Inside the Market’s roundup of some of today’s key analyst actions
Seeing a more constructive wireless pricing environment likely to have been sustained in the second quarter, RBC Dominion Securities analyst Drew McReynolds thinks the Canadian telecom sector has “now moved beyond the trough.”
However, heading into earnings season, he warns investors “the timing and magnitude of any meaningful recovery in pricing, growth, valuations and investor sentiment [will likely] be gradual.”
“We continue to believe the two boxes that Canadian operators must tick in 2025 in order for investor sentiment on the sector to meaningfully improve are progress on renewed wireless pricing discipline and progress with balance sheet de-levering,” said Mr. McReynolds in a research report released Tuesday.
“In contrast to Q1/25, we believe in Q2/25 progress was made on both fronts setting a better tone heading into results. For the Big 3 in Q2/25, we expect: (i) slightly negative average network revenue growth alongside a notable year-over-year decline in wireless net additions and negative but stable low-single digit wireless ARPU [average revenue per user] pressure; and (ii) slightly negative average wireline revenue growth with steady Internet net additions and modest Internet ARPU growth offset by ongoing television and telephony cord-cutting/shaving. Company-wise, we expect: (i) TELUS and Rogers to be the only operators delivering positive consolidated revenue growth year-over-year (up 1.5 per cent and up 1.7 per cent, respectively); (ii) Quebecor to lead on wireless net additions (+70k) and network revenue growth (up 5.4 per cent); (iii) Rogers to largely eliminate the gap to BCE and TELUS on Internet net additions (+25k versus +18k and +20k, respectively); and (iv) Cogeco to deliver mixed results reflecting a step-up in competitive intensity in the U.S.”
In summarizing his investment thesis for the industry, Mr. McReynolds emphasized “waters remain a little choppy but the storm is abating” with the S&P/TSX Telecom Index having generated a 7-per-cent total return thus far in 2025 compared to 11 per cent for the S&P/TSX Composite.
“We continue to expect industry revenue growth to remain under scrutiny entering the more promotional H2/25 period,” he added. “Until new value propositions emerge and scale to create meaningful new revenue streams for the industry, we expect revenue headwinds to persist through 2025 making any meaningful Canadian telecom comeback more of a 2026 story. However, given the more constructive wireless pricing environment emerging in Q2/25 and what appears to be the avoidance of the more negative tariff-induced macro scenarios for Canada, we believe the mid-points of the 2025 guidance ranges for the Big 3 (and particularly Rogers and TELUS) now look more achievable than a quarter ago.”
“With a still subdued growth outlook and valuations that we view as reasonable in the current interest rate environment, we see limited potential for meaningful sector-wide multiple expansion and therefore put greater emphasis on NAV growth and any company-specific re-rating catalysts that can drive total returns for investors. Our Outperform-rated stocks are Rogers, Quebecor, and TELUS. While near-term growth headwinds and the lack of catalysts for BCE leave us currently on the sidelines, we see a more attractive medium-term set-up for the stock due to an uptick in NAV growth driven by the May 2025 dividend cut, the Ziply contribution, and what could be a return to growth for the business segment. For Cogeco, we believe a return to positive revenue growth remains the primary catalyst for the stock, the visibility of which remains limited in our view.”
After making modest estimate revisions for the stocks in his coverage universe, Mr. McReynolds made a trio of target price changes:
- Cogeco Communications Inc. (CCA-T, “sector perform”) to $75 from $76. The average target on the Street is $78.40, according to LSEG data.
- Quebecor Inc. (QBR.B-T, “outperform”) to $45 from $43. Average: $41.48.
- Rogers Communications Inc. (RCI.B-T, “outperform”) to $55 from $54. Average: $52.03.
He maintained his $35 target for BCE Inc. (BCE-T, “sector perform”) and $24 target for Telus Corp. (T-T, “outperform”). The averages are $33.86 and $22.83, respectively.
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While she thinks new investors to ATS Corp. (ATS-T) will likely “stay on the sidelines” in the near term following Monday’s announcement of the departure of chief executive officer Andrew Hider, TD Cowen analyst Cherilyn Radbourne expects existing shareholders to stick with the company, given the “strong growth platform” he built and anticipating “a strong candidate pool” should be attracted.
Shares of the Cambridge, Ont.-based automation solutions provider dropped over 8 per cent after it said Mr. Hider is leaving to pursue a new leadership opportunity outside the industry. He’d been in the role since 2020.
“Based on Mr. Hider’s leadership caliber, the potential for another organization to recruit him was always a risk, but the announcement still came as a surprise,” said Ms. Radbourne. “Mr. Hider is leaving ATS to become CEO of Baxter, a global med-tech leader; therefore, we do not interpret his departure as a signal regarding his view of ATS’ future prospects.
“We see the timing as unfortunate, because ATS is exiting a very difficult F2025. That said, the company has a near-record backlog of $2-billion, weighted more than 50 per cent to its core life sciences market, which provides a solid foundation for F2026, and the EV customer dispute has been resolved. ATS is also a much stronger platform than it was when Mr. Hider joined as CEO in 2017, with a larger market cap and dual-listed stock, a leadership position in life sciences, and an established services business, which should attract a strong CEO candidate.”
The analyst also thinks ATS’ decentralized management structure and the presence of a long-time, strategic shareholder should “provide interim continuity.”
“ATS’ CFO, Ryan McLeod, will become interim CEO upon Mr. Hider’s departure (August) while the Board conducts a formal search (approximately 6 months plus),” said Ms. Radbourne. “Mr. McLeod has been with ATS for 20 years and became CFO in 2020. Mike Martino of Mason Capital, currently a Board member, is expected to become the new Board Chair, following David McAusland’s retirement.
“We also see a non-zero probability of a bid to acquire ATS. There are no obvious strategic buyers, other than a large industrial conglomerate, but private equity has shown a prior interest in automation/life sciences. BC Partners, alongside the founding family, privatized IMA, a close ATS comparable in early-2021 for 13 times EV/EBITDA (TTM/FTM).”
Maintaining her financial forecast for the company, she cut her target for ATS shares to $49 from $59 with a “buy” rating. The average is $48.63.
"We view ATS as uniquely positioned to benefit from reshoring/supply-chain de-risking, and see continued scope for margin improvement and M&A upside," she added.
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National Bank Financial analyst John Shao sees “incremental opportunities” for Kraken Robotics Inc. (PNG-X) following the close of its $115-million pubic share offering.
“Kraken expects the net proceeds of the Offering will be used to support the Company’s growth into a scalable global prime contractor, including: (1) enhancing the ability to consider larger accretive acquisitions particularly in the U.S. and Europe given the Company’s strengthened global profile; (2) demonstrating a stronger balance sheet when bidding for larger governmental and commercial contracts; and (3) for general corporate purposes,” he said.
"Making select acquisitions to expand the product offering seems to be in Kraken’s DNA. Recall that Kraken’s acquisition of Germany-based ENITECH Subsea GmbH (renamed to Kraken Power) in 2018 is a textbook example of a strategic acquisition that has greatly expanded the Company’s total addressable market. Going forward, with a much strengthened balance sheet, we see Kraken on a similar path to acquire technologies in adjacent verticals. For now, we contemplate those opportunities as being: (1) underwater communications and navigation systems (acoustic modems, USBL/LBL positioning systems); (2) light ROV or hybrid AUV/ROV platforms; (3) maritime data analytics and cloud platforms (e.g., AI-based target detection and seabed change monitoring and marine asset integrity software; and (4) subsea energy and power solutions to expand its subsea battery offering. From a customer’s perspective, assessing the bidder’s balance sheet risk is an important consideration, and we believe this offering has greatly reduced that risk.”
Upon resuming coverage of St. John’s-based company, which focuses on subsea intelligence through three-dimensional imaging sensors, power solutions, and robotic systems, Mr. Shao reaffirmed his investment thesis, seeing Kraken “democratizing cutting-edge technology” and touting notable headwinds.
“Multiple macro and geopolitical considerations, such as the imminent navy upgrade cycle, an increasing occurrence of unmanned equipment in modern warfare, and Europe and Canada’s shift towards large military spending, have created multi-year market tailwinds for the Company,” he said.
“As a product company, Kraken has a history of making select acquisitions to expand into adjacent verticals. That acquisition strategy, coupled with the Company’s internal development of next-generation products, further entrenched Kraken’s market leadership.”
Maintaining his “outperform” recommendation for its shares, Mr. Shao raised his target by $1 to $4. The current average on the Street is $3.60.
“As a result of a favorable macro environment, Kraken’s peers in the defense sector saw a 15-per-cent multiple expansion since the start of May. As of the time of writing, Kraken is trading in-line with its peer group but exhibits a much higher growth profile,” he said.
Elsewhere, Canaccord Genuity’s Doug Taylor raised his target to $3.50 from $3.25 with a “buy” rating after resuming coverage.
“What was already a robust balance sheet is now much more so and should eliminate any question of its capacity to begin competing and executing on the more sizable opportunities in its $2-billion-plus pipeline, in our view. The company has begun referencing the opportunity to now serve as prime contractor on some large opportunities, necessitating additional working capital. We see this new potential and increased financial flexibility as offsetting the relatively small dilution to our target price,” said Mr. Taylor.
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In a research report previewing quarterly earnings for his industrial and transportation coverage universe released Tuesday, CIBC World Markets analyst Kevin Chiang downgraded Mullen Group Ltd. (MTL-T) to “neutral” from “outperformer” and reduced his target to $15 from $16. The average on the Street is $16.55.
"We have lowered our earnings expectations for MTL, reflecting the challenging macro environment across its segments,“ he said. ”Our 2025E and 2026E EBITDA estimates fall by 6 per cent and 3 per cent, respectively, which in turn lowers our price target from $16.50 to $15. This lowers our return to price target to 5 per cent, which moves us to the sidelines. While MTL is trading at a trough-like valuation, has a strong balance sheet, and its real estate provides investors with a safety net, we believe the upside in its equity value will be capped until we see more consistent positive momentum in its earnings."
Mr. Chiang also made these other target adjustments:
- Bombardier Inc. (BBD.B-T, “outperformer”) to $167 from $140. Average: $135.29.
- Cargojet Inc. (CJT-T, “outperformer”) to $142 from $150. Average: $141.08.
- TFI International Inc. (TFII-N/TFII-T, “outperformer”) to US$110 from US$118. Average: US$111.52.
“Heading into the Q2/25 earnings season, we do not expect any major guidance revisions from the waste sector or aviation/aerospace names we cover,” he said. “While for the waste sector we believe expectations were for guidance to be raised after Q1/25 earnings, the weaker commodity price environment (and for GFL, stronger C$) make this more challenging. For the latter, the aviation/aerospace names we cover continue to benefit from a healthy demand environment, while for AC fuel/FX have become incremental tailwinds relative to expectations earlier this year. We also expect CPKC to hold its 2025 EPS guidance, having revised it when it reported Q1/25 results. We do expect CN to revise its 2025 EPS guidance from 10-15 per cent currently to 7-12 per cent to reflect the stronger C$/US$ exchange rate and additional conservativism related to the macro environment. We do not expect TFII to issue full-year guidance, but to provide Q3/25 EPS expectations within the range of US$1.25 to US$1.40 (we are estimating Q3/25 EPS of US$1.33 versus consensus of US$1.40). For MTL, given the softer energy price environment and challenging freight backdrop, we now see the company’s EBITDA tracking below its 2025 guidance (we are forecasting 2025E EBITDA of $321-million versus guidance of $350-million).”
“We like the following names heading into Q2/25 reporting season: 1) BBD (positive demand trends and FCF upside with book-to-bill); 2) AC (FX and fuel tailwinds and demand resilient); and 3) CPKC (healthy volume and pricing trends)."
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National Bank Financial analyst Michael Doumet thinks 5N Plus Inc. (VNP-T) is “set to be a near-term beneficiary of the Big Beautiful Bill.”
“In our view, the BBB will rush production starts for utility-solar to meet the 2026-2027 deadline; FSLR will continue to benefit from the 45X manufacturing incentive (to be phased out in 2028-2031), FEOC restrictions (for projects that start beyond 2025), and tariffs,” he said. “Based on our understanding, VNP’s ‘baseline’ sales to FSLR (i.e. contract minimum; what is in the 2025 guide) contemplates a 15-per-cent year-over-year increase in CdTe [Cadmium Telluride] material sales (vs. 30 per cent year-over-year in 2026).
“The ‘baseline’ does not account for a (i) faster-than-expected ramp of FSLR’s U.S. production in Alabama/Louisiana and (ii) potential share gains in FSLR’s non-U.S. production, both of which we expect there to be a high likelihood of materializing. In terms of sensitivities, (i) a one-quarter acceleration in FSLR’s U.S. production ramp could lead to a 10-per-cent increase in CdTe sales vs. ‘baseline’ and (ii) a market share gain of 25 per cent of FSLR’s non-U.S. production (5N+ used to have a 50-per-cent share; it now has zero) could drive a 10-per-cent to 20-per-cent increase (in 2026) vs. ‘baseline’. We expect higher ‘spot’ buying in 2Q from FSLR, indicative of a need to expand the contract minimum.”
In a research note released Tuesday reviewing his recent tour of Montreal facility, which includes a new corporate office, Mr. Doumet said he expects a “sizeable” beat when 5N reports second-quarter results on Aug. 4, coming off “a big beat” to open its current fiscal year. He also predicts a raise to its full-year guidance.
“In fact, for 2025, we believe there is a high likelihood of VNP exceeding the upper-limit of its 2025 EBITDA guide ($55-million to $60-million) by 15 per cent,” he added. “And, despite the outsized growth in 2025, we believe VNP can generate double-digit growth in 2026, as sales to FSLR are set to meaningfully accelerate (we think more than 30 per cent). We raised our valuation multiple to 11.25 times EV/EBITDA on our 2026 (vs. prior 11.0 times) to account for our conservative estimates (our estimates do not reflect potential upside from continued strong operating performance and/or upsizing of its FSLR contract (in 2025/26).”
With his “outperform” rating (unchanged), Mr. Doumet bumped his target to $11.25 from $11. The average is $11.30.
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Scotia Capital’s Orest Wowkodaw and Eric Winmill are expecting “mixed” second-quarter results from Canadian miners “driven by diverging commodity prices and varied operating performances.”
“Although many of our estimates appear well below current consensus, we expect material consensus revisions over the next two weeks,” they added. “We anticipate investors to also focus on potential negative guidance revisions and select mine ramp-up updates. The large and mid-cap producers continue to trade at relatively attractive valuations as we estimate an average implied Cu price of $5.08/lb or 12 per cent above spot (vs. a 20-per-cent average premium since 2023).”
In a client report released Tuesday, the analysts predicted companies will have largely flat results versus the previous quarter, citing mixed commodity price trends with copper rising while iron saw a decline.
“We forecast CIA-T, CS-T, ERO-T, HBM-T, IVN-T, NEXA-N, and TECK.B-T to miss consensus EBITDA expectations, ANTO-L, FM-T, and LUN-T to beat, with CCO-T and FCX-N in-line,” they said.
“On an EPS basis, we expect several misses but notable beats by ANTO-L, CCO-T, and LUN-T. We profile our quarterly EPS, EBITDA, and guidance performance vs. consensus tracker . .. ANTO-L and FCX-N have the best track records of meeting EBITDA expectations over the past eight quarters while six companies are tied for the weakest results. CCO-T has the strongest guidance track record while TECK.B-T has the weakest.”
The duo made a group of target adjustments after updates to their financial projections. They are:
- Cameco Corp. (CCO-T, “sector outperform”) to $100 from $95. The average is $93.31.
- Champion Iron Ltd. (CIA-T, “sector outperform”) to $5 from $5.50. Average: $6.78.
- Ero Copper Corp. (ERO-T, “sector outperform”) to $25 from $26. Average: $27.
- First Quantum Minerals Ltd. (FM-T, “sector perform”) to $26 from $24. Average: $22.95.
- Labrador Iron Ore Royalty Corp. (LIF-T, “sector perform”) to $29 from $30. Average: $30.80.
"In our view, CCO-T, FCX-N, FM-T, and LUN-T all appear relatively well positioned heading into the Q2 print. Conversely, we believe CIA-T, CS-T, ERO-T, HBM-T, and TECK.B-T could disappoint expectations. Looking beyond Q2, TECK.B-T, CS-T, and CCO-T are Top Picks. We also highly recommend CIA-T, ERO-T, FCX-N, HBM-T, and LUN-T," the analyst said.
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In other analyst actions:
* Barclays’ Alex Scott upgraded Great-West Lifeco Inc. (GWO-T) to “equal-weight” from “underweight” with a $56 target, up from $47 and above the $55 average on the Street. He downgraded Sun Life Financial Inc. (SLF-T) to “underweight” from “equal-weight” with a $82 target, down from $86 and below the $90.09 average.
Mr. Scott also raised his Manulife Financial Corp. (MFC-T) target by $1 to $46, keeping an “equal-weight” rating. The average is $48.58.
"Equity market strength is lifting long-term earnings, interest rates remain high, and credit remains healthy. Against this backdrop, we’re leaning into names with equity leverage and capital flexibility-upgrading GWO to EW, favoring OW-rated JXN, and downgrading SLF to UW on emerging Medicaid dental," he said.
* Bernstein’s David Vernon raised his targets for Canadian National Railway Co. (CNR-T) to $158 from $156 and Canadian Pacific Kansas City Ltd. (CP-T) to $120 from $115 with a “market perform” rating for both. The averages are $162.47 and $120.03, respectively.
* BMO’s Tamy Chen raised her Canadian Tire Corp. Ltd. (CTC.A-T) target to $191 from $175, keeping an “outperform” rating. The average is $171.70.