85. Average: $87.12.
- Canadian Western Bank (CWB-T, “sector outperform”) to $62 from $52. Average: $50.12.
- EQB Inc. (EQB-T, “sector outperform”) to $135 from $109. Average: $110.
- Laurentian Bank of Canada (LB-T, “sector perform”) to $30 from $26. Average: $26.64.
- National Bank of Canada (NA-T, “sector perform”) to $154 from $129. Average: $135.08.
- Royal Bank of Canada (RY-T, “sector outperform”) to $197 from $167. Average: $172.33.
- Toronto-Dominion Bank (TD-T, “sector outperform”) to $98 from $86. Average: $84.75.
“From a stock-selection perspective, CM remains our top pick in the group despite its impressive outperformance which has driven a material re-rating in the shares,” said Mr. Grauman. “The stock is now trading at a small premium based on Street EPS estimates for F2026, but we believe that this premium can go a little higher if CIBC continues to execute. We also continue to like the risk-reward profile for TD, even though this is very much not a consensus view. The U.S. election certainly has the most positive read-through for BMO, but we remain cautious on this name heading into the quarter. After three large consecutive misses, the margin of error on this stock is small. Furthermore, significant downward revisions in EPS expectations for this bank means that its valuation is also not as compelling as one would maybe think. That said, macro trends are clearly improving for BMO and so we would view a clearer picture of its recent credit issues as a very favorable development. That is certainly something that we will be looking for this earnings season. We continue to rate RY as a Sector Outperformer, but while underlying earnings momentum is clearly there, especially if we do see a big capital markets boom next year, valuation on this name is stretched by historic standards, and we see scope for laggards to increasingly narrow that gap.”
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RBC Dominion Securities’ Irene Nattel continues to see Dollarama Inc. (DOL-T) as “the best positioned Canadian retailer for pinched consumer budgets and the value-seeking spending backdrop that likely continues into 2025.”
“DOL deep value positioning should sustain DOL as destination of choice for everyday household and seasonal items,” she said in a report released Monday. “Having said that, we do not expect DOL to be immune to constrained consumer spending and expect modest SSS [same-store sales] pressure relative to H1, in part reflecting shift in timing of Halloween but also reflecting cautious consumer spending overall and intentional consumer spending patterns focused on buying closer to/at need.”
Ahead of the Dec. 4 release of its third-quarter results, the equity analyst adjusted her forecast to reflect that “constrained” spending, however she emphasized the Montreal-based discount retailer’s financial report is likely to be “solid.”
She’s currently projecting earnings per share of 99 cents, up 7.6 per cent year-over-year and a penny above the Street’s expectation, which she said is “predicated on annual SSS consistent with mid-point of the long-term target range 4-5 per cent, although we expect normalizing cadence through F25 with H2 less than H1.”
“FQ3E SSS of up 2.75 per cent (two-year stacked up 13.9 per cent) reflecting timing of Halloween, RBC credit card data and peer commentary around sequentially weaker consumer spending in Q3, ” she added. “Fiscal 2025 estimate of 4.4 per cent toward the high end of guidance range 3.5-4.5 per cent with H2 less than H1.
“While channel checks pointed to good Halloween sell-through boosted by unusually warm weather, a portion of Halloween sales will shift to Q4 as Q3 ended October 27, two days earlier than last year. Notwithstanding moderating consumer spending trends, DOL relative same-store performance clearly stands out against the backdrop of stretched consumer wallets and value- seeking behaviour. Moderating our FQ3E GM [gross margins] percentage to 44.9 per cent (down 45 basis points year-over-year) to reflect mix and cost headwinds and very modest deleveraging on scale/volume. Rail strike impact likely de minimis given short duration. Our FQ3E SG&A ratio down 15 basis points reflect scaling and efficiencies partly offset by labour pressure.
Reiterated an “outperform” recommendation for Dollarama shares, Ms. Nattel increased her target by 9 per cent to $160 from $147 after raising her valuation multiple. The average target on the Street is $144.82, according to LSEG data.
“In the current environment of uncertain global macro and policy outlooks, we favour names with proven performance across cycles and with superior visibility, predictability and sustainability of earnings growth,” she said.
“In our view, recent multiple expansion at or slightly above one-standard deviation above the 10-year average should be sustainable. Accordingly, we raise our target multiple to 18.0 times from 16.5 times F27E EBITDA (January 2027), one standard deviation above the normalized 10-year average, 1.5 times lower than current NTM [next 12-month] valuation, and consistent with current C25E multiple.”
Elsewhere, TD Cowen’s Brian Morrison reaffirmed a “buy” rating and $154 target.
“We forecast growth in Canada to moderate, as sales lap an outsized two-year stack, inflation-driven price increases moderate, and there were fewer key selling days this Halloween season than the last,” said Mr. Morrison. “As growth moderates, so too shall the outlook for margin expansion and in turn net income growth. On a more positive note, strong growth from the LATAM operations should be fueled by SSSG, above-trend new-store additions, and operating leverage. The growth of these two in aggregate will be augmented by its active NCIB. This derives our Q3/F25 Adjusted EPS forecast of $0.97 (6-per-cent year-over-year growth).”
“The outlook for Dollarcity remains our focus as growth in Canada moderates following the multi-year benefit of inflation-driven consumer trade-down. The long runway for growth at Dollarcity should sustain mid-teen annual consolidated EPS growth and a valuation toward the upper end of its average forward multiple range. With strong year-to-date share appreciation, we expect gains to be more muted near term.”
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After hosting executives for institutional meetings in Montreal last week, National Bank Financial analyst Zachary Evershed sees Jamieson Wellness Inc. (JWEL-T) “staying the course” after they reiterating confidence in their long-term targets, seeing them “driving margin expansion through scale and sustainable growth.”
“Unsurprisingly, discussions centered around both growth and profitability profiles of the U.S. and China,” he said.
“Over the next 4-6 years, management remains bullish on growth in each market, and continues to target margin expansion of 150-250 basis points in Canada through capacity utilization and innovation, 600-800 bps in China through operating leverage and scaling (current team in China is built to handle significantly higher volumes), and 200-300 bps in the U.S. through the same levers (youtheory currently runs at 50 per cent capacity, leaving significant space for operating leverage upside).”
Mr. Evershed said the Toronto-based vitamin and natural health product manufacturer also reiterated its capital allocation priorities, seeing “organic growth initiatives (sustainable market share gains across all channels) sitting firmly above the rest.”
“This is then followed by returning capital to shareholders through dividend growth roughly in line with earnings growth, debt repayments and opportunistic share buybacks,” he added. “We note that JWEL currently does not have a running NCIB program, but we expect an announcement on this front between now and Q4 reporting.”
In a note released Monday, Mr. Evershed introduced his estimates for the 2026 fiscal year, including $919.6-million in revenue and adjusted earnings per share of $2.77. Both exceed the Street’s current expectations ($891.6-million and $2.50, respectively) and represent growth of 4 per cent in Canada, 12.5 per cent in the U.S., and 30 per cent in China.
“Despite JWEL’s commanding market share over the VMS [vitamins, minerals and supplements] space [in Canada], management continues to find avenues for growth; recent efforts have been focused on conventional and discount grocers as VMS demand is growing outside of pharmacist-staffed stores,” he said. “Jamieson’s LDD [low double-digits] e-commerce penetration in Canada outstrips the market’s HSD [high-single digits] level.”
“Despite widespread fears that the VMS market would contract sharply exiting the pandemic, the Canadian and American markets never saw a pull-back in demand but rather a reversion towards a low-to-mid-single digit growth rate, supported by long term tailwinds including population growth, and a general increased interest in self-care and health & fitness. Additionally, management notes younger generations are entering the VMS market significantly earlier than the prior generations, possibly driven by social media exposure.”
Keeping an “outperform” rating for Jamieson shares, Mr. Evershed raised his target to $42 from $36.50 after moving his valuation ahead to align with his view on 2026. The average target on the Street is $40.82.
“We reiterate our Outperform rating as JWEL continues to deliver on ambitious growth plans,” he said.
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RBC Dominion Securities’ Sam Crittenden said a recent analyst tour of Capstone Copper Corp.’s (CS-T) Chilean assets support “his positive view based on strong near-term growth (to nearly 300kt by 2026 from 189kt in 2024), a FCF inflection on the horizon, and several future growth options.”
He said the ramp-up at the Mantoverde mine within the Atacama Fault System, which represents 36 per cent of his net asset value estimate) appears to be “making good progress.”
“Mantoverde is currently operating at 80 per cent of nameplate capacity and Capstone believes they can reach 100 per cent within the next few months,” said Mr. Crittenden. “The mine has made steady progress since producing first concentrate in June and is tracking ahead of the historic ramp-up average. There have been some failures of motors and other minor equipment which we view as typical teething pains. The deposit appears as expected in terms of grade and metallurgy with recoveries achieving design rates when the mill is operating consistently.
“The Mantoverde Optimized project can add 20ktpa of copper, increase throughout to 45ktpd from 37ktpd, and extend the mine to 25 years from 19 for initial capex of $146-million. This can be completed by mid-2026 if permits are obtained by mid-2025. Beyond MV-O, a second line could be added to take throughput to 90ktpd with capex of $1.2-1.5-bilion.”
The analyst also said the Mantos Blancos in the same region (21 per cent of NAV) is starting to achieve design throughput after new equipment was installed in July, while Santo Domingo (14 per cent) could “provide the next leg of growth and a partnership announcement is a potential catalyst in mid-2025.”
Seeing a potential free cash flow inflection approaching, he explained: “At spot prices, we estimate $863-million of FCF in 2025 (from negative $50-million in 2024), implying a yield of 8 per cent vs. peers at 3 per cent. Capstone trades at 1.0 times our NAVPS estimate of $9.87 and 13.4 times/6.3 times 2024/2025 estimated EBITDA, vs. mid-cap peers at 1.1 times NAV and 5.0 times 2025e EBITDA, and large-cap peers at 1.3 times NAV and 7.8 times 2025e EBITDA.”
Mr. Crittenden reaffirmed his “outperform” rating and $12 target for Capstone shares. The average on the Street is is $13.39.
“Capstone is a mid-tier copper producer with a portfolio of North and South American assets that provide significant leverage to copper price upside,” he said. “The growth engine for Capstone is in Chile (approximately 75 per cent of NAV) through the ongoing Mantoverde sulphide expansion ramp-up (MVDP), optimization studies, and de-risking Santo Domingo development. We view 2024 as a transformational year for Capstone through the incoming production growth which should coincide with a significant improvement in cost structure.”
Meanwhile, National Bank’s Shane Nagle said the tour provided “confidence” in the near-term ramp-up on the operations. He kept an “outperform” recommendation and $13 target for Capstone shares.
“We reiterate our Outperform rating given our positive long-term growth outlook for the company as we continue to see expansion opportunities and potential cost savings through the Mantoverde-Santo Domingo district integration plan in the coming years,” said Mr. Nagle. “CS is in a unique position to benefit from an improved backdrop for copper prices given several transformational growth projects in the pipeline, further exploration success to better define longer-term growth opportunities will help support the Company’s premium valuation.
Elsewhere, analysts making target adjustments include:
* Scotia’s Orest Wowkodaw to $12.50 from $13 with a “sector outperform” rating.
“The ramp-ups at the new Mantos Blancos (MB) and Mantoverde (MV) sulphide mines appear to be making solid progress and are nearing design capacity,” he said. “Although CS has several attractive brownfield growth options ahead, including a new MB tailings reprocessing project, we have tempered the pace of our near-term growth outlook. We still anticipate 29-per-cent Cu growth at 15 per cent better costs in 2025. Overall, we view the update as mixed for the shares.
“We rate CS shares SO based on strong Cu growth and leverage, takeover optionality, and valuation.”
* Canaccord Genuity’s Dalton Baretto to $12.50 from $14 with a “buy” rating.
* CIBC’s Bryce Adams to $12.50 from $12 with an “outperformer” rating.
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The late Friday announcement of “a more granular” rate structure for the 407 ETR highway in 2025 points to a higher valuation for AtkinsRéalis Group Inc. (ATRL-T), according to National Bank Financial analyst Maxim Sytchev, who thinks the changes will lead to “more cash to spend on M&A, eventually.”
In mid-June, the Canadian engineering giant revealed it is aiming to sell its 6.76-per-cent stake in the Toronto-area toll road, which is worth an estimated $1.7-billion, within three years as it pushes on with a strategic revamp it says has re-energized the business.
Under the new arrangement, the highway will be cut into 12 separate geographic zones (from four previously) and will distinguish passenger vehicles between motorcycles as well as light versus medium passenger vehicles in the under 5,000-killogram category. Passenger vehicles fell into one category in the past.
“While the new fee structure is not directly comparable to the prior set up, realized revenue per km traveled will likely come in significantly higher in 2025 than the 1.5-per-cent assumption in our model,” said Mr. Sytchev. “Importantly, this increase will compound the double-digit price increase made effective this February (we model a 12-per-cent increase in realized pricing per km for 2024E). The toll increase for light passenger vehicles amounts to between 3 cents and 14 cents per kilometre. In addition, camera charges, account fees, and transponder fees will also be increasing; net-net, management expects the majority of personal users to see a $8 per month increase in their monthly bill.”
The analyst said the changes show 407′s “pricing power in full display.”
“407′s demand elasticity seems to be only conceptual in nature because after last year’s aggressive 20-per-cent price hike (after 4 years of status quo), traffic signals seem to not have deteriorated,” said Mr. Sytchev. “We shall see if the same is true in the next 12 months with yet another double-digit percentage price hike; we suspect 407 ETR’s internal econometric modeling would suggest as such.
“LTM [last 12-month] dividends to ATRL from 407 were approximately $75-million; assuming a 15-per-cent hike in pricing translates to an equivalent rise in dividends, we should expect an $11-million bump to 2025 FCF for ATRL (or close to 5 per cent higher than our currently modeled $244 million). This is ignoring the capital appreciation that will translate into a higher DCF value for ATRL’s stake in the 407 (currently $10.96 per share) as we were only modelling a modest 2-per-cent increase in rates for 2025. All of the above should therefore translate into a higher exit multiple for the 407, boosting ATRL potential dry powder for a future acquisition (recall that the company has telegraphed its intentions to sell the asset in likely 2025 to fuel M&A in the U.S.).”
He kept an “outperform” rating and $76 target for AtkinsRéalis shares. The current average is $80.67.
“AS ATRL management contemplates asset disposition, lower interest rates should also help valuation,” he said. “ATRL shares are now trading at 13.6 times EV/EBITDA on 2025E, below direct peers STN at 15.8 times and WSP at 16.9 times. At these levels, engineering margin expansion thesis needs to play out (Q3/24 results showed progress).”
Elsewhere, Scotia’s Jonathan Goldman raised his target to $81 from $73 with a “sector outperform” rating.
“Our estimates are largely unchanged post-quarter,” said Mr. Goldman. “Our target price goes up ... due to the use of a higher multiple for Nuclear, now 17.5 times EV/EBITDA on our 2025 compared to 12.5 times previously (which was in line with the Engineering Services business). Moreover, our Nuclear valuation may prove conservative given a loose peer group of Nuclear cos trades at an average of 20.7 times. We believe Nuclear deserves a higher valuation versus ES given higher barriers to entry, higher growth, and higher ROIC (higher margin, lower capex). Nuclear backlog increased to $3.2-billion from $1.8-billion last quarter primarily due to life extension programs (namely the Qinshan, China project) providing a high degree of visibility. Discussions are ongoing for several additional life extension program opportunities. Only $224 million was booked in the backlog subsequent to quarter-end for Phase 1 of the new CANDU reactors at Cernavoda, the first new builds since 2007. Nuclear headcount is up 570 year-to-date (up 17 per cent year-over-year)”.
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With bitcoin poised to reach the US$100,000 milestone, Stifel analyst Bill Papanastasiou expects top-line and margin expansion across most of his cryptocurrency coverage universe.
“Bitcoin has seen an explosive move and is closing in on a historic $100k spot price following the election of pro-crypto candidate Donald Trump, who has pledged positive change for the digital assets space,” he said. “We are left with a refreshing sense of optimism that a long-awaited digital assets framework will be introduced in the near-to-medium term, effectively opening the gates to broader institutional involvement across the ecosystem. Furthermore, we have seen record average daily net flows into the US Bitcoin ETFs (which recently reached more than $100-billion in assets under management) and a surge in the number of proxies that have adopted some form of the MicroStrategy Incorporated (MSTRN) playbook. From a Bitcoin mining perspective, network hashrate has been reflexive to changes to the spot price and has been weighing on economics, however, hashprice is up more than 50 per cent as compared to the average for CQ3/24 which will translate into higher top line and margin expansion in CQ4/24.”
After updating his forecasts in response to the recent earnings period as well as the surge in bitcoin prices, Mr. Papanastasiou upgraded Toronto-based Bitfarms Ltd. (BITF-Q, BITF-T) to “speculative buy” from “hold” with a US$3.50 target, up from US$2.30 but below the US$4.06 average.
“On the back of improving mining economics and margin expansion, we are raising our price target to US$3.50/share (up from $2.30/share) and adjust to a SPEC BUY rating,” he said.
‘Our target price implies 3.8 times calendar 2025 estimated Revenue, representing a discount to reflect perceived execution risk following an extensive management and board shakeup (missed guidance of 21.0 EH/s target) and continued overhang on the stock by RIOT’s activist position.”
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After updating her model to reflect the five-year outlook provided at its Friday’s Investor Day event, CIBC’s Anita Soni downgraded Barrick Gold Corp. (GOLD-N, ABX-T) to “neutral” from “outperformer” previously.
“We believe Barrick hosts some of the best assets and a world class operational team,” she said. “However, the under-investment in Nevada Gold Mines (NGM) (which GOLD highlighted in its presentation) prior to the JV consolidation in 2019, combined with the post-pandemic inflationary environment has presented GOLD with significant challenges. The company is now embarking on a period of reinvestment at NGM which we expect could begin to deliver returns in 2026.
“We are downgrading our rating to Neutral, with a significantly lower, yet still compelling potential return to our revised target of 21 per cent. However, we expect the market will need to see a few quarters of delivery against these revised targets before GOLD will outperform its senior peers.”
Ms. Soni dropped her target to US$22 from US$27. The average is US$24.37.
Others making target changes include:
* Raymond James’ Brian MacArthur to US$25 from US$26 with an “outperform” rating.
* Scotia’s Tanya Jakusconek to US$23 from US$24 with a “sector outperform” rating.
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In other analyst actions:
* Gerdes Energy Research initiated coverage of Suncor Energy Inc. (SU-T) with a “buy” recommendation and $69 target, exceeding the $61.98 average on the Street.
* Scotia’s Jonathan Goldman cut his Finning International Inc. (FTT-T) target to $47, matching the average, from $51 with a “sector outperform” rating.
“We lowered our 2024/2025 estimates by 6 per cent/6 per cent and are in line with consensus for both years,” he said. “Our working assumption in Canada is that current product support levels do not improve through 2025 (incorporating typical seasonality). That may end up being conservative as maintenance capex cannot be deferred indefinitely and machine utilization hours continue to increase (see oil sands production). Lower revenues in Western Canada are offset by higher revenues in South America, which continues to see good activity levels in copper mining. The company received a $250 million order from a global miner in Chile in October and continues to add technicians 200 in 3Q), which we view as the best leading indicator of product support demand. We lowered our margin assumptions in Canada (due to lower new/used equipment margin assumptions over our forecast horizon and mix) and in South America (due to higher SG&A assumptions to support growth.”
* Mr. Goldman bumped his GDI Integrated Facility Services Inc. (GDI-T) target to $41 from $40 with a “sector perform” rating. The average is $42.30.
“There were two incrementals in the quarter, one negative, which we view as temporary, and one positive, which we view as structural. Lower growth and margins in the U.S. janitorial business are a function of the remnants of the large customer loss at the end of 1Q24, which was mostly backfilled with new wins, but is expected to result in negative q/q comps over the next two quarters; and slower than expected integration of Atalian, which is expected to be completed by 1Q25. On a positive note, improvement initiatives in Technical Services – price increases implemented in the backlog last year; not pursuing lower margin business – appear to have structurally raised the margin profile within management’s target range of 7 per cent (on a run-rate basis, incorporating seasonality). We modestly raised our 2025E by 3 per cent as the latter should slightly outweigh the former. The company also showed good progress on w/c reduction (+$21 million in the quarter) and deleveraging,” he said.