Inside the Market’s roundup of some of today’s key analyst actions
While National Bank Financial analysts Dan Payne and Travis Wood remain “optimistic” about the outlook for Canada’s energy sector, they emphasized recent policy decisions and building narratives from U.S. president Donald Trump during his first few days in office leave them “somewhat tepid in the shorter term.”
“After marking-to-market Q4, our price assumptions remain unchanged and continue to characterize 2025 as a stock picker’s market, where shorter-term duration ideas will have the potential to generate alpha for the year,” they said in a research note titled Elephants in the Room.
During the approaching fourth-quarter 2024 earnings season, the analysts expect the uncertainty surrounding the implementation of U.S. tariffs as the top topic of discussion among both executives and investors. They’re currently projecting 6-per-cent earnings gains on average from the third quarter, falling largely in line with the Street.
“Sequentially we generally see the biggest opportunity in the gas and liquids-weighted peer groups,” they said. “Outside ARX and TOU (which we touch on in the tariffs section below), we continue to like gas-weighted names such as KEL for its significant and immediate value-expansion profile (set to provide for 40% production growth, largely in H1/25) and PEY for its attractive risk-adjusted returns and optionality on account of its strong hedging program, while we flag that the Canadian gas producers in general trail the U.S. peer group by a 2-turn discount on average (approximately 6 times vs. 4 times).
Also, as reflected in our recent rating changes, we increasingly favour AAV and BIR given their compounding long-term value propositions (and exposure to AECO upside), with AAV offering high-impact value through vertical integration of net zero gas to power, and BIR offering high-value impact through vertical integration towards LNG off-take and global pricing.”
The analysts also named several companies that they think are “less exposed on a relative basis to the threat of tariffs, as well as highlight those names with relative upside should the tariffs not come to fruition.”
“In general, we see lighter crudes as more likely to attract tariffs given the available substitutes in the U.S. from domestic production, but in terms of those names that are less impacted, or sheltered from potential tariffs, we flag SU, IMO, ARX and TOU as names to watch,” they said. “For SU and IMO, these names sell a large portion of SCO barrels with most, if not all, of their refinery operations more insulated here in Canada (while SU remains one of our top picks which we believe is most likely to continue to experience multiple expansion this coming year given its relative discount and likelihood of posting earnings beats), while ARX and TOU send LNG volumes abroad, with Canadian condensate revenues sheltered due to the shortage of condensate in the basin.
“In regard to who has torque if tariffs do not materialize, we flag MEG, ATH, CVE and TVE as names that have traded downwards recently (down 4 per cent on average year to date as of January 28) due to their expected relative exposure to potential tariffs (and sizable short interest for certain names), and which screen well in this scenario.”
With their annual total return implying an average of 43 per cent, the analysts made these target adjustments:
- Arc Resources Ltd. (ARX-T, “outperform”) to $34 from $32. The average is $32.78.
- Cenovus Energy Inc. (CVE-T, “outperform”) to $28 from $29. Average: $30.
- Freehold Royalties Ltd. (FRU-T, “outperform”) to $16 from $15.50. Average: $17.10.
- Imperial Oil Ltd. (IMO-T, “sector perform”) to $110 from $109. Average: $101.51.
- Kelt Exploration Ltd. (KEL-T, “outperform”) to $10 from $9. Average: $9.33.
- Lycos Energy Inc. (LCX-X, “outperform”) to $4.75 from $5.25. Average: $4.69.
- Meg Energy Corp. (MEG-T, “sector perform”) to $28 from $27. Average: $31.93.
- Ovintiv Inc. (OVV-N/OVV-T, “outperform”) US$56 from US$51. Average: US$59.45.
- Prairiesky Royalty Ltd. (PSK-T, “sector perform”) to $33 from $32. Average: $30.91.
- Suncor Energy Inc. (SU-T, “outperform”) to $68 from $65. Average: $61.85.
- Vermilion Energy Inc. (VET-T, “outperform”) to $19 from $18. Average: $17.38.
- Veren Inc. (VRN-T, “outperform”) to $13 from $12.50. Average: $11.29.
- Whitecap Resources Inc. (WCP-T, “outperform”) to $14.50 from $15. Average: $13.54.
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RBC Dominion Securities analyst Walter Spracklin said his “high conviction” on shares of Canadian Pacific Kansas City Ltd. (CP-N, CP-T) was reinforced by its “solid” fourth-quarter results, “strong” guidance and “upside opportunity from its growth proposition.”
“EPS was better than forecast, guidance exceeded consensus on the high end, and the outlook provided with regard to the revenue synergy pipeline seems compelling to us,” he said. “With strong operating momentum going into 2025, as well as easy comps and idiosyncratic growth opportunities, CPKC remains our top idea in railroads.”
After the bell on Wednesday, CPKC reported revenue of $3.87-billion, falling below Mr. Spracklin’s $3.97-billion estimate but matching the expectation the Street. Adjusted earnings per share of $1.29 was a gain of 9 per cent year-over-year and above the projections of both the analyst ($1.25) and the Street ($1.24). An operating ratio of 57.1 per cent was an improvement of 1.6 per cent from the same period a year ago and also better than anticipated.
The company also reissued its 2025 outlook, predicting adjusted earnings growth of 12 per cent to 18 per cent, and freight volume increases in the range of 4 per cent to 6 per cent.
“Off a base of $4.25, this implies EPS guidance of $4.76–5.02, with the high end exceeding consensus of $4.91 (RBCe: $4.99),” said Mr. Spracklin. “We see the wider range as attributable to macro and tariff uncertainty, and looking at the high end, not only do we view favourably that it is above consensus, but we also see upside to the high end should the economy cooperate and tariff risk not materialize.”
“Revenue synergies and associated pipeline look very good. Key from results was commentary on the growth pipeline, with management indicating that the opportunity flagged at the investor day remains intact. Specifically, management highlighted continued opportunity with Schneider via MMX and growth in the refrigerated market as the Americold facility starts to ramp mid-2025. We continue to see CP as well positioned to drive over the road conversion going forward.”
Maintaining his 2025 EPS forecast of $4.99, which represents 17-per-cent growth, the analyst “slightly” moderated his 2026 and 2027 EPS expectations but still models growth by 17 per cent in 2026 and 15 per cent in 2027.
However, seeing “strong 2024 results, 2025 momentum, and further potential upside into the revenue pipeline synergy,” he raised his target for CP shares to $128 from $124, reiterating an “outperform” rating. The average is $126.73.
“Our target multiple represents a premium to peers, reflecting the power of CPKC’s operating model and compelling opportunity related to the KCS integration,” Mr. Spracklin said.
Others making changes include:
* Citi’s Ariel Rosa to US$91 from US$88 with a “buy” rating.
“CP delivered impressive results off a challenged 3Q that included a 4-day work stoppage, a derailment in North Dakota, and higher incentive comp,” he said. “It reaffirmed its’24-’28 CAGR guides of high-single-digits for revenue and double-digits for EPS with its EPS outlook for ‘25 at 12 per cent to 18 per cent (in-line with our 15-per-cent prior estimate). CP noted ‘24 OR would have been much better without the winter challenges and port strikes. CP’s mgmt. and best-in-class growth profile continue to support our Buy rating.”
* Desjardins Securities’ Benoit Poirier to $134 from $133 with a “buy” rating.
“CP does not seem overly concerned about tariff uncertainties and expects to end the year at the higher end of its earnings growth guidance range (18 per cent),” he sai. “This signals good visibility on idiosyncratic growth and efficiency opportunities regardless of the macro backdrop. The 2025 guidance and commentary were quite upbeat and bullish.”
* ATB Capital Markets’ Chris Murray to $130 from $129 with an “outperform” rating.
“Management issued 2025 guidance for 12.0-18.0-per-cent EPS growth notably ahead of U.S. peers, on expectations for mid-single-digit volume growth and healthy underlying pricing conditions, noting some conservatism is embedded in the range to account for potential tariffs. Management remained constructive on volume conditions and its ability to realize further synergies with increased shareholder returns included in its outlook for 2025. CPKC delivered a strong Q4/24 print and issued guidance for best-in-class growth in 2025, reinforcing why it remains our preferred rail name warranting a premium multiple,” said Mr. Murray.
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Cautioning the macroeconomic environment remains “mixed,” TD Cowen analyst Daniel Chan continues to see “indicators of improvement” from CGI Inc. (GIB.A-T).
“North America is growing nicely, BFSI grew for a second consecutive quarter, and the business pipeline is up 20 per cent year-over-year,” he said. “We’re also optimistic on the buy side of the growth equation, following two larger metro market acquisitions. A strong balance sheet and FCF implies M&A momentum could build.”
Shares of the Montreal-based IT and management consulting giant closed up 0.5 per cent on Wednesday following the premarket release of its first-quarter 2025 results and appointment of Julie Godin as its new executive chairperson.
The results led Mr. Chan to conclude “green shoots continue to emerge.”
“We estimate that organic revenue was 0.6 per cent year-over-year in constant currency,” he said. “North America showed strength, growing 6.9 per cent year-over-year. Management called out strong demand for its managed services and IP helping to grow the pipeline, which was up 20 per cent year-over-year. We are also encouraged that book/bill was a solid 110 per cent, driven by continued strength in managed services (MS). Management called out that discretionary spending remained muted, while demand for cost savings, such as MS and offshoring remained high. North American strength was offset by softness in Germany, France, and the MRD endmarket. These geographic dynamics are consistent with what industry research firm, ISG, saw for the quarter, which we highlighted in our preview. CGI is right-sizing its cost base in those regions given lower utilization rates, likely in the SI&C service lines.
“EBIT margin was in line with our expectation following the closing of acquisitions. These acquisitions tend to have lower margins than CGI’s target and will take time to bring up to CGI’s level; however, given the company’s solid integration track record, we believe EBIT margin will expand from here.”
Also seeing M&A momentum “building” with its plan to acquire BJSS, a British-based technology and engineering consultancy, following deal to take over U.S. artificial intelligence specialist Daugherty Business Solutions last month or $347-million, Mr. Chan raised his revenue forecast while lowering his margin expectation due to the transactions.
Reaffirming a “buy” rating for CGI shares, he increased his target to $190 from $180. The average on the Street is $173.21.
“We rate CGI a BUY, given its relatively resilient position in the IT services space, strong margins, and solid balance sheet, which provides upside optionality should M&A accelerate,” he said.
Elsewhere, other analysts making target adjustments including:
* RBC’s Paul Treiber to $192 from $178 with an “outperform” rating.
“CGI reported fiscal Q1 (Dec-quarter) largely in line with consensus. While organic growth was below expectations, M&A is likely to more than offset the softness. Due to contribution from acquisitions, we are slightly increasing our adj. EPS estimates. Q1 further validates CGI’s model for value creation, in that healthy FCF enables M&A, which drives the majority of growth,” he said.
* Desjardins Securities’ Jerome Dubreuil to $190 from $178 with a “buy” rating.
“CGI did not match Accenture’s organic growth acceleration this quarter, as improved discretionary spending in financial services was offset by weaker European manufacturing demand,” he said. “However, we are encouraged by the increased pace of M&A. CGI’s inorganic growth contribution could surpass Accenture’s within two quarters, barring other acquisitions. Management addressed concerns about the DOGE initiative, viewing it as an opportunity since the U.S. government will need more IT/automation to achieve its efficiency goals.”
* Raymond James’ Steven Li to $183 from $180 with an “outperform” rating.
“One quarter does not a trend make but the improved SI&C bookings (up 2 per cent year-over-year) is notable and may suggest a bottom. We need to see a pick-up in SI&C before organic growth starts to accelerate again. The higher M&A pace (helped by strong FCF and balance sheet) is positive in our view especially given acquired assets look quite strategic on paper,” he said.
* Scotia’s Divya Goyal to $185 from $170 with a “sector outperform” rating.
“Overall, we were pleased to see CGI’s strong growth this quarter, given its well-established and resilient managed services practice and traction across key verticals further strengthened by the company’s sustained focus on its ‘Build and Buy’ strategy. CGI management remains committed to delivering value to its shareholders and expressed optimism for the remainder of the fiscal year, focusing on several key areas including (a) continued investment in innovation and technology to drive growth, (b) expansion across new and existing markets, and (c) ongoing efforts to improve operational efficiency and reduce costs internally and across their client base. We believe CGI will continue to benefit from its long-term client relationships, curated service offerings and expansive IP portfolio, alongside increasing AI engagements. We continue to maintain our bullish outlook on CGI and believe the company remains an attractive long-term investment with accretive M&A, Share buybacks and Dividends to continue to create further upside,” she said.
* BMO’s Thanos Moschopoulos to $190 from $177 with an “outperform” rating.
“We remain Outperform on CGI and have raised our target price to $190 following in-line Q1/25 results, while CGI also announced a UK acquisition; its second tuck-in, in recent weeks. We’ve made minor changes to our model. We continue to model a modest uptick in organic revenue growth as the year progresses (North America has started to look better), and expect to be helpful for the stock’s multiple. When coupled with anticipated EPS growth—for which the tuck-ins have provided incremental visibility—we believe the stock remains attractive,” he said.
* Canaccord Genuity’s Robert Young to $190 from $175 with a “buy” rating.
* CIBC’s Stephanie Price to $183 from $178 with an “outperformer” rating.
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Ahead of fourth-quarter earnings season for Canada’s telecommunications companies, TD Cowen analyst Vince Valentini reset the interest rate assumptions embedded his valuation for their stocks to account for a “slightly” higher bond yield projection.
“Based on recent estimate revisions by TD Strategy, we have increased our 12-month out assumption for the Government of Canada 10-year bond yield to 3.15 per cent versus 3.0 per cent previously (TD Strategy is at 3.10 per cent in Q4/25 and 3.15 per cent in Q1/26),” he said. “Our EV/EBITDA multiples for Rogers, BCE, and TELUS get adjusted upwards or downwards based on the difference between current/forecasted rates and the long-term average (20-year average for the GoC 10-year yield is 2.60 per cent). Given that our revised estimate of 3.15 per cet is above the long-term average, there is downward pressure on our target multiples, which has slightly lowered our target prices.”
In the earnings season, which kicked off tomorrow with Rogers Communications Inc. (RCI.B-T) on Thursday, Mr. Valentini hopes to receive updates on capital allocation and non-core asset sale initiatives, however he cautioned “we do not know how much new information will be available at this time.”
“Also, despite some recent favourable news in the sector regarding broadband and mobile pricing, we believe it would be premature for any of the big three telcos to inflate their 2025 guidance on the assumption that this type of pricing discipline is sustained,” he said. “We suspect that they will all prefer to set the bar low and then hopefully be able to beat that guidance if ARPU trends improve over the course of the year.”
The analyst made these target adjustments:
- BCE Inc. (BCE-T, “hold”) to $31 from $32
- Rogers Communications Inc. (RCI.B-T, “buy”) to $63 from $65.
- Telus Corp. (T-T, “buy”) to $24 from $25.
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Ahead of the Feb. 12 release of its fourth-quarter 2024 financial results, Citi analyst Jon Tower sees risks to Restaurant Brands International Inc.’s (QSR-N, QSR-T) 2025 unit growth.
“We see risks that initial commentary on 2025 unit growth doesn’t meet the long-term guide (up 5 per cent), and, if it does meet target, smaller brands/lower AUV [average unit volume] boxes will likely be the driving force,” he said. “We believe the stock’s multiple fairly reflects this, along with concerns about the U.S. competitive environment and low visibility into growth in some longer-term key markets (e.g. China); however, we view this quarter as one that is unlikely to meaningfully shift sentiment.”
In a note released Thursday, Mr. Tower compiled a list of five key topics and questions for investors to evaluate from the quarterly release: “(1) Trends by daypart in Canada and performance of cold in winter months. How have flatbread sales trended, and what else is being considered for PM-oriented innovation? (2) Are broader value perceptions for the industry starting to improve in the U.S. and/or key INTL markets? How are smaller brands competing in this environment? (3) To the extent 2025 unit growth commentary disappoints, what should give investors confidence in a 2026+ re-acceleration? How should investors think about the store growth breakdown by brand, particularly in INTL, and what that means for the aggregate sales vs unit growth contribution? How does the cadence of BK US closures fit in? (4) Plans for accelerating remodel activity for BK in 2025 and beyond? Is there any reason to not waterfall in mid-teens sales lifts? (5) Moving pieces of inflation vs efficiencies vs a step up in incentive comp in 2025 G&A expectations (previously said incentive would be a $15-$20-million bump).”
To reflect adjustments to his same-store sales forecast as well as foreign exchange assumptions, Mr. Tower trimmed his 2024 and 2025 EPS estimates to $3.34 and $3.49, respectively, from $3.36 and $3.68.
That led him to lower his target for Restaurant Brands’ U.S.-listed shares to US$65 from US$73, reaffirming a “neutral” rating. The average on the Street is US$80.19.
“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 U.S. brand repositioning/reinvestment (including the integration of the TAST business) particularly as the competitive set struggles to drive traffic.”
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CIBC World Markets diversified financials analyst Nik Priebe made a series of target price adjustments to stocks in his coverage universe on Thursday.
- Brookfield Asset Management Ltd. (BAM-N/BAM-T, “outperformer”) to US$70 from US$63. The average on the Street is US$57.13.
- ECN Capital Corp. (ECN-T, “neutral”) to $3.50 from $2.50. Average: $3.60.
- Fairfax Financial Holdings Ltd. (FFH-T, “outperformer”) to $2,400 from $2,200. Average: $2,235.82.
- Fiera Capital Corp. (FSZ-T, “neutral”) to $9 from $11. Average: $9..54.
- Power Corp. of Canada (POW-T, “neutral”) to $48 from $51. Average: $50.71.
- Trisura Group Ltd. (TSU-T, “outperformer”) to $50 from $60. Average: $56.89.
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In other analyst actions:
* In a report titled Strength in Diversity, Paradigm Capital’s Razi Hasan initiated coverage of Exchange Income Corp. (EIF-T) with a “buy” rating and $69 target. The average on the Street is $69.73.
“Exchange Income Corp. (EIC) has a compelling offering of both defensive and growth qualities supported by the company’s diverse business model,” he said. “Management has historically been responsible stewards of capital, growing the company both organically and through accretive acquisitions, while providing consistent dividend growth. As of the end of 2023, EIC has paid out over $870-million in dividends, with an average CAGR [compound annual growth rate] on annualized dividends of 5 per cent. In addition, the company has invested over $1.9-billion completing more than 30 acquisitions. With over $900-million in liquidity, EIC is well capitalized for future growth, with the ability to return capital to shareholders.”
“We view the shares of EIC as attractively valued with a solid growth set-up for several of the company’s business lines.”
* RBC’s Douglas Miehm lowered his Bausch Health Companies Inc. (BHC-N, BHC-T) target to US$10 from $11 with a “sector perform” rating. The average is US$9.33.
“BHC will report Q4/24 after market close on Feb. 19, following BLCO’s Q4 results (before market open) on the same day,” he said. “We estimate Q4/24 revenue of $2.56-billion (vs. FactSet cons. $2.52-billion) and adj. EBITDA of $919-million (vs. FactSet cons. $939-million). We expect the focus to be on 2025 guidance, upcoming debt maturities in Q4/25 ($2,215-million), and the potential full separation of BLCO. We lower our PT from $11 to $10 as we reduce the BLCO sale scenario weighting to 60 per cent from 75 per cent given FT news of Blackstone likely dropping out of consortium with TPG to take out BLCO.”
* CIBC’s Paul Holden bumped his target for Element Fleet Management Corp. (EFN-T) to $34 from $33 with an “outperformer” rating. The average is $32.69.
* BMO’s Andrew Mikitchook initiated coverage of Founders Metals Inc. (FDR-X) with an “outperform” rating and $7.50 target, exceeding the $6.17 average.
“The high-grade Froyo gold discovery blended with the open pitable bulk zones on the Antino project in Suriname could create a unique high-margin project of scale to the benefit of Founders shareholders. The company has built a track record of exploration success and there appears room for further material extensions and discoveries. We are initiating coverage of Founders Metals with a $7.50 target price and an Outperform (Speculative) rating based on our conservative placeholder assumptions for an initial development of the Antino discoveries,” he said.
* Desjardins Securities’ Brent Stadler initiated coverage of Green Impact Partners Inc. (GIP-X) with a “buy” rating and $9 target. The average is $9.06.
“GIP is a Canadian waste-to-energy company with a focus on long-term contracted biofuel projects that produce ethanol and RNG,” he said. “GIP’s story today primarily revolves around its large $1.5-billion Future Energy Park (FEP) project; FEP is expected to be a large-scale biofuel facility in Calgary and could be the largest carbon negative ethanol and RNG project in North America. Completing the project would be a game-changer for GIP as we estimate that derisking the FEP project (GIP will have a 50 per cent interest) could take GIP’s NAV/share to $25.00+ (at the low end of GIP’s guidance, discounted to the present). We expect FEP to reach financial close by the end of 1Q25/early 2Q25, start construction in the April/May timeframe and COD in 2027, with a full year of contribution to results in 2028. FEP’s primary source of revenue consists of ethanol and RNG, and is expected to comprise fixed-volume contracts (10 years on average) with 35-per-cent contracted revenue plus a natural price hedge between key inputs (wheat) and outputs (ethanol).”
* TD Cowen’s Craig Hutchison increased his MAG Silver Corp. (MAG-T) to $27 from $26 with a “buy” rating. The average is $26.76.
“We have updated our estimates to reflect MAG’s Q4 production results and 2025 outlook for Juanicipio,” he said. “[Wednesday’s] results reinforce our conviction for MAG as our top pick among the silvers, and we expect 2025 to be a pivotal year as management should implement a capital return strategy including dividends and/or buybacks.”
* Scotia’s Ben Isaacson raised his Methanex Corp. (MEOH-Q, MX-T) target to US$66 from US$60, exceeding the US$59.91 average, with a “sector outperform” rating.
* Scotia’s Kevin Krishnaratne initiated coverage of Vitalhub Corp. (VHI-T) with a “sector outperform” rating and $14 target, topping the $13.42 average.
“While our target implies a premium to software consolidators trading at 17.6 times F2026 EV/EBITDA, we think VitalHub’s singular focus on Healthcare has it more closely resembling the M&A model of Canadian peer The Descartes Systems Group, a leader in the Supply Chain & Logistics sector, trading at 26.2 times F2026 EV/EBITDA,” he said. “We believe VitalHub’s highly predictable and profitable software as a service (SaaS) business alongside a well-executed M&A playbook (400+ targets in the pipeline) are the perfect ingredients to build a Digital Healthcare leader, in rare company among other software consolidators. While the stock is coming off a spectacular 2024, with shares surging 170 per cent, we see continued gains for years to come with the company just getting started in penetrating a multi-billion-dollar total addressable market (TAM).”