Inside the Market’s roundup of some of today’s key analyst actions
National Bank Financial analyst Patrick Kenny thinks the domestic natural gas and NGL infrastructure sector is “fueling electrification tailwinds as well as supporting global decarbonization efforts through rising LNG exports.”
“Overall, as energy security and market diversification remain firmly perched atop the political priority list, we recommend investors gain exposure to the energy superpower tailwinds across the Canadian natural gas & NGL infrastructure landscape,” he said, calling natural gas and NGL infrastructure “Canada’s energy superpower conduit.”
He added: “With line-of-sight towards 19 bcf/d [billion cubic feet per day] of egress capacity versus surplus WCSB volumes available for export of 10.5 bcf/d, we see an opportunity to grow production by 8.5 bcf/d into next decade, calling for incremental investment across the gas & NGL infrastructure value chain.”
In a research report released Thursday, Mr. Kenny said energy expansion and LNG exports support WCSB natural gas production growth, and heminimized the risk stemming from contracted tolls for the Alliance Pipeline, which is a 3,848-kilometre integrated Canadian and U.S. natural gas transmission system.
“Although lower future tolls on the Canadian portion of the Alliance Pipeline are expected, we highlight relatively comparable netbacks for WCSB shippers selling into Chicago via Alliance versus Ontario (not to mention the more than 50-per-cent economic uplift versus the depressed AECO market). As such, we’ll ‘take the under’ on the potential impact to Alliance run-rate EBITDA (consensus: $150-million per year; NBF: $100-million/year) and expect final resolution to act as a positive catalyst for the stock.”
Given his view that energy security tailwinds are strengthening, Mr. Kenny upgraded his recommendation for Pembina Pipeline Corp. (PPL-T) to “outperform” from “sector perform” previously.
“As the largest third-party processor of gas in Canada, Pembina has significant unutilized capacity spanning the Montney and Duvernay resource plays, setting the company up to capture incremental NGL volumes down its Peace Pipeline system. Combined with NGL extraction, ethane supply and other opportunities, we highlight a sector-leading 15-per-cent unrisked valuation upside profile across the company’s gas & NGL infrastructure franchise.”
“With the stock down more than 5 per cent year-to-date and now trading less than 11 times 2026 estimated EV/EBITDA (peers: 12 times), combined with 15-per-cent unrisked valuation upside related to unutilized processing capacity and expansion opportunities, we are upgrading our rating on PPL.”
Mr. Kenny reaffirmed a target of $56 for Pembina shares. The current average on the Street is $61.06, according to LSEG data.
He also named Pembina a top pick alongside AltaGas Ltd. (ALA-T, “outperform” and $44 target) and TC Energy Corp. (TRP-T, “outperform” and $75 target)."
“Meanwhile, BIP, ENB & KEY also stand to benefit, and we would look to add to core positions on any material broader market weakness,” he added.
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Given AGF Management Ltd. (AGF.B-T) reported largely in-line second-quarter adjusted EPS earnings per share “with no surprises on the retail flows front,” Desjardins Securities analyst Gary Ho thinks Wednesday’s 4.1-per-cent drop in share price was “unwarranted” and now sees a “compelling entry point validated by industry transaction markers.”
The Toronto-based firm reported adjusted EPS of 39 cents, matching Mr. Ho’s estimate and just a penny below the consensus on the Street. Wealth Management EBITDA of $30.2-million was slightly below the analyst’s $31.1-million projection, however “strong” retail flows of $65-million topped his $39-milion forecast.
“We foresee a few near/medium-term positive catalysts: (1) retail net flows trending at/above industry; (2) redeployment of capital for organic growth to seed new private alt strategies and for share buybacks; (3) growth in fees/earnings from its private alt platform; and (4) M&A should be EPS-accretive,” he said.
Keeping a “buy” rating, Mr. Ho raised his target price to $15 from $14, “given AGF’s continued retail net inflows, SMA/ETF AUM growth and healthy balance sheet, with the NCIB supporting its share price.” The average on the Street is $14.10.
“We raised our multiple to 5 times (was 4.25 times) to reflect recent industry transactions (completed at higher multiples) and the scarcity of larger Canadian asset managers,” he added.
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In a report titled April showers, but waiting on May flowers, National Bank Financial analyst Zachary Evershed updated his expectations for Canadian building materials distributors for the next 12 months to reflect a “dimmer” outlook for the U.S. market.
“While we started the year with hopes for an inflection slowly manifesting within underlying price/volume trends, albeit somewhat tempered by tariff risks, recent developments have left us more bearish on the balance of the year, once again kicking the recovery trade to the right: in particular, we note the weak U.S. housing starts print in May of 1.256 million (consensus: 1.357 million), accumulation of unsold inventory , and recent spate of negative readthroughs from peers and channel partners during this spring selling season,” he said.
Previewing second-quarter earnings season, Mr. Evershed emphasized a “soft” spring sell season has stalled “the inflection narrative,” adding “Data points during the first half of the year witnessed worsening sentiment amongst channel participants such as homebuilders, distributors, and renovation superstores, mostly on account of weakness in consumer sentiment (unaided by rapidly alternating tariff implementation and pauses), and continued pressure in the housing environment.”
While he said recent domestic strength “partially softens the blow” for Doman Building Materials Group Ltd. (DBM-T) and Richelieu Hardware Ltd. (RCH-T), he said Adentra Inc.’s (ADEN-T) “predominantly U.S.-based revenue is exposed to the pause in rate cuts south of the border to tame a potential resurgence in inflation, increasing the lifespan of the mortgage rate which has seen housing activity slump as consumers contend with affordability issues.
“While we maintain a favourable long-term outlook on the sector given the supply deficit that has built up since the Great Recession, we believe rates will keep demand suppressed in the short term and await relief from a potentially quickened pace of cuts toward the end of 2025 and into 2026,” he said.
Mr. Evershed did, however, predict valuations “should be building momentum.”
“Despite the challenging demand environment for building materials, a bright spot in support of valuations has emerged with both Brad Jacobs’ building materials distribution platform (NASDAQ: QXO; Not Rated) and Home Depot (NYSE: HD; Not Rated) engaging in bids to acquire Gypsum Management & Supply (NYSE: GMS; Not Rated),” he said. “While HD has not publicly disclosed its proposal details, QXO’s offer of US$95.20/share values GMS at US$5-billion, implying 10 times EV/EBITDA and 11.7 times P/E based on FY26e. This transaction follows quickly off the tails of QXO’s US$11-billion acquisition of Beacon Roofing Supply at 11 times EV/EBITDA and 15 times P/E. Both transactions paint substantial multiple upside, particularly for ADEN and DBM, and it’s worth noting that multiples in the industry typically start to work well ahead of improvements in fundamentals.”
Mr. Evershed trimmed his targets for shares of Adentra to $41 from $46 with an “outperform” rating and Richelieu to $37 from $37.50 with a “sector perform” rating. The averages on the Street are $38.89 and $37.75, respectively.
He kept a $10.50 target for Doman with an “outperform” rating, exceeding the $9.71 average.
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Prime Minister Mark Carney’s commitment to the biggest increase in military spending since the Second World War, National Bank Financial analyst Cameron Doerksen sees “positive implications for Canadian defence industry players and related suppliers such as infrastructure companies.”
In a note released late Wednesday, he pointed to three companues that will benefit from higher Canadian spending:
* Bombardier Inc. (BBD.B-T) with an “outperform” rating and $115 target. The average is $116.64.
Analyst: “Bombardier’s Defence segment revenue today is modest, but the company has aspirations to grow the business to US$1.0-1.5-billion by 2030. As for specific new opportunities for Bombardier, Canada is likely to move forward with a procurement for new Airborne Early Warning & Control planes (AEW&C) with the SAAB GlobalEye or the L3Harris solutions (both based on the Bombardier Global 6000/6500 platform) likely be the chosen aircraft, in our view. In addition, given its position is one of Canada’s leading aerospace companies with extensive engineering and program management capabilities, we could also see Bombardier expanding its range of services for the Canadian military into areas such has aftermarket support.”
* CAE Inc. (CAE-T) with an “outperform” rating and $43 target. The average is $40.29.
Analyst: " CAE was recently named Canada’s Top Defence Company by Canadian Defence Review magazine, so it stands to reason that within NBF’s coverage universe, CAE stands out as the biggest potential beneficiary from Canada’s higher defence spending. CAE is already under contract to provide training and other support services on multiple major procurement programs already underway in Canada. Furthermore, most of the large-scale new procurement programs we see from the new spending (such as new submarines, Army investments, airborne surveillance planes, to name just a few) will require some form of training program for which CAE is ideally placed. Indeed, Canada’s commitment to prioritize Canadian companies in new procurement makes CAE an essential partner to any new non-Canadian supplier bidding on major programs. Last year, CAE’s Defense & Security segment accounted for 42 per cent of total company revenue and the segment sports a backlog of over $11-billion. CAE has growth opportunities globally, but based on existing programs in backlog and the backdrop for increased spending, new contracts in Canada should allow the company to outgrow broader defence market growth rates. With segment margins also rising (EBIT margins forecast at 8.0-8.5 per cent this fiscal year but improving to 10%+ in the coming years), Defense should become a more meaningful contributor to the bottom line for CAE."
* Exchange Income Corp. (EIF-T) with an “outperform” rating and $73 target. The average is $70.55.
Analyst: “EIF’s Aerospace segment accounts for 11 per cent of total company revenue, but EIF should see some direct benefits over time from Canada’s increased defence spending, particularly for the company’s PAL Aerospace division. Perhaps the bigger opportunity for EIF from higher Canadian defence spending is the indirect impact stemming from expected sizeable new investments in infrastructure in the North. EIF airline subsidiaries are already major players supporting northern communities in Nunavut, Manitoba, and Labrador, and with the pending acquisition of Canadian North, EIF will expand its reach to the Northwest Territories and additional destinations in Nunavut. Investment in the North, both from defence-related infrastructure, but also potentially from critical mineral development, will drive additional passenger and air cargo demand for EIF. Essential Air Services, which includes the northern airline subsidiaries, accounts for 36 per cent of EIF’s total revenue.”
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In other analyst actions:
* In response to Ascot Resources Ltd’s (AOT-T) announcement it has placed its flagship Premier gold project in northwestern British Columbia on care and maintenance after not reaching a cost agreement with its mining contractor and the launch of a strategic review to explore options for advancing the asset, BMO’s Brian Quast downgraded its shares to “market perform” from “outperform” without a specified target.
“As a result of the perilous state of the company’s finances, and the decision to cease development, we are using an in-situ valuation for the stock, instead of the NPV approach used previously, which was in line with the mine plan. We are also removing the price target and downgrading to Market Perform (Speculative) until a financing package is put in place,” he said.
* Jefferies’ Sheila Kahyaoglu raised her CAE Inc. (CAE-N, CAE-T) target by US$1 to US$28 with a “hold” recommendation. The average is US$30.
* Wells Fargo’s Roger Read raised his targets for Canadian Natural Resources Ltd. (CNQ-T) to $46 from $42 with an “equal-weight” rating and Suncor Energy Inc. (SU-T) to $60 from $59 with an “overweight” rating. The averages are $51.39 and $59.47, respectively.
* H.C. Wainwright analyst Brandon Folkes initiated coverage of Victoria, B.C.-based Eupraxia Pharmaceuticals Inc. (EPRX-Q, EPRX-T) with a “buy” rating and US$12 target, matching the average on the Street.
“Eupraxia has the potential for a best in class treatment for the ever-growing eosinophilic esophagitis (EoE) market, and has shown the potential for an annual treatment of EP-104GI in this condition, which could grow to a 1 million addressable patient market,” he said. “Eupraxia has shown strong data on the company’s lead asset, EP-104GI for EoE, a chronic, inflammatory esophageal condition with limited treatment options. EP-104GI is a long-acting fluticasone propionate injectable suspension, administered as into the esophageal wall, providing local delivery of drug. EP-104GI leverages Eupraxia’s proprietary delivery platform. DiffuSphere a proprietary, polymer-based micro-sphere technology, is designed to facilitate targeted drug delivery of both existing and novel drugs. The technology is designed to support extended duration of effect and delivery of drugs in a hyper-localized fashion, targeting only the tissues that physicians are wanting to treat, and has shown efficacy and applicability in EoE, as well as osteoarthritis knee pain.”
* In a research report previewing second-quarter results for North American oil and gas services providers, RBC’s Keith Mackey bumped his target for Step Energy Services Ltd. (STEP-T) to $4.50 from $4.25 with a “sector perform” rating. The average is $4.93.
“2Q25 reporting for our Oil & Gas Services coverage begins July 18 with SLB,” he said. “Covered stocks are down 23 per cent year-to-date, while WTI is down 10 per cent, but up 18 per cent from recent lows. This divergence should center discussions on how much downside remains in the stocks. We are generally below the Street for 2Q EBITDA estimates, but see select opportunities for relatively favourable risk/reward setups across our coverage. Our fundamental stock selection leans toward differentiated and resilient business models, offering unique thematic exposure, basin diversification, and strong or improving FCF fundamentals. Our preferred list across our global coverage is: SLB (SLB), Baker Hughes (BKR), Subsea 7 (SUBC), TechnipFMC (FTI), Enerflex (EFXT), Trican Well Service (TCW), Patterson-UTI Energy (PTEN), Atlas Energy Solutions (AESI), and CES Energy Solutions (CEU). Within this update, we have added CEU and removed PSI.”
* Raymond James’ Luke Davis raised his Tamarack Valley Energy Ltd. (TVE-T) target to $5.50 from $5 with an “outperform” rating. The average is $5.75.
“Tamarack’s Investor Day offered technical details on its waterflood program and strategic insights on management’s updated 5-year plan and return of capital framework,” said Mr. Davis. “The theme of the day was ‘Compounding Success’ underpinned by growth across the Clearwater while Charlie Lake shifts into maintenance mode. In our view, management’s commitment to profitable, measured growth resonates far more than a growth-for-growth’s-sake mentality, and we believe the company is positioned to outperform for the balance of the year on waterflood optimization and improving efficiencies, paving the way for accelerated shareholder returns.”