Inside the Market’s roundup of some of today’s key analyst actions
Finning International Inc.‘s (FTT-T) share price has disconnected from its traditional drivers of copper and oil prices, according to National Bank Financial analyst Maxim Sytchev.
Warning investors that divergence “rarely lasts,” he lowered his recommendation for the Vancouver-based industrial equipment dealer’s shares to “sector perform” from “outperform” previously.
“While the overall correlation of Finning’s share price to a blended copper/WTI index is a significant 64 per cent since 2011, looking at the same correlation on a trailing two-year basis shows that it has almost disappeared over the last three years,” said Mr. Sytchev. “Although management has continued its (largely successful) efforts to de-risk the company earnings profile through the cycle and create a generally leaner and more resilient business, an outsized reliance on commodities makes Western Canada and Chile inherently cyclical economies.
“One must also consider ‘through-the-cycle P/E’ — even if the NTM [next 12-month] multiple is reasonable. As FTT shares have rallied 29 per cent year-to-date, the company’s trailing 10-year P/E ratio (CAPE) is now at a 4-times turn premium relative to its 24.7-times average since 2003. While the significant acceleration in EPS growth over the last few years is of course only partially reflected in the denominator, potential commodity and general macro pullbacks will certainly weigh on earnings, and this is an equally important part of the cycle that must be factored in, even for the sake of evaluating short-term downside risk."
In a client note released Thursday, Mr. Sytchev argued Finning’s shares have jumped “too much, too fast, especially given very choppy macro backdrop” even though its first-quarter results. He also noted a divergence from Caterpillar Inc.’s (CAT-N) share price, which he sees as “a proxy for investor positioning.”
“Q1/25 was good, we are happy to see 4Refuel go, PS [Power Systems] resuming its growth, a step-back from the brink around tariffs, a potential Argentina recovery, etc.,” he said. “Let’s step back for a second, however, and think about what really changed? The U.S. is still driving the tariff card that will be both inflationary and likely lead to slower growth; somewhat friendlier body language from the incoming Federal government is encouraging, but team Carney cannot make WTI = $90; same goes for copper which, surprisingly, is holding up better than expected. Our point is that yes, shares moved for a reason (better execution, divestitures of marginal assets, NCIB), but the onus of risk / reward skew is different now vs. when we originally upgraded the stock at $36 on the back of a poorly received Q4/23. At that time, the market was disappointed around PS (only briefly post Chilean Investor Day when Product Support was supposed to be a shining star) as well as the Argentina write-down, and shares traded at 9.4 times NTM P/E (14.1 tomes on 2025E now). A slower growth / higher inflation combo (good ‘ol stagflation) also was not conducive to industrials in general but copper in particular based on our precedent work.
"Needing to call two commodities correctly again, after a 35-per-cent post-upgrade move (and up 29 per cent year-to-date vs. up 4 per cent for TSX), we believe it’s time to move to the sidelines as further outsized risk-adjusted returns are probably less likely."
Mr. Sytchev kept a $55 target for Finning shares. The current average on the Street is $55.38, according to LSEG data.
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When Dollarama Inc. (DOL-T) reports its first-quarter fiscal 2026 financial results on June 11, National Bank Financial analyst Vishal Shreedhar is expecting the discount retailer to display “resilient growth expected amid macro uncertainty."
“We model positive Q1/F26 sssg [same-store sales growth] , reflecting, among other factors, good consumer spending (supported, in part, by StatsCan retail sales data until February 2025),” he said. “Our review of peer commentary similarly suggests good consumer spending despite weak confidence levels. (2) NBF models a slight expansion (10 basis points year-over-year) of EBITDA margin (excl. DC) to 28.3 per cent. Beyond the quarter, we expect gross margin headwinds to more than offset SG&A leverage (NBF models 70 basis points year-over-year decline in F2026 EBITDA margin excl. DC). (3) We do not anticipate a material direct impact from tariffs on DOL. Mitigation factors include product substitutions, supplier concessions, and/or pricing/product adjustments, where necessary. (4) Public filings indicate Dollarama did not repurchase shares during Q1/F26. We suspect this to reflect, among other factors: (i) heightened capex, (ii) The Reject Shop acquisition, and (iii) Dollarcity expansion in Mexico.”
For the quarter, Mr. Shreedhar is currently projecting earnings per share of 84 cents, matching the current consensus forecast on the Street and up 7 cents from the same period in fiscal 2025. He attributes that 8-per-cent year-over-year gain to positive same-store sales growth (3.6-per-cent estimate versus 5.6 per cent a year ago] and gains from 72 net new store openings over the past 12 months as well as contributions from Dollarcity, share repurchases and operating leverage.
“We project a lower gross margin rate (unfavourable FX, higher shipping rates and unfavourable product mix) and SG&A leverage (scaling and efficiency/labour productivity initiatives, partly offset by wage pressures and higher operating costs),” he added.
After a modest increase to his full-year 2026 revenue and earnings expectations, Mr. Shreedhar raised his target for the Montreal-based company’s shares to $182 from $176, reaffirming an “outperform” recommendation. The average target is $171.96.
“We hold a positive view on DOL’s shares reflecting a stable, long-dated high-growth, high return on capital international growth story supported by strong cash flows, a solid balance sheet and resilient sales performance,” he said. “We acknowledge execution and the macro backdrop are key.”
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Following its Investor Day event in Toronto on Wednesday, Scotia Capital analyst Phil Hardie thinks a “solid runway for double-digit growth lies ahead" for Intact Financial Corp. (IFC-T).
"The presentations were themed around how the company plans to execute its growth strategy and sustain its track record of outperformance,“ he said. ”Intact has consistently achieved its financial objectives of generating annual net operating income per share (NOIPS) growth of 10 per cent and ROE [return on equity] outperformance of more than 500 basis points. A key message from the event was that despite the company roughly tripling the size of its business over the past decade, the team has a clear roadmap & high degree of confidence that it will be able to sustain or potentially exceed its target of NOIPS growth of 10 per cent. This has been enabled by the company’s evolution, which has resulted in its addressable market now being 10 times larger than it was a decade ago.
“We believe this introduced accelerated organic growth potential and dramatically expanded its M&A opportunities. Further, its deep claims expertise and ability to leverage leading data and AI capabilities offer additional growth levers through margin expansion. We came away from the event with a greater appreciation of Intact’s significant runway for growth and ability to sustain announced NOIPS growth in the double digits.”
Believing Intact’s high ROE with low volatility are likely to support a premium valuation, Mr. Hardie raised his target for Intact shares to $318 from $305 with a “sector outperform” rating. The average is $323.58.
"Intact stands out from its peers given its relatively high ROE with low volatility,“ he explained. ”We think this has been a key driver for shareholder value creation and expect it to support a premium valuation for the stock. Over the past 10 years, ROE has averaged just over 14.5 per cent and in 2024 reached 16.8 per cent despite elevated catastrophe losses. The consistently high ROE has been achieved from growing and diversified earnings, with the management team noting that the company can now achieve an ROE of almost 9 per cent from its investments and distribution income alone. We think this helps underpin our underlying thesis of Intact as a ‘quality compounder’ and also highlights the importance of its combined focus on both 10-per-cent NOIPS growth and ROE outperformance.
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RBC Dominion Securities analyst Arthur Nagorny sees tariff-related impacts “clouding” the outlook for Mattr Corp. (MATR-T), prompting him to reduce his forecast with the expectation of second order effects weighing on the earnings moving forward.
On May 14, the Toronto-based materials technology company reported first-quarter results that topped the Street’s expectations, driven by customers accelerating purchases ahead of potential tariffs. Revenue jumped 52.4 per cent year-over-year to $320.1-million, exceeding both Mr. Nagorny’s $316.3-million estimate and the consensus forecast of $316.2-million.
“Looking ahead, the remaining Shawflex facility transition is on track to be complete by mid-year, and we continue to expect Mattr to benefit from lower MEO costs ($5-7-million of final costs expected in Q2 vs. $2.7-million in Q1 and $18-million in 2024) and efficiencies as the new facilities ramp up (i.e., under-absorption likely to be minimal post-H1),” said Mr. Nagorny.
“With that said, we expect tariff-related disruptions to outweigh these benefits over the nearterm. Although Mattr’s own USMCA-compliant products are not directly impacted by tariffs (though we note the company currently sources some raw material from other countries that are subject to tariffs), the resulting uncertain macro outlook has impacted customer confidence/demand. As it relates to Flexpipe, management now expects North American onshore well completions to decline 15 per cent year-over-year in 2025 (vs. down 10 per cent prev.), driven in part by the lower oil price backdrop and customer capex guidance cuts, while recent activity declines from auto OEMs/industrial customers are likely to impact DSG-Canusa/Shawflex (relatively minimal impact experienced in Xerxes/AmerCable thus far).”
The analyst lowered his forecasts for second quarter and beyond to reflect those disruptions, however he emphasized “the outlook is fairly dependent on how the tariff situation unfolds.”
Maintaining an “outperform” rating for Mattr shares, Mr. Nagorny dropped his target to $12 from $14, which is the current average.
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In other analyst actions:
* In response to its offer to be acquired by Pan American Silver Corp. (PAAS-T) in a US$2.1-billion stock-and-cash deal, TD Cowen’s Wayne Lam downgraded MAG Silver Corp. (MAG-T) to “sell” from “buy” with a $28.57 target, up from $28 and exceeding the $27.79 average.
"We believe the offer is attractive, with low potential for a superior bid. As such, we believe investors should tender to the offer," he said.
Elsewhere, CIBC’s Cosmos Chiu moved his rating to “tender” from “neutral” with a $28 target, rising from $26.
"The transaction offers significant value and multiple benefits to MAG shareholders by providing exposure to PAAS’ diversified portfolio of 10 silver and gold mines, including potential growth opportunities from the La Colorada Skarn project. MAG shareholders will still retain exposure to Juanicipio’s strong performance while scaling up their portfolio by gaining equity in Pan American," said Mr. Chiu.
* Following Wednesday’s announcement of a $200-million streaming and royalty agreement with Royal Gold Inc. (RGLD-Q), Canaccord Genuity’s Dalton Baretto raised his Solaris Resources Inc. (SLS-T) target to $17.50 from $16.50 with a “speculative buy” rating. The average is $13.80.
"We note the non-dilutive nature of the transaction and the attractive cost of capital vs. equity (SLS trades at just 0.2 times our NAV currently). With this transaction, SLS effectively solves for most of the required financing ahead of construction, and we estimate that just 13 per cent of the gold produced at Warintza is exposed to the stream. SLS also retains exploration upside on targets outside the Area of Influence," said Mr. Baretto.