Inside the Market’s roundup of some of today’s key analyst actions
Raymond James analyst Steven Li initiated coverage on the Canadian telecom industry in a lengthy report titled Old Dogs, New Tricks, and Starlink.
He began by acknowledging the many challenges of the sector.
“The Canadian telecommunications industry is navigating a period of many changes — some structural, some less so, but all still impactful. Following recent consolidation events, such as Rogers integrating Shaw and the acquisition of Freedom Mobile by Quebecor, wireless competition has intensified with the establishment of a credible fourth national carrier. On the wireline side, the regulatory agencies (CRTC, ISED) with an increasingly pro-consumer mandate, have explicitly targeted pricing affordability and competitive intensity as primary objectives. These structural changes are coinciding with a deteriorating macroeconomic environment and a deceleration in aggregate population growth driven by federal revisions to immigration targets. Looming in the background is the longer-term emergence of SpaceX’s Starlink as a potential broadband and mobility disruptor, although we believe meaningful competitive impact is at minimum two to three years away. In a nutshell: it’s a perfect storm — we believe it is going to be difficult to grow (revenues, EBITDA) organically in our forecast horizon," Mr. Li said.
But the analyst also sees opportunities in the sector.
“With AI driving efficiencies and declining capex intensity, it is also the perfect time for free cash flow harvesting,” he said. “No doubt investors have found very few reasons to engage with the sector over the past couple of years, but maybe a more risk-off environment would be just what the doctor ordered, prompting investors to re-evaluate companies with depressed valuations, growing and recurring cash flows, essential infrastructure assets, and in some cases, attractive income characteristics.”
BCE Inc. (BCE-T) was given a “market perform” rating and C$37 price target.
“In the past year, BCE has made two bets: AI Fabric and Ziply. While these initiatives together represent only ~10% of BCE’s enterprise value, we believe they can have an outsized impact on BCE’s growth profile and prospects and subsequently trading multiple. Depending on execution, these strategic initiatives could alleviate legacy pressures and provide growth optionality or hurt BCE’s value.”
Quebecor Inc. (QBR-B-T) was also assigned a “market perform” rating, with a price target of C$72.
“Quebecor is aggressively fulfilling its federal mandate as a national challenger, with plans to expand into Western Canada to pressure the “Big 3”. While Quebecor has been the clear wireless share gainer since its acquisition of Freedom, in an environment where lower international migration and a weak consumer are headwinds, it is hard to justify a higher multiple, in our view. We forecast flattish free cash flow in F2026 as capex intensity rises to fulfill its national carrier obligation. As part of the acquisition of Freedom, the Canadian government required Quebecor to meaningfully invest to expand and upgrade Freedom’s network to sustain long-term competition."
Rogers Communications Inc. (RCI-B-T) was given an “outperform” rating and C$68 price target.
“Rogers Communications is the current sector’s leader in free cash flow growth, with a forecast increase of 25% in 2026 driven by declining capital intensity even if its high leverage remains a primary vulnerability for the time being. The path to multiple expansion lies in monetizing its $20+ bln sports and media portfolio. The July 6 announcement that Rogers had signed an agreement to acquire the remaining 25% minority stake in MLSE from Kilmer Sports for C$4.35 bln in cash to now own 100% of MLSE, serves as a critical catalyst, potentially allowing Rogers to surface the value of its sports portfolio to aggressively pay down debt.”
Finally, Telus Corp. (T-T) received a “market perform” rating and C$18.50 price target.
“Unlike its peers, Telus has actively diversified its revenue streams beyond traditional telecom connectivity, creating distinct business segments that present both immense opportunities and risks. Today, 25+% of the company’s sales are derived from non-telecom businesses. But now, at the same time, the company faces a leadership transition with a new CEO, growth headwinds similar to peers, ongoing questions around dividend sustainability (dividend increases paused for now, but >100% payout) and leverage. We believe a lot hinges on Telus’ ~10% free cash flow compounded annual growth rate target through 2028 and the potential monetization of Telus Health. With successful execution on that free cash growth target, Telus’ payout ratio should start to look more comfortable, especially with declining capital intensity following a largely complete fiber build and moderating 5G spend.”
TD Cowen analyst Aaron MacNeil downgraded Rockpoint Gas Storage Inc. (RGSI-T) to “hold” from “buy” while slicing his price target to C$32 from C$35. The action was tied to the company’s business activities in California, and also the stock’s 10% price gain since April.
“We are now forecasting that 2027 California Take-or-Pay volumes will track relatively flat y/ y versus our prior expectations for growth. This results in downward estimate revisions and a negative mix shift in our PT calculation,” Mr. MacNeil said.
National Bank analyst Cameron Doerksen raised his price target on NFI Group Inc. (NFI-T) to C$29 from C$26, citing increased confidence in government funding for transit in the U.S. and the Winnipeg-based bus manufacturer’s solid backlog of work. He is maintaining an “outperform” rating.
The Infrastructure Investment and Jobs Act (IIJA), which funds U.S. transit bus purchases, expires at the end of September 2026, and a new bill will need to be passed to establish the framework for public transit funding over the next five years. The proposed House bill replacing the IIJA would see a slight dip in allocated funds on a net basis, Mr. Doerksen noted.
But, “based on our analysis, total net funding proposed under the bill across the main sections that impact transit bus purchases is projected to come in at ~$55.7 billion, a ~7% increase versus what was seen during the five years of the IIJA. We also stress that NFI’s firm backlog is supported by already allocated funds under the IIJA, which would be available for transit agencies beyond the expiry of the bill,” the analyst said.
He concluded, "Our constructive view on the stock is based on the following: (1) NFI has a solid ~$13 billion backlog that, along with a still supportive transit funding backdrop that we see continuing, should facilitate bus delivery growth through 2027; (2) the company’s margins should benefit from ongoing tailwinds from better pricing in backlog as well as higher throughput; (3) supply chain issues, particularly around seats, have eased; (4) higher EBITDA and cash flows will bring leverage down, leading to lower interest expense.“
“We previously valued the stock by applying a 7.5x EV/EBITDA multiple to our 2027 forecast, but with more certainty around public transit funding in the U.S. remaining supportive beyond the current funding bill that expires at the end of September, we are comfortable increasing our target multiple to 8.0x. This would still be a discount to NFI’s pre-pandemic average forward multiple of 8.7x as well as the bus/truck builder peer group average of 8.5x next year,” he added.
Scotiabank analyst Konark Gupta upgraded TFI International Inc. (TFII-T) to “sector outperform” from “sector perform” with a C$260 price target, up from C$200.
Although the stock has already significantly outperformed other stocks in the transportation sector since mid-March on early investor bets on improving conditions in the freight industry, Mr. Gupta expects further upside over the next 12 months.
“EPS is poised to grow materially this year after three years of declines. Q2 EPS guidance ofUS$1.50-US$1.60 points to first y/y growth since Q3/24 and looks highly achievable to us. In fact, we expect TFII to beat the guidance and consensus given the continued upward momentum in TL pricing and a rebound in LTL volumes. Similarly, we expect management to guide ahead of Q3 consensus (currently US$1.64)while maintaining some conservatism (we forecast US$1.80). Given TFII’s significant exposure to contract rates as opposed to spot rates, we expect a gradual recovery in annualized EPS to its prior peak ofUS$8.02 (2022), which could potentially be possible by as early as mid/late-2027. Valuation remains quite attractive vs. U.S. TL and LTL peers, despite the significant multiple expansion recently, although some discount is still warranted due to LTL segment’s margin gap vs. peers,” the analyst said in a note to clients.
He added, “We believe the current market setup, particularly pricing and capacity, along with TFII’s new acquisitions since early 2022, especially Daseke (a leading flatbed and specialized TL carrier), and previously done share buybacks should help EPS recover to the prior peak ofUS$8.02(2022) rather quickly (likely by late-2027 to early-2028) as compared to the rate at which EPS fell from the peak (three years). In addition, the company’s leverage ratio remains low as FCF generation has continued to be strong despite weaker EPS, which should support TFII’s M&A aspirations for additional EPS growth. We are currently not modeling any large M&A deals other than regular tuck-ins.”
Investors have been expressing concerns that MDA Space Ltd. (MDA-T) has been moving away from its traditional focus on satellite manufacturing, but RBC analyst Ken Herbert suggests the company’s diversification into other businesses is a net positive.
Mr. Herbert is preparing to adjust some of his estimates to reflect the company’s recent C$1.27 billion equity offering tied to its acquisition of a 70% interest in Collecte Localisation Satellites (CLS). He already has adjusted estimates for the company’s acquisition of Blue Canyon Technologies from RTX (Raytheon) for US$620 million.
For now, he is maintaining a C$58 price target and “outperform” rating on the stock.
“We can appreciate some investor concerns with the greater diversification in the business, and the fact that MDA now has a more complex operating structure. Moreover, the CLS acquisition, on the surface, does not directly support the company’s push into national security markets. However, we appreciate the greater options both Blue Canyon Technologies (BCT) and CLS bring to the business, and we view these acquisitions as consistent with management’s expectations for M&A activity. We believe each transaction was important for market access, and we believe the capabilities will provide greater synergies as the space economy continues to evolve,” Mr. Herbert said in a note to clients.
“The focus for investors remains on bookings and backlog growth, especially in Satellite Systems segment, but we value the diversity and geographic expansion,” he added.
With WSP Global Inc. (WSP-T) shares now trading 40% below their 52-week high, an attractive entry point has opened up for investors, said Desjardins analyst Benoit Poirier. He reiterated a C$372 price target and a “buy” rating.
The analyst noted that engineering stocks are down about 15% year to date, as AI disruption fears have driven multiples lower.
But, “we do not view AI as disruptive to engineers. We see it as a growth and efficiency lever that can help a labour-constrained sector meet structurally rising demand,” Mr. Poirier said.
He also thinks organic growth is poised to recover, supporting a valuation rebound, “with further upside on margins and M&A.”
“Sentiment toward the engineering sector weakened following AECOM’s investor day, at which the company outlined a standalone AI initiative—including hiring 200+ PhDs to develop its own proprietary LLM AI tool—and flagged a near-term margin headwind of ~60–70bps,“ the analyst said in a note. ”Engineering stocks have declined ~20% over the following five trading sessions, suggesting investors are pricing in a more disruptive AI scenario. We view this response as premature. In contrast, WSP has taken a more pragmatic approach, focused on leveraging partnerships rather than large upfront investments. Since early 2025, WSP has established collaborations with leading technology providers, including Microsoft, combining its proprietary engineering expertise and data with partners’ digital platforms, AI capabilities and energy management technologies. This approach allows WSP to develop scalable, value-added solutions while maintaining flexibility and mitigating execution risk."
More to come