Inside the Market’s roundup of some of today’s key analyst actions
Citi analyst Jon Tower thinks Restaurant Brands International Inc.’s (QSR-N, QSR-T) growth to 8-per-cent adjusted operating income in the current fiscal year “remains opaque” following Wednesday’s release of its fourth-quarter 2024 results.
“We see little shifting the debates/sentiment on the name despite QSR staying anchored to 8-per-cent AOI growth in 2025 when: (1) QSR wouldn’t commit to the KPIs (NRG, SSS [net restaurant growth and same -store sales]) that flow into it, and (2) like others, ‘25 is starting on softer footing (weather in core markets, increased competitive deal activity, leap day laps),” he said. “We expect investors view the 8-per-cent skeptically, (with 1-per-cent below target SSS pressuring our ‘25 AOI by ~$30M and contributing to our own 6-per-cent AOI growth estimate). Combined with capex/TI spend resetting higher and questions about how a China resolution ultimately plays into LT unit targets, we expect the multiple remains under pressure.”
Shares of the parent company of Tim Hortons and Burger King slid 1.7 per cent following the premarket release as growth concerns persist, despite beat quarterly profit and sales estimates. It reported revenue of US$2.3-billion and adjusted earnings per share of 81 US cents, topping the Street’s expectation of US$2.28-biion and 78 US cents, according to LSEG data.
Mr. Tower summarized the release by saying: “Key points from the call & follow-up — (1) 2024 4-wall franchisee EBITDA improved at TH Canada (to CAD $305K) and PLK US (to $255K) but stagnated at BK US ($205K) and took a step back at Firehouse Subs ($90K). The step-up in franchisee contribution to the ad fund in ‘25 (from 4 per cent to 4.5 per cent) will add pressure to BK US 4-wall EBITDA and, while a couple of years out, the brand needs this to improve by another 12 per cent by year end ‘26 for this increased ad spend to stick. (2) Expect the elevated capex/TI spend to remain in place over the next several years ($400-$450M capex on BK US remodels and TH Canada unit growth stepping higher. The company will prioritize debt paydown over repurchases as well. (3) Expect TH supply chain margins to settle near 19 per cent in ‘25, as coffee costs are not likely to be a material headwind due to contracting (normally 6-18 months). (4) QSR is leaning more into procurement, and where it can leverage purchasing across brands to drive incremental savings for franchisees. (5) BK US did 370 remodels in 4Q and is targeting 400 in F25. This implies a further acceleration to 570/year in F26-F28 to get to the 85-per-cent modern target.”
Citing “a relatively unchanged operating outlook, but the net of lower interest/higher taxes benefitting estimates,” the analyst moved his 2025 and 2026 EPS projections to US$3.52 and US$3.92, respectively, from US$3.49 and US$3.73.
That led him to bump his target for the company’s NYSE-listed shares to US$67 from US$65, reiterating a “neutral” rating. The average on the Street is currently US$79.01.
“The company has demonstrated an ability to improve franchisee profitability in core home markets across the portfolio and we expect this broadly continues, along with strong unit growth for Burger King International, ramping of PLK [Popeyes Louisiana Kitchen] brand globally and solid comp growth at TH Canada,” he said. “However, limited visibility into the economics of nascent businesses outside core markets (e.g., PLK INTL, TH INTL, FHS) means its difficult to underwrite NRG (new restaurant growth) returning to and sustaining at more than 5 per cent and layering this into valuation. At the same time, we see above average room for near- to medium-term estimate volatility related to the Burger King US brand repositioning/reinvestment (including the integration of the TAST business) particularly as the competitive set struggles to drive traffic.”
Elsewhere, CIBC’s Mark Petrie cut his target to US$78 from US$86 with an “outperformer” rating.
“We view QSR’s Q4 results positively, with better-than-feared SSS trends supported by strong cost control delivering 14-per-cent AOI growth,” said Mr. Petrie. “However, the cost control lever will be tougher in 2025, and we forecast growth below aspirations for SSS, NRG and AOI. Even still, we believe the foundation is strengthening and sets the stage for hitting targets in 2026. Furthermore, valuation reflects pessimism.”
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With lower-than-anticipated fourth-quarter results, Sun Life Financial Inc. (SLF-T) finally “succumbs to weak U.S. stop loss claims trends,” according to National Bank Financial analyst Gabriel Dechaine.
After the bell on Wednesday, the lifeco reported underlying earnings per share for the quarter of $1.68, falling below both the analyst’s $1.82 forecast and the consensus estimate due largely to “negative morbidity in U.S. Stop Loss.” Reported EPS of 41 cents was also below Mr. Dechaine’s projection ($1.68 per cent) due largely to lower tax-exempt income in Corporate and an impairment charge in Vietnam.
“U.S. earnings were down 39 per cent year-over-year, due primarily to experience losses (i.e., higher claims) in the Stop Loss business. The segment reported experience losses of $56-milllion, compared to $24-milllion of gains in the prior year. We note this performance mirrors what we saw from peers this past quarter (e.g., Cigna) or over several prior periods (e.g., Voya). While this outcome is clearly a negative for the quarter, SLF’s margins should eventually rebound, considering major industry players are repricing their policies over the next year. Guidance from these companies suggests margins will materially improve by 2026, messaging that we believe will also be delivered by SLF. On the bright side, Dental profits of $20-milllion were up 33 per cent year-over-year and put SLF on track to achieve its $100-milllion turnaround year target for 2025.
“MFS reports weak flows, with some ‘green shoots’ (USD) $216-million of profits were in line, as were $20-billion of net outflows (25-per-cent retail/75-per-cent institutional). On the bright side, gross retail flows were positive year-over-year (up 23 per cent) for the second consecutive quarter, while gross institutional sales growth was positive for the fifth quarter in a row.”
To reflect the lower U.S. group results, Mr. Dechaine lowered his 2025 forecast, while his 2026 projections declined due to lower surplus earnings. That led him to trim his target for Sun Life shares to $93, matching the average on the Street, from $95, keeping an “outperform” rating.
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In a research report titled Steady as she goes, RBC Dominion Securities analyst Sabahat Khan said the operating backdrop for Toromont Industries Ltd. (TIH-T) “remains supportive, although demand/pricing continues to normalize vs. the operating backdrop observed in 2021-20.”
Shares of the Vaughan, Ont.-based industrial equipment dealer gained 3.4 per cent on Wednesday following the release of fourth-quarter results that exceeded the Street’s expectations with its CIMCO refrigeration division “being a notable standout.” Consolidated revenue of $1.307-billion was a gain of 6.5 per cent year-over-year and topped both Mr. Khan’s $1.305-billion estimate and the consensus forecast of $1.291-billion. Earnings before interest and taxes rose 3.2 per cent to $211.2-million in line with the analyst’s projection of $211.8-million and above consensus of $189.5-million.
“Within the Equipment Group segment, total equipment sales growth was broad-based (construction up 6 per cent, mining up 4 per cent, material handling up 44 per cent), with growth across New Equipment sales (up 7.1 per cent), Rentals (up 6.5 per cent), and Product Support (up 3.8 per cent, reflecting continued growth of the technician workforce and higher parts revenue). Overall, the operating backdrop is supportive (residential activity noted as a soft spot, in line with previous commentary) and the backlog remains elevated ($1.1-bilion, down 2.7 per cent quarter-over-quarter). Although the Equipment Group backlog continues to moderate, we note that: 1) this was largely driven by lower mining orders in the quarter, which tend to be lumpy (e.g., mining represented 26 per cent of backlog exiting Q4/24 vs. 38 per cent of backlog in Q4/23); and 2) backlog was particularly elevated over the past 3 years due to supply chain disruptions.
“Going forward, we believe that Toromont can maintain/grow its current New Equipment revenue base from a lower backlog level (i.e., as backlog conversion trends back to historical levels). As it relates to profitability, EBIT margin continues to moderate, largely reflecting the mix shift toward New Equipment sales given the normalization of equipment availability (which has also impacted margins within this business line), while Rental margins have also been impacted by lower fleet utilization and higher acquisition costs. Looking ahead, we expect the operating backdrop to remain largely supportive (tariffs being the primary uncertain factor), with net pricing to continue moderating (in line with CAT’s Q4 commentary.”
While Toromont did not address the potential impact of U.S. tariffs, Mr. Khan warned they could impact the company’s sales, “particularly as some portion of Canadian equipment sales makes its way to the U.S,” and costs “as the company sources products in US$, primarily from the U.S., in our view).”
“While we would expect the company to pass on pricing to its customers where possible, we believe this could potentially leave the company in a tougher competitive position vs. foreign OEMs (i.e., Japanese),” he added.
Maintaining an “outperform” recommendation for its shares, Mr. Khan bumped his target to $139 from $138. The average is $137.17.
Others making changes include:
* National Bank’s Maxim Sytchev to $133 from $126 with an “outperform” rating.
“Despite the tariffs overhang, management’s tone on the call was more positive than expected, underpinned by a favourable commodity tape (especially gold), mix shift that privileges construction a little bit more vs. mining in terms of deliveries, rentals opportunity and accelerating growth at CIMCO,” Mr. Sytchev said. “All-in, the margin normalization thesis is less steep than we would have feared. We went positive on the stock again when shares got oversold in mid-December. With a net cash position and optionality to deploy capital over the medium to longer-term, Toromont remains a defensive way to participate in the construction cycle in Eastern Canada without a commensurate execution risk.”
* Scotia’s Jonathan Goldman to $133.50 from $132 with a “sector perform” rating.
“TIH deserves its premium valuation, in our view, due to its favourable end-market exposure and track record of consistent execution, both on display in the quarter. Further, with a net cash position of $170 million exiting the quarter (pro forma AVL), the company maintains significant B/S optionality,” he said. “We like that the company is being active on M&A, albeit small, signaling a willingness to immediately put capital to work outside of a CAT dealership. AVL should also provide a nice organic growth opportunity as management is aiming to increase capacity. We remain on the sidelines due to limited conviction in upward earnings revisions, limited visibility around the probability/timing of large-scale M&A, and valuation/narrow return to target.”
* Raymond James’ Steve Hansen to $130 from $122 with a “market perform” rating.
“We are increasing our target price on Toromont Industries Ltd. based upon the company’s better-than-expected 4Q24 results, strong underlying margin performance, and upward commensurate revisions to our financial forecast. Notwithstanding these revisions, we have elected to maintain our neutral (MP3) rating based upon our lingering macro concerns associated with the weakening Canadian economy, escalating geopolitical uncertainty (i.e. tariff risk), and excess new equipment supply. We will continue to monitor,” said Mr. Hansen.
* CIBC’s Krista Friesen to $131 from $129 with a “neutral” rating.
* Canaccord Genuity’s Yuri Lynk to $134 from $130 with a “buy” rating.
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Ahead of the March 5 release of Linamar Corp.’s (LNR-T) fourth-quarter 2024 financial results, TD Cowen analyst Brian Morrison sees few near-term catalysts, citing its “weak” outlook for the period as well as “slowing demand in its Industrial segment, and ongoing tariff uncertainty that could have a material financial impact.”
“While Linamar’s valuation is attractive relative to its average, we see downside risk to the consensus outlook and prefer our HOLD recommendation until we have improved visibility upon these headwinds subsiding,” he added.
Mr. Morrison is currently projecting normalized earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter of $309-million, down from $328.42-million during the same period a year ago but in line with the Street’s expectation. He estimates earnings per share of $1.51, falling from $1.69 in fiscal 2023 and below the consensus of $1.59.
“We anticipate a weak year-over-year financial performance as Mobility sales should decline on lower North American production volumes as D3 OEMs manage elevated dealer inventory levels, and Industrial sales should also decline year-over-year due to moderating demand in both the Access/Agriculture segments,” he said. “This should lead to operating inefficiencies and margin decrements, that in aggregate combine for our forecast of an 8-per-cent year-over-year decline in adjusted EBITDA.”
The analyst also warned of the Guelph, Ont.-based company’s “material” exposure to potential U.S. tariffs.
“This is due to 57 per cent of its sales being generated from these countries, the majority of which we believe is consumed by the U.S. market,” said Mr. Morrison. “While we believe that a large proportion of these costs should be passed through to the OEM/consumer there is heightened risk to Linamar from inflation driving demand destruction or, less likely in our view, the request for shared cost absorption by OEMs. Our current forecast excludes the potential financial impact from tariffs, that admittedly seem to evolve/change on a daily basis.”
Keeping a “hold” recommendation for its shares, he reduced his target to $66 from $68, below the average on the Street of $73.20.
“We see attractive long-term value in Linamar, but there is too much ‘noise’ currently that could impact its financial forecast, and in the interim weigh upon its applied multiple,” said Mr. Morrison. “With a lack of near-term catalysts, our concern is that it remains a low-multiple ‘value trap’ until we gain visibility upon the current production/tariff headwinds. It is our view that these items are likely to persist through at least Q1/25, and as such, continue to pressure its applied multiple and provide few immediate share price catalysts. While we acknowledge the 12-month return exceeds our 15-per-cent threshold, we maintain a HOLD recommendation is appropriate at this time.”
In a separate note, Mr. Morrison reiterated a “buy” rating and $13 target for shares of Martinrea International Inc. (MRE-T) in a preview of its March 6 quarterly release. The average is currently $15.25.
“Near-term production and tariff uncertainty continue to weigh upon Martinrea’s share price,” he said. While this is negatively impacting its earnings and valuation, Martinrea is focused upon implementing operational efficiencies and generating positive FCF, that is supportive of its NCIB. We acknowledge a lack of immediate catalysts but remain intrigued by its compelling upside relative to downside risk.”
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With gold prices in the fourth quarter of 2024 averaging US$2,660 per ounce, Desjardins Securities analyst Allison Carson expects many companies in her precious metals coverage universe to end the year in a strong financial position.
“Gold prices are now reaching new highs around US$2,900/oz, and we expect this to continue to drive strong cash flows at the beginning of 2025, which should help to provide further financial flexibility and support balance sheet strength for M&A, with many of our producers under coverage in need of growth.”
With that advantageous backdrop entering the new year, Ms. Carson sees increased flexibiLity across the sector, setting up the potential for further M&A activity.
“Exiting January, we have already seen M&A, with Agnico Eagle acquiring O3 Mining and Discovery Silver acquiring Newmont’s Porcupine complex,” she noted. “The majority of our producers are expected to end 2024 with strong liquidity, and we continue to view APM, CG, LUG and WDO as potential acquirers in 2025.
“Year-to-date performance is strong across the board. In the year to date, we have seen leading share price performance from our precious metals producers—all were up 13 per cent or more, with APM up 42 per cent; gold and silver prices were up 8 per cent and 11 per cent, respectively. We have also seen strong performance from several developers, including ATX and SLVR, which were up more than 50 per cent. In addition to strong gold and silver prices driving these performances, encouraging exploration results and positive permittingupdates have also driven share price performance.”
In an earnings season preview report released Thursday, the analyst made a pair of rating revisions:
* She upgraded Wesdome Gold Mines Ltd. (WDO-T) to “buy” from “hold” with a $17.50 target, rising from $15. The average on the Street is $16.86.
Analyst: “We have upgraded WDO following a solid performance at both its mines in 2024. In addition, 2025 guidance outlines production growth in the year ahead. We have been encouraged by exploration results at Eagle River, particularly with results located near current infrastructure which have the potential to extend the minelife with limited capex. At Kiena, we believe the addition of the Presqu’île ramp in 2025 should help the company with its ‘fill the mill’ strategy and unlock the potential from the deposits located along the rehabilitated 33 level. We expect that minelife extension and an acquisition are potential opportunities for the stock to re-rate.”
* She downgraded Centerra Gold Inc. (CG-T) to “hold” from “buy” with an $11 target, falling from $12.75. The average is $11.73.
Analyst: “We downgraded CG to Hold (from Buy) as we remain cautious on its ability to meet annual production guidance for 2024. In addition, we remain conservative on production at Öksüt in 2025 given that (1) the mine has processed all of its stockpile; and (2) inflation remains elevated in Turkey. We believe the acquisition of a gold asset or divesture of the molybdenum business could help the company refocus as a gold producer and/or provide a path to gold production growth.”
Ms. Carson also made these other target revisions:
* Aya Gold & Silver Inc. (AYA-T, “buy”) to $23 from $24. Average: $20.59.
* Lundin Gold Inc. (LUG-T, “buy”) to $42 from $38. Average: $38.06.
* Orla Mining Ltd. (OLA-T, “buy”) to $12 from $10. Average: $9.68.
“Our top picks remain OLA for the gold producers and PRB for the developers,” said Ms. Carson. “We continue to like OLA as it is a consistent low-cost producer. In addition, the company has several key catalysts in 2025, including the closing of the Musselwhite acquisition and expected positive permitting updates at both Camino Rojo and the South Carlin Complex in 1H25. We continue to like PRB due to its location within a Tier 1 mining jurisdiction, with the Novador project being one of the top 5 undeveloped gold resources in Canada. We expect PRB to continue to be more attractive from an M&A perspective as it derisks the project and demonstrates exploration upside.”
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Scotia Capital analyst Robert Hope sees “strong and visible growth” for his energy infrastructure coverage universe, forecasting mid-single digit gains.
“Specifically, we see a 4-per-cent 2025-2027 EBITDA CAGR [compound annual growth rate] for the pipeline/ midstream group,” he said. “This compares to a 6-per-cent 2025-2027 EPS CAGR for the utility group and 5-per-cent 2025-2027 EBITDA CAGR for the power and renewables group. For the pipeline/ midstream group, we continue to believe the outlook for natural gas and natural gas liquids (NGLs) is quite strong, with incremental volumes improving returns on existing assets and creating opportunities to invest additional capital. We see the most estimate upside potential with the midstream group in 2027 given our favourable volume outlook. Tailwinds from the significant demand for electricity, and particularly clean power, have created opportunities for our power coverage, and in our view, we believe this will contribute to a continued robust growth outlook for both thermal and renewable technologies. The power demand theme also benefits our utility group as load growth creates investments opportunities across transmission, generation, and reliability.
“Overall, we see the strongest 2025-2027 growth from ENB-T in the pipeline group, GEI-T & KEY-T in the midstream group, NPI-T in the power group, and AQN-N and ALA-T in the utilities.”
In a report released Thursday, Mr. Hope introduced his 2027 company-specific projections, leading him to increase his target prices by an average of 3 per cent based on valuation adjustments.
“Our new targets call for a median total shareholder return of 23 per cent (including dividend yields), which we view as attractive,” he said. “Looking at valuation, we see the pipeline and midstream group trading above their 5-year averages, though we argue that fundamentals have not been this strong in years. The AI enthusiasm was largely washed out of the thermal power stocks following the DeepSeek news, though we still see upside potential related to data center announcements. Valuations for the renewable power group remain attractive (well below average) as share price weakness has continued into 2025, while the utility group is trading below 5-year averages despite a strong fundamental outlook. We see the greatest opportunity for valuation expansion with the natural-gas levered infrastructure names.
“Catalysts to watch for in 2025. So far in 2025, we have seen a volatile macro environment, with a constantly changing narrative on tariffs on Canadian energy, the inauguration of President Trump along with a host of policy changes, and an upcoming leadership change in Canada. Looking into 2025, we expect investors will be most focused on the tariff narrative, and we see tariffs being a headwind for SOBO-N and midstream marketing margins, while Canadian utilities and ALA-T could be relative winners (link). For the power group, we expect forecasts for power demand in light of the DeepSeek news will be very closely followed, though overall, we believe that AI / data centers will continue to be a key driver of energy demand in the near-term. In addition, changes to the Inflation Reduction Act, specifically the availability of production tax credits and investment tax credits, will be meaningful for the renewable power group, whose valuations continue to decline on rising rates and uncertain policy support. Lastly, investor interest remains tepid for the utility group, though we note that their defensive appeal could increase with the ongoing political noise and evolving macro conditions.”
Mr. Hope made these target adjustments:
- Atco Ltd. (ACO.X-T, “sector perform”) to $51 from $49. The average is $58.54.
- AltaGas Ltd. (ALA-T, “sector outperform”) to $40 from $39. Average: $38.50.
- Algonquin Power & Utilities Corp. (AQN-N/AQN-T, “sector perform”) to US$5.50 from US$5.25. Average: US$5.67.
- Brookfield Renewable Partners LP (BEP-N/BEP.UN-T, “sector outperform”) to US$29 from US$28. Average: US$30.08.
- Brookfield Infrastructure Partners LP (BIP-N/BIP.UN-T, “sector outperform”) to US$41 from US$38. Average: US$40.25.
- Canadian Utilities Ltd. (CU-T, “sector perform”) to $38 from $37. Average: $38.08.
- Emera Inc. (EMA-T, “sector outperform”) to $62 from $60. Average: $56.91.
- Enbridge Inc. (ENB-T, “sector perform”) to $65 from $61. Average: $63.07.
- Fortis Inc. (FTS-T, “sector perform”) to $66 from $63. Average: $62.22.
- Gibson Energy Inc. (GEI-T, “sector outperform”) to $27 from $26. Average: $27.12.
- Hydro One Ltd. (H-T, “sector perform”) to $46 from $45. Average: $44.92.
- South Bow Corp. (SOBO-N/SOBO-T, “sector perform”) to US$26 from US$24. Average: $33.16 (Canadian).
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In other analyst actions:
* Raymond James’ Michael Glen downgraded NanoXplore Inc. (GRA-T) to “market perform” from “outperform” with a $3 target, down from $4. Other changes include: National Bank’s Rupert Merer to $3 from $3.50 with an “outperform” rating and RBC’s James McGarragle to $3 from $3.25 with an “outperform” rating. The average is $4.44.
“The primary reason for this downgrade pertains to demand uncertainty in the near-term and the follow-on impact we believe this could have on graphene adoption over the medium-term. We are already aware that such adoption requires a lengthy period of analysis and testing from potential customers, and we have some concerns that timelines could become even more stretched. At the same time, we have challenges with how to value or assess potential expenditures and expansion for battery materials, as this market is currently in a state of substantial change,” said Mr. Glen.
* Scotia’s Mario Saric reduced his Brookfield Asset Management Ltd. (BAM-N, BAM-T) target to US$62.50 from US$63 with a “sector outperform” rating, while BMO’s Sohrab Movahedi raised his target to US$53 from US$50 with a “market perform” rating. The average is US$58.54.
“Similar to U.S. peers, BAM Feb share price erosion (down 8.0 per cent but up 2.4 per cent vs. U.S. peers) feels like an opportunity ahead of an expected meaningful acceleration in earnings growth in 2025 ... admittedly on the back of a stagnated 2023 & 2024,” said Mr. Saric.
* Jefferies’ Julien Dumoulin-Smith initiated coverage of Fortis Inc. (FTS-T) with a “hold” rating and $67 target. The average is $62.22.
* Jefferies’ John Aiken raised his Intact Financial Corp. (IFC-T) target to $301 from $284 with a “hold” recommendation. Other changes include: Raymond James’ Stephen Boland to $302 from $290 with an “outperform” rating, CIBC’s Paul Holden to $290 from $280 with a “neutral” rating and Desjardins Securities’ Doug Young to $315 from $295 with a “buy” rating. The average is $294.08.
“Overall, this was a strong quarter marked by healthy underwriting results across each division, with Canada Commercial a standout in light of lower claims, minimal cats and favourable PYD,” said Mr. Boland. “For the quarter, Intact reported NOIPS of $4.93, well ahead of consensus at $4.31 and RJL at $4.25. The overall combined ratio (CR) was 86.5 per cent vs consensus at 89.4 per cent. The company’s outlook was virtually unchanged, with firm to hard pricing conditions expected to persist across the business over the next 12 months.
“Intact’s unique competitive advantages continue to support an industry-leading ROE, while a broadening geographic mix is helping to mitigate the company’s exposure to extreme weather events here in Canada. We also note that 2024 was a record year for cat losses across the Canadian market, and industry profitability across other business lines (e.g. auto) continue to be challenged. These factors suggest industry pricing in Canada should remain favourable well into 2025. Elsewhere, both the U.S. and UK segments continue to perform strongly. The UK in particular could prove a notable source of future value as Intact works on improving profitability across the segment (targeting a 90 per cent combined by 2026), while the recent Direct Lines acquisition provides new growth opportunities across the region.”
* CIBC’s Anita Soni raised her Kinross Gold Corp. (KGC-N, K-T) target to US$14 from US$13 with an “outperformer” rating. The average is US$13.07.
* National Bank’s Zachary Evershed trimmed his TerraVest Industries Inc. (TVK-T) target to $126, below the $127 average, from $128 with a “sector perform” rating.
“Our outlook for organic growth is essentially unchanged for the year, but with new potential tariffs being announced on short notice in the U.S., management notes there could be some volatility in either direction,” he said. “TVK has significant pricing power in most of its verticals, and expects to raise prices to pass through any cost increases (and could in fact grab extra margin), but with how quickly policies could be implemented, there may be timing issues.”
* Raymond James’ Daryl Swetlishoff cut his West Fraser Timber Co. Ltd. (WFG-N, WFG-T) target to US$105 from US$115 with an “outperform” rating. The average is US$107.33.
“Outperform rated West Fraser kicked off ‘Trees’ 4Q24 earnings season [Wednesday] after market, posting $140 mln EBITDA - 20 per cent below Street consensus at $175 mln and RJL at $225 mln,” he said. “The variance from our overly bullish estimates was mainly in the North American EWP segment related to lower volumes, unfavorable product mix and cost inflation. We do not regard this miss as a read-thru to other lumber producers as WFG’s 4Q24 lumber segment EBITDA was in-line with our estimates. We note sector headlines continue to be dominated by a potential 25-per-cent ‘Trump tariff’ on top of existing 14.4-30-per-cent ‘normal’ softwood lumber duties. While this is undoubtedly bad news for the bulk of the Canadian wood products’ industry, we highlight several idiosyncratic factors that mitigate West Fraser’s negative earnings impacts, including: 1) advantageous geographic and product diversification, with only 30 per cent of WFG’s lumber and OSB production volume crossing the U.S. border, 2) integration synergies and a low company specific duty rate of just 11.9-20 per cent, which combined with 3) tariff-induced commodity price inflation backstops net earnings accretion assuming at least 35 per cent of duty costs passed on to U.S. customers.”
* RBC’s Drew McReynolds increased his WildBrain Ltd. (WILD-T) target to $2.50 from $2 with a “sector perform” rating. The average is $2.21.
“Q2/25 results were in line with our forecast while the F2025 outlook including Canadian Television Broadcasting was reiterated. Following upward revisions to our Global Licensing forecast for the second consecutive quarter, our price target increases,” he said.