Canada’s S&P/TSX Small Cap Index TXTW-I hit a record high of 1,021.20 in early Friday trading and is up 34 per cent over the past 52 weeks. The Russell 2000 in the U.S. is up about 13 per cent over the past 52 weeks.
Small-cap spotlight
Investors in The North West Company Inc. (NWC-T) will be looking for the impact of forest fire evacuations on the retailer’s second-quarter earnings when they’re released next week, as well as any guidance on how a huge flow of settlement money coming into some of Canada’s First Nations communities could benefit the company in the coming quarters.
The Winnipeg-based retailer behind brands such as Giant Tiger, Northern and Cost-U-Less in small communities across northern Canada, Alaska, the South Pacific and the Caribbean, is set to release its second-quarter earnings after markets close on Sept. 8.
The company serves many northern communities that have been severely impacted by forest fires in recent months.
“Our understanding is that some of these were only partial evacuations, and that none of NWC’s personnel or stores have been harmed,” CIBC analyst Ty Collin wrote in an Aug. 26 note previewing the company’s upcoming earnings.
The analyst is forecasting same-store sales growth (SSSG) of 0.6 per cent for the second quarter, due in part to the impact of wildfires. SSSG was 4.3 per cent for the second quarter last year. Mr. Collin is also forecasting EBITDA margin contraction due to wildfires, “reflecting lower sales and potential inventory-related impacts.”
North West Co. is expected to report revenue of $642.7-million for the second quarter, according to S&P Capital IQ estimates, and earnings per share (EPS) of 76 cents. The company reported revenue of $646.5-million and earnings of 73 cents for the second quarter last year.
Mr. Collin, who has an “outperformer” (buy) rating and $59 price target on the stock, will also be looking for details on a significant amount of settlement money that has started flowing into First Nations communities in recent weeks. The compensation payments are part of a $23-billion settlement for more than 300,000 First Nations children and their families.
Analysts say the money is expected to be spent in many of the communities where North West Co. has stores, providing the company with a significant earnings boost over at least the next two years.
“We continue to view this as the most significant catalyst for NWC and are encouraged to see this beginning ahead of NWC’s expectations (H1/26), albeit largely in line with our own (late Q3/F25),” Mr. Collin wrote. “The cadence of payments remains uncertain, but considering that timing of this catalyst has been a key question for investors, we view this update positively.”
RBC analyst Ryland Conrad initiated coverage of North West Co. in July with an “outperform” rating and $60 price target, noting that the company is a leading retailer to underserved remote communities where there are high barriers to entry for competition.
“Against the current backdrop of still elevated macro uncertainty and a fluid trade environment, we favour stocks with defensive attributes and/or idiosyncratic growth drivers. In our view, NWC firmly checks both of those boxes,” he wrote in a July 28 note.
He also said the company has exposure to about $80-billion in First Nations settlements over the next decade, including about $25-billion in direct compensation coming into First Nations communities across Canada.
He points to RBC analysis suggesting that the company serves more than 20 per cent of Canada’s First Nations population living on reserves.
“While we factor in incremental revenues of [more than] $500-million from settlement compensation through 2027 (implying a [roughly] 10 per cent in-market capture rate), we believe our forecast could prove conservative,” he wrote.
He also pointed to North West Co.’s “Next 100″ cost-cutting program that should help drive efficiencies and boost margins.
“While financial targets are limited, management expects the program to deliver incremental EBIT through 2026, offsetting one-time investments,” he wrote.
BMO Capital Markets analyst Stephen MacLeod noted recently that North West Co. could face headwinds from a reduction of federal SNAP funding in the U.S. as part of the Trump Administration’s “One Big Beautiful Bill.”
“If unmitigated, this presents a potential headwind to North West’s Alaskan sales,” he wrote in a July 11 note, but added that carve-outs and exemptions in the bill appear to have reduced near-term impacts for Alaska.
“While there remain uncertainties around the implementation of the SNAP (formerly known as Food Stamps) funding changes, we believe potential headwinds are manageable,” wrote the analyst, who has an “outperform” and $59 target on the stock.
Small-cap summary
Elemental Altus Royalties Corp. (ELE-X) and EMX Royalty Corp. (EMX-X) announced a merger of the two companies after markets closed on Thursday. The merged company, to be named Elemental Royalty Corp., will have 16 producing royalties contributing to a projected approximate adjusted revenue of US$80-million in 2026, positioning it as a new mid-tier gold-focused streaming and royalty company, according to the release.
As part of the transaction, Tether Investments S.A. de C.V. has agreed to purchase approximately 75 million Elemental Altus Shares for $1.84 each for gross proceeds of US$100-million.
The proposed deal sees EMX shareholders receive 0.2822 Elemental Altus Shares for each EMX Share held.
Upon completion of the transaction, including the Tether financing, existing Elemental Altus shareholders and former EMX shareholders will own approximately 51 per cent and 49 per cent of the outstanding common shares of the merged company.
The implied market capitalization of the merged company is estimated at US$933-million, the companies stated.
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Tecsys Inc. (TCS-T) reported first-quarter results that missed expectations.
After markets closed on Thursday, the Montreal-based supply chain management SaaS company reported revenue of $46-million for the quarter ended July 31, up from $42.3-million a year earlier but below expectations of $47-million.
Net profit was $800,000 or 5 cents per share, similar to last year and in line with expectations. Adjusted EBITDA was $3.2-million compared to $2.6-million a year ago and below expectations of $3.4-million.
“Tecsys reported its FQ1 results that were below our and the consensus forecast mainly due to hardware-related revenue lumpiness, while the core SaaS business remained solid, in line with our Street-high estimate with Y/Y growth above the company’s guidance range,” wrote National Bank Financial analyst John Shao in a Sept. 4 note.
“We’d note this was not the first time that a miss was driven by hardware, and when that happened, it was usually followed by recoveries in subsequent quarters. This view, coupled with management remarks on ‘substantial pipeline growth over the summer months’ led us to believe that Tecsys’s core business remains as robust as before.”
He has an “outperform” (buy) and $50 target on the stock.
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Transcontinental Inc. (TCL-A-T) saw its revenue and profit drop in its third quarter.
After markets closed on Thursday, the company reported revenues of $684.4-million for the quarter ended July 27, down from $700-million a year earlier. The expectation was for revenue of $677.8-million.
The Montreal-based company stated that the revenue decrease is primarily due to the impact of the sale of its industrial packaging operations and lower volumes in the packaging sector.
Net earnings of $38.7-million or 46 cents per share compared to $43.6-million or 50 cents a year ago.
Adjusted net earnings of $58.9-million or 70 cents compared to $51.4-million or 60 cents a year earlier. The expectation was for adjusted EPS of 69 cents.
National Bank Financial analyst Adam Shine, who has an “outpeform” (buy) and $24 target on the stock, said the revenue was above his expectation of $674-million and adjusted EPS beat his expecations of 66 cents.
"Despite weaker-than-expected Q3 results, adjusted EBITDA in packaging is still expected to deliver organic growth while printing adjusted EBITDA is now anticipated to grow rather than be stable given better than expected results YTD (recent M&A should also help),“ he wrote in a Sept. 4 note.
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Enghouse Systems Ltd. (ENGH-T) reported third-quarter results that missed expectations.
After markets closed on Thursday, the company reported revenue came in at $125.6-million for the quarter ended July 31, down from $130.5-million a year ago. The result was below expectations of $130.1-million.
Net income was $17.2-million or 31 cents per share compared to $20.6-million or 37 cents last year. The expectation was for EPS to come in at 37 cents.
Adjusted EBITDA was $32.3-million compared to $37.7-million a year ago.
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VersaBank (VBNK-T) shares rose 5 per cent in Thursday trading after the company reported a 5-per-cent increase in revenue for its third quarter ended July 31.
Before markets opened on Thursday, the London, Ont. business-to-business digital bank reported revenue of $31.6-million, up from $30.1-million a year ago.
Net income was $6.6-million or 20 cents per share compared with $9.7-million or 36 cents last year. Adjusted net income was $9.7-million or 30 cents per share, unchanged on a year-over-year basis.
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Interfor Corp. (IFP-T) said on Thursday that it plans to cut lumber production across all of its operating regions in North America by approximately 145 million board feet between September and December this year, representing about 12 per cent of its normal operating stance.
“The temporary curtailments will be through a combination of reduced operating hours, prolonged holiday breaks, reconfigured shifting schedules and extended maintenance shut-downs,” the company stated, adding that the reductions “are in response to persistently weak market conditions and ongoing economic uncertainty. ”
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Bird Construction Inc. (BDT-T) shares surged 13 per cent on Thursday after the company announced the acquisition of B.C.-based Fraser River Pile & Dredge (FRPD) for about $82.3-million.
“FRPD is expected to be a catalyst for future growth, similar to our prior acquisitions,” stated Bird CEO Teri McKibbon in a release after markets closed on Wednesday.
The company said FRPD is Canada’s oldest and largest privately owned marine construction, land foundation and dredging company.
National Bank Financial analyst Maxim Sytchev upgraded the stock to “outperform” (buy) from “sector perform” (hold) after the news and boosted his target to $28 from $26.
“The transaction significantly increases Bird’s pro forma revenue exposure to accelerating infrastructure spending across Canada, including vital ‘nation-building’ projects and the snowballing build-out of both trade-enabling and defence-focused physical infrastructure,” he wrote in a note.
“FRPD’s high proportion of self-perform work aligns with Bird’s strategic and operational criteria for acquisitions, and will incrementally lower reliance (and associated risk) on subcontractors going forward. In addition, FRPD brings significant cross-selling opportunities, including with legacy Jacob Bros operations as the purchase scales up Bird’s BC infrastructure operations.”
Cannacord Genuity analyst Yuri Lynk maintained his “buy” rating and increased his target price to $36.50 from $35 after the acquisition news.
“While the stock jumped 13 per cent in response, it’s still nearly 14 per cent below its August 13 closing price, just before it announced a top-line Q2 miss,” he wrote in a note. “With a seemingly favourable macro environment, notwithstanding some industrial project delays, and management’s margin improvement plan firmly on track, we recommend adding to positions.”
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High Liner Foods Inc. (HLF-T) announced on Wednesday the immediate appointment of Kimberly Stephens as its chief financial officer. Ms. Stephens succeeds Darryl Bergman, who will be leaving to pursue new opportunities, but will continue to work as an advisor until Oct. 3
Ms. Stephens has been vice-president, finance and investor relations at the company for the past three years and has 25 years of financial experience, the company stated.
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Telus Inc. T-T announced plans to take back control of its affiliate, Telus Digital TIXT-T.
Before markets opened on Tuesday, Vancouver-based Telus said it will acquire all outstanding multiple and subordinate shares of Telus Digital, which offers technology outsourcing, for US$539-million or US$4.50 a share. The price is above the US$3.40 that the company initially proposed in June.
The offer represents a 16-per-cent premium on Telus Digital stock, which closed at US$3.88 on the New York Stock Exchange on Friday.
Read the full Globe story here: Telus inks deal to take back control of Telus Digital
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Hammond Power Solutions Inc. (HPS-A-T) issued a statement this week stating that expanded U.S. tariffs on steel and aluminum derivative products will apply to certain materials and components included in many of the company’s products.
“The company expects these tariffs to have a relatively uniform impact across its industry,” the company stated in a release before markets opened on Tuesday.
“Although there may be short-term implications arising from these changes, at this time, the company does not anticipate that the tariffs will have a material impact on its business,” it stated.
On Aug. 19, the U.S. expanded its steel and aluminum tariffs to include over 400 additional product categories, noted Acuman Capital analyst Jim Byrne in a note.
“Management anticipates the tariffs to impact the overall industry and will work with its customers and suppliers to ensure they manage these additional costs,” he wrote. " Nearly all of the Company’s products had been compliant under USMCA until this recent update."
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Quarterhill Inc. (QTRH-T) shares rose this week after the company announced the successful resolution of a previously disclosed contract renegotiation with one of its tolling customers.
Before markets opened on Tuesday, the company said the resolution was reached through mediation and includes a one-time payment to Quarterhill in the third quarter “to address historical cost-recovery matters.” The payment details weren’t released.
The company said the agreement also secures “improved payment terms, enhanced performance standards, and a structure that raises annual revenue while simultaneously reducing costs associated with the previous contract.”
It also said the new terms provide a “termination-for-convenience provision covering a three-year operations and maintenance period, with financial incentives that support stronger margins and reward exceptional performance.”
The company said the resolution “marks a significant milestone” in its operational transformation, “offering greater clarity for shareholders while reaffirming the company’s commitment to strong customer relationships and forward-looking growth.”
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Cybin Inc. CYBN-A shares dropped 17 per cent on Tuesday after the Toronto-based neuropsychiatry company announced the immediate departure of its CEO Doug Drysdale. Co-founder, executive chairman and president Eric So was appointed interim CEO. The stock is down 23 per cent over the past five days, as of Thursday’s close.
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Aimia Inc. (AIM-T) announced this week that it has received a tax refund of $29.3-million, including net interest proceeds, from the Canada Revenue Agency (CRA)
In a release issued before markets opened on Tuesday, Aimia said the funds are from a 2013 income tax audit of the company’s former subsidiary, Aeroplan Inc.
“As disclosed previously, Aimia expects to use the proceeds from the tax refund to support its 2025-2026 normal course issuer bid and for general investment purposes,” it stated.
The company also expects a refund from the provincial tax agency, Revenu Québec, for the remaining $6-million portion of the 2013 income tax audit.
Upcoming small-cap earnings:
Sept. 8: Major Drilling Group International Inc. (MDI-T), The North West Company Inc. (NWC-T)
Sept. 10: D2L Inc. (DTOL-T), Haivision Systems Inc. (HAI-T), Currency Exchange International Corp. (CXI-T)
Sept. 11: Haivision Systems Inc. (HAI-T), ADF Group Inc. (DRX-T), Transat A.T. Inc. (TRZ-T)
Sept. 15: High Tide Inc. (HITI-X)
Sept. 24: AGF Management Ltd. (AGF-B-T)