Inside the Market’s roundup of some of today’s key analyst actions
National Bank Financial analyst Dan Payne upgraded his rating on Advantage Energy Ltd. (AAV-T) to “outperform” from “sector perform”, citing optimism over structural changes in the North American gas market as well as strength and opportunity within the company’s business. He also raised his target price to C$15 from C$11.50.
“We continue to believe that this top tier operator will be a primary beneficiary of funds flow to the gas complex, whether for exposure to best in class gas exposure with upside to structural change, or the compounding equation of value to high-value (net zero) product through its Entropy subsidiary,” Mr. Payne said in a note to clients.
The average analyst price target is C$13.90, according to Refinitiv Eikon data.
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Raymond James analysts led by Daryl Swetlishoff cut price targets on several pulp and paper and building materials stocks but still advised a buying opportunity is just around the corner.
“Led by BC, we expect further cost-push driven lumber curtailments to support 2025 North American lumber pricing. Legislative revisions by the US Department of Commerce (DoC) have postponed the 6th Administrative Review (AR6) softwood lumber duty hike (from ~14.4% to ~30%) to November (vs. August previously). In response, we have recast our lumber commodity forecasts ~10% lower with earnings impacts offset by lower assumed FX rates of 0.71 CAD/USD (vs. 0.73 prior). Potentially throwing a wrench into this analysis, we expect that, barring a deal, ~25% “Trump Tariffs” are coming to Canadian exports (which could include lumber). When added to existing lumber duties, shipping to the USA would be uneconomic for nearly all Canadian lumber production, necessitating large increases in US lumber prices to keep wood flowing. We highlight that there could be a ‘settlement window’ following a Conservative party win in an upcoming Canadian Federal election.”
“Despite anticipated volatility, we advocate investors add to positions ahead of the peak spring home-selling season and 4Q24 results. On the back of a series of weak quarters for lumber players, we contend the Street has adopted an overly cautious stance with the combination of nearly 20% higher 4Q24 building materials pricing and the weaker CAD backstopping our call for average ~200% above consensus quarterly results,” he added.
The price target on Atlas Engineered Products (AEP-X) was cut to C$2.10 from C$2.40; Canfor Corp.’s (CFP-T) target went to C$24 from C$28; Interfor Corp.’s (IFP-T) target went to C$26 from $C30; West Fraser Timber Co. Ltd.’s (WFG-N) went to US$115 from US$120; Western Forest Products Inc.’s (WEF-T) went to 50 cents Canadian from 60 cents; Mercer International Inc.’s (MERC-Q) went to US$7 from $7.50 and Doman Buildings Materials Group Ltd.’s (DBM-T) went to C$11.50 from C$12.
The analysts’ top pick remains Canfor, while they also reiterated a “strong buy” rating for pure play lumber producer Interfor. West Fraser was downgraded to “outperform” from “strong buy” on valuation concerns and a 12% cut to Raymond James’ 2026 EBITDA estimate.
“In light of potential tariffs, we highlight treated lumber distributor Doman, diversified industrials play ADENTRA and truss manufacturer Atlas (all rated Strong Buy) as attractive low volatility plays offering compelling ~60% upside to our targets,” Raymond James analysts added.
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Raymond James analysts led by Frederic Bastien made several changes to price targets on the Infrastructure and Construction stocks they cover as part of an annual outlook.
“Overall, we believe our I&C group is set for a constructive 2025,” the analysts said. “Supporting this outlook are the big efforts our management teams have expended to eliminate end-market concentration, reinforce balance sheets and tailor service offerings that answer critical infrastructure needs. Even so, we are of the view diverging interest rates in major economies, Donald Trump’s first 100 days in office, ongoing geopolitical risks, and stretched valuations all make for a volatile first half of the year. For us, the word for 2025 is caution. The next 12 months are setting up as a stock picker’s market.”
Raymond James’ rating on North American Construction Group (NOA-T) was upgraded to a “strong buy” from an “outperform”, with an unchanged price target of C$40. The average analyst price target is C$39.80.
The analysts commented: “With the trials and tribulations of 2024 in the rearview, we expect 2025 to go down as one of North American Construction Group’s best ever. From where we sit, concerns around the longevity of the firm’s relationship with Suncor have largely subsided, the recently acquired Australian business (MacKellar) is demonstrating profitable and exceptionally consistent growth, the 2025 guide offered last month leaves room for upside surprise, and valuation remains unfairly discounted at current levels. The shares notably trade at 6.9x our EPS estimate for 2025, a big discount to the five-year average for a select group of Canadian and Australian contractors. All things considered, now is the time for investors to jump back in the sandbox.”
Its price target on Brookfield Infrastructure Partners L.P. (BIP-N) rose to US$46 from US$44, with the rating remaining as a “strong buy”.
Raymond James commented: “While our financial forecast for 2025 may not scream upside like those of other stocks in our coverage universe, the risk-reward balance between growth and defensiveness looks quite enticing to us. We remind investors that in the past six years, BIP’s ROIC has risen from 11% to 14%, inflation indexation has expanded from 75% to 85%, and business concentration has fallen dramatically (only two assets now make up more than 10% of FFO). Its payout ratio, meanwhile, has slipped from 75% to 67% over the same period. This leaves Brookfield the flexibility to self-fund more of its growth, be it organically via its record capital backlog, or inorganically through opportunistic transactions.
“We see Brookfield well exposed to the hot-button themes of today such as decarbonization, deglobalization, and digitalization. AI-driven power demand, in particular, is creating a domino effect across BIP’s business. It is already unlocking significant value in the assets you would expect, such as the recently acquired hyperscale and retail colocation data centers, and also promising to impact others you would not. Enter gas storage, which is enjoying a renaissance of sorts now that natural gas is firmly established as a critical transition fuel. This means Brookfield’s investment opportunity set is likely larger, and its asset more valuable than most investors give it credit for.”
AtkinsRéalis Group Inc. (ATRL-T) saw its price target raised to C$98 from C$84, with an unchanged rating of “outperform.”
Raymond James commented, “Now that its balance sheet is approaching investment grade again, we opine that ATRL will get the M&A ball rolling soon. Management is acutely aware the firm hasn’t acquired anything of size since 2017, so it plans to build credibility with bite-sized transactions first. A relatively new corporate development team is combing through US-based firms ranging from 300 to 1,200 professionals in size and with the expertise to advance AtkinsRéalis’ sphere of excellence in transportation or water. While no geography is off the table, we anticipate big spending states such as New York, Pennsylvania, New Jersey, California, Oregon, and Washington will be favoured. With the business firmly anchored, now is also a good time for the company to sell its Highway 407 and Linxon interests, in our opinion.”
Stantec Inc. (STN-T) saw its target raised to C$130 from C$120, with a “market perform” rating maintained.
Raymond James commented: “To be clear, we believe there is nothing alarming about the company’s long-term prospects. But with organic growth decelerating from prior levels, management recently tempering its expectations for margin expansion somewhat, and the Energy & Resources (E&R) segment hitting an air pocket in 3Q24, we believe the stock needs a catalyst to get it going.”
WSP Global Inc. (WSP-T) saw its price target raised to C$310 from C$270, with a “strong buy” rating reaffirmed.
Raymond James commented: “From where we sit, no rival can combine growth and profitability as potently as WSP. On one hand, the engineering consultancy is leveraging an entrepreneurial DNA and the unwavering support of anchor investors to not only attract best-in-class professionals, but also capitalize on secular tailwinds in infrastructure. On the other, it is delivering consistency and margin improvements through service breadth, scale, operational efficiencies, and technology. In a world where geopolitics overshadow many other risks to global growth, these attributes elevate WSP’s status as a must-own defensive compounder.
“Several trends more structural than cyclical in nature are driving historically high growth rates for the company and its industry. For proof consider that WSP’s organic revenue has increased at an estimated CAGR of 7% over its 2022-2024 strategic cycle, versus the 3% it annualized over the prior 10 years. Underpinning this step change are investments in healthcare and hyperscale data centers, multilateral support for infrastructure, increasing environmental regulation, and the energy transition. Now that Power Engineers has joined its ecosystem, WSP can take aim at the planned $21 trillion set to be invested in electricity grids by 2050. There is also good reason to believe WSP’s leading Transportation & Infrastructure practice will sustain high-single to low double-digit on the strength of the bipartisan Infrastructure Investment and Jobs Act (IIJA) and similar programs around the world. In Buildings, niche transactions have enhanced the mechanical, electrical, plumbing (MEP) practice, cementing the firm’s go-to status for data centers and healthcare projects. WSP is also of one the few consultancies following global miners everywhere they go, with services extending from impact assessment studies and environmental permitting to decommissioning. All told, we are optimistic the business will increase internal revenue to the tune of 7% this year, keeping the recent trend intact.”
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National Bank Financial analyst Cameron Doerksen trimmed his price target on Cargojet Inc. (CJT-T) to C$151 from C$158 as he looked ahead to fourth-quarter results. He maintained an “outperform” rating.
“For Q4, we have lowered our forecast to reflect a better assessment of some cost pressure Cargojet is expected to experience, notably around crew costs. We have also made adjustments to our 2025 cost estimates to reflect what we now anticipate will be higher than previously forecasted cost items (crew costs plus lagging inflationary cost items such as maintenance). As a result, our new EBITDA margin assumption is 32.3% versus 34.4% previously,” Mr. Doerksen said.
The analyst said the current valuation of the stock “looks attractive,” with an enterprise value 7.9 times that of EBITDA based on his updated 2025 forecasts. Historically, the stock has traded at 10.9 times.
“Although Cargojet will face some cost headwinds in 2025, with a positive outlook for CJT’s domestic network volumes and y/y growth from the contract signed last year supporting e-commerce volumes between China and Canada, the outlook remains generally constructive for the company,” he said.
The quarterly results will be released on Feb. 17. The average analyst price target is C$160.18.
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TD Cowen initiated coverage of Transcontinental Inc (TCL-A-T) with target price C$23 and a “buy” rating.
“After an extended period of aggressive growth via acquisition, TCL’s management has focused on portfolio optimization, yielding recent Return On Capital Employed improvement. We believe TCL is undervalued given an exceptional free cash flow profile (expected average annual yield of 16.2% in 2025/26),” said analyst Sean Steuart.
He sees more room for the stock to narrow its valuation discount. “Following an extended period of underperformance, TCL’s share price has improved 67% over the past 15 months (admittedly from a low base). Based on consensus 12-month forward estimates, TCL trades at a P/E multiple of 7.2x versus its peer group average of 10.8x. TCL has an entrenched valuation discount, but the gap has narrowed the past year (current 3.6 points versus the long-term average of 5.3 points). We see potential to further close the valuation difference as margin improvement programs bear fruit, yielding EPS and FCF/ share growth,” he said.
The average analyst price target is C$22.67.
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Desjardins Securities analyst Chris Li is maintaining his “buy” rating and C$175 price target on Canadian Tire Corp. Ltd. (CTC-A-T) following a surprising CFO transition announcement.
Darren Myers will join the company as executive vice-president and CFO, effective April 1, following Gregory Craig’s decision to retire after a 31-year career at Canadian Tire, with the last five years as CFO.
Mr. Myers has more than a decade of experience in operational functions and capital markets, having most recently served as CFO of Algonquin Power & Utilities, preceded by CFO roles at Loblaw and Celestica. Mr Craig will oversee the company’s 4Q24 reporting (February 13) and remain an advisor until June 30, 2025.
“While Mr. Craig’s retirement was not expected by the investment community, we expect a smooth transition given he will stay on as an advisor for a few months, Mr Myers’ extensive experience as a CFO and familiarity with investors, and support from CTC’s finance team and leadership,” Mr. Li said in a note to clients.
“And while it is true that historically CTC’s CFO has come from within the company with financial services experience, we believe Mr. Myers’ familiarity with retail, financial services and real estate from his experience at Loblaw should serve him well at CTC, although we acknowledge CTC’s product and business mix is different from Loblaw’s and financial services account for a much larger portion of CTC’s earnings. Overall, today’s announcement has a neutral impact on our view on the stock.”
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In other analyst actions:
Apple Inc (AAPL-Q) Jefferies cut its target price to US$200.75 from US$211.84 and downgraded its rating to “underperform” from “hold”. He warned of a potentially weak revenue number from the technology giant. JP Morgan also cut its target price to US$260 from US$265.
Barrick Gold Corp. (GOLD-N, ABX-T) was downgraded at Scotiabank to “sector perform” from “sector outperform”, with a reduced price target of US$19, down from US$23. The action was taken because of the suspension of its Mali asset.
Canadian Natural Resources Ltd (CNQ-T) Jefferies cuts target price to C$50 from C$54
Capstone Copper Corp (CS-T): Scotiabank cuts target price to C$11 from C$12
Cenovus Energy Inc (CVE-T): Jefferies cuts target price to C$30 from C$32
MDA Space Ltd (MDA-T): Citigroup raises target price to C$30 from C$26
Storagevault Canada Inc (SVI-T): Scotiabank cuts target price to C$5.25 from C$5.50
Suncor Energy Inc (SU-T): Jefferies raises target price to C$58 from C$54