Inside the Market’s roundup of some of today’s key analyst actions
With shares of Air Canada (AC-T) having rebounded “strongly” in response to lower jet fuel prices and a diminishing risk of labour disruptions this summer, National Bank Financial analyst Cameron Doerksen raised his rating to “outperform” from “sector perform” previously.
In a client report released before the bell, he did warn second-quarter results “and to a lesser degree Q3” will still display the negative impact of higher fuel prices. However, he now sees the potential for further potential share price appreciation:
“Fuel still elevated, but has eased significantly,” said Mr. Doerksen. “Compared to last year jet fuel prices remain elevated, and a weaker CAD is an incremental cost headwind for Air Canada. However, jet fuel prices have eased significantly from the peaks seen late in Q1 and early in Q2 (currently C$1.20/litre versus C$1.46 average spot in Q2). Whereas previously we estimated Air Canada would need a 15-per-cent-plus yield improvement to fully offset higher fuel costs in H2 (all else equal), with the recent easing of jet fuel prices, we now estimate that in H2/26 Air Canada will only need a 7-per-cent yield improvement to fully offset the higher fuel costs. Assuming geopolitical tensions ease further, we anticipate that jet fuel prices will continue to fall, which should be positive for Air Canada shares.
“Some demand destruction evident, but yields a tailwind in coming quarters. As we highlight below, Air Canada has begun to see some resistance to higher airfares, particularly from leisure customers. As a result, yield increases may not be as robust as initially expected for the peak summer period. However, jet fuel prices have fallen, and Air Canada has booked stronger yields based on higher than current jet fuel prices well into Q4. We therefore still expect the airline to benefit from a solid yield tailwind in the coming quarters. In addition, starting in Q2, Air Canada will be lapping easier comps on U.S. transborder routes (where demand appears to have stabilized). Air Canada also faces an easier comp in Q3 and to a lesser degree in Q4 due to the flight attendant strike late last summer.”
Mr. Doerksen also emphasized his “greater confidence” in the airline’s ability to avoid a labour disruption during the summer, which he said was a key concern previously. The company reached a new agreement with its customer service agents earlier in June.
“A tentative agreement with the company’s maintenance and ground handling employees was narrowly rejected in late June, but given the closeness of the vote, we are more confident that a deal can be reached without a disruption,” he said. “Assuming a deal is reached, all of Air Canada’s major unions will have agreed to re-set contracts and annual labour cost escalation will be more modest in 2027 and beyond.”
Seeing Air Canada’s valuation as inexpensive compared to industry peers, Mr. Doerksen hiked his target for its shares to $29 from $22 after forecast adjustments. The average target on the Street is $25.61, according to LSEG data.
“In our updated 2027 forecast which reflects more normalized earnings for Air Canada versus 2026 which has been heavily impacted by the spike in jet fuel costs,” he said, “Air Canada shares are trading at 3.4 times EV/EBITDA. This is below the historical average forward multiple (excluding the pandemic years) of 3.8 times EV/EBITDA and well below the U.S. legacy airline peer group, which trades at 5.6 times 2027 EV/EBITDA on average.
“We have also published a detailed Thematic Report (Aeroplan loyalty program an under-appreciated asset for Air Canada) on Air Canada today highlighting the value of the airline’s loyalty program, Aeroplan. We view Aeroplan as an underappreciated asset within Air Canada, driving less cyclical, growing and higher margin cash flows, while also providing a clear competitive advantage. Although Aeroplan is a core component of Air Canada’s business and will not be monetized, given the value ascribed to other airline loyalty programs as separate entities, we nevertheless view Aeroplan as providing valuation support for Air Canada shares."
Canaccord Genuity analyst Matthew Lee thinks the Capital Markers and Wealth business for Canadian banks have “more to give” with their performances in fiscal 2025 and 2026 “setting a higher base for each segment.”
“For the past six quarters, the Canadian Banks have impressed investors by delivering exceptional performance in their fee-based businesses—Capital Markets and Wealth,“ he said. ”In Q2, for example, all but BNS beat consensus forecasts in Capital Markets, while all but CIBC surpassed estimates in Wealth. Alongside manageable credit, this fee growth has helped drive a meaningful re-rating despite weak P&C loan growth, with the Big 6 outperforming the TSX by 20 per cent over the past six months. The next leg of the investment thesis depends on proving that these fee streams are durable enough to support continued double-digit EPS growth and further ROE expansion.“
While acknowledging “volatility will always exist,” Mr. Lee raised his earnings forecasts while also pointing to “better businesses, better valuations.”
“The valuation case is not just that our earnings estimates are higher; it is that a larger share of bank earnings should now be valued as durable,” he explained. “A higher Capital Markets floor reduces the cyclicality discount historically applied to trading and advisory revenues, while structural Wealth growth adds more recurring, capital-light earnings to the mix. That combination should support stronger PTPP growth, steadier high-ROE earnings, and a higher justified multiple. With fee revenues now larger, broader, and more durable than in prior cycles, we believe premium valuations can persist for the banks best positioned to turn that mix shift into sustainable EPS growth.”
With his new projections, the analyst made these target adjustments:
- Bank of Montreal (BMO-T, “buy”) to $265 from $242. The average is $230.73.
- Bank of Nova Scotia (BNS-T, “hold”) to $121 from $111. Average: $115.22.
- Canadian Imperial Bank of Commerce (CM-T, “hold”) to $168 from $160. Average: $156.61.
- National Bank of Canada (NA-T, “hold”) to $224 from $205. Average: $206.83.
- Royal Bank of Canada (RY-T, “buy”) to $310 from $282. Average: $277.68.
- Toronto-Dominion Bank (TD-T, “buy”) to $185 from $169. Average: $160.56.
"Given our more constructive view, we have raised our forecasts for both fee-based businesses, with the benefit to Capital Markets primarily impacting F26 and F27, while our Wealth estimates are increased over the medium term as well. By bank, RY sees the greatest benefit, with BMO and NA also seeing meaningful increases in fee-business growth. While we expect TD to outgrow the group in both segments, the bank’s massive P&C business makes our changes less impactful to overall earnings growth. We have raised our targets across the board and maintain our ratings for the group," said Mr. Lee.
Scotia Capital analyst Jonathan Goldman thinks it is “increasingly likely” Finning International Inc. (FTT-T) will “participate in prime power rather than just standby,” estimating its total addressable market could be close to $30-billion for new equipment and $1.7-billion of annual product support.
“With utility grids lacking excess capacity and connections taking too long, hyperscalers are building their own power plants,” he explained. “Turbines are preferred, but with lead times extending more than 5 years, hyperscalers have turned to natural gas reciprocating engines. Initially a stopgap solution, recips have emerged as a viable alternative. That’s important since prime power consumes 5-8 times the amount of product support as standby: we estimate annual product support revenue per GW [gigawatt] of prime power at $120-million to $150-million. AESO has received 20GW of interconnection requests with only 1.2GW of spare capacity. The recent Greenlight announcement shows that behind-the-meter (BTM) arrangements are gaining momentum.”
With Alberta’s data centre build out “gaining momentum,” Mr. Goldman emphasized “the main bottleneck is permitting,” but he sees Pembina Pipeline Corp.’s (PPL-T) decision to go ahead with its planned $4.6-billion Greenlight Electricity Centre is “a positive sign that Alberta data centre industry is moving ahead.”
“AESO is set to unveil a new proposal that would free-up of 1.6GW temporary grid access for ‘large load’ users that commit to building their own BTM power sources. Alberta has been actively courting hyperscalers to establish data centers in the province, which is well-suited for data centers given favourable climate, good access to natural gas and pipelines, and lots of land.
“AESO received 20GW of interconnection requests, but approved only 1.2GW representing the maximum additional large load capacity that the grid can serve without negatively impacting reliability. That 1.2GW is a standby opportunity for Finning, leaving the remaining 18.8GW as prime. 1GW of power is equivalent to about 400 engines plus 10-15 per cent for redundancies. As a general rule of thumb, we estimate new equipment cost at $1.5-million/MW including all the packaging, cabling, fuel storage, etc. Further, annual product support is 1-2 per cent of equipment cost for standby and 8-10 per cent for prime (prime requires more product support because equipment runs 24/7). As it relates to Greenlight, we understand the project represents a small diesel standby opportunity for Finning.”
The analyst thinks the optionality for Finning is currently priced into Finning shares.
“Our conservative base case values the power stub at $12-14/share, before considering upside from AI-related infrastructure build-out,” he said. “With FTT shares at $98, that implies the base business is trading at less than 16 times P/E on our 2027E, not far off from the 10-year average of 14.5 times, which itself is inappropriate given: 1) structurally lower earnings volatility in the oil sands; 2) nation-building/construction inflection; 3) generational mining opportunity in Argentina; and 4) steady mining activity in Chile supported by more than $6 copper.”
Keeping his “sector outperform” rating for Finning shares, Mr. Goldman raised his target to $118 from $114 after adjustments to his forecast. The average is $120.50.
He also made these other adjustments:
- Toromont Industries Ltd. (TIH-T, “sector perform”) to $238 from $229. Average: $232.38.
- Wajax Corp. (WJX-T, “sector perform”) to $36 from $37. Average: $34.67.
In a client note titled Material Momentum to Mention, National Bank Financial analyst Dan Payne said Logan Energy Corp.’s (LGN-X) provided investors with a “strong” update on Monday “as it gains momentum in its growth and returns, and which remains underappreciated in its prevailing valuation; arguably the best risk-adjusted value profile in the group at the moment!”
Before the bell, the Calgary-based growth-oriented exploration, development and production company, which was formed through the spin-out of the early stage Montney assets of Spartan Delta Corp. (SDE-T), increased its full-year production guidance to 17,000 to 18,000 barrels of oil equivalent per day, an increase of 1,000 barrels.
It also provided an operations update that Mr. Payne said is “highlighting the building momentum within its business, which is the product of operational outperformance and an expanded capital outlook.”
“Operational execution has recently proven strong drilling results, with six Montney wells at Pouce Coupe (half in the Middle & Lower, respectively), delivering average IP30 rates of +950 boe/d (62-per-cent liquids), indicative of low capital efficiency liquids results to derive top-tier returns,” he explained. “The contribution of those wells (on-stream May) and performance of existing production supported Q2/26 volumes of approximately 17 mboe/d (39-per-cent liquids) that stand significantly ahead of prior guidance (by a factor of 10 per cent), as a measure of that outperformance.
“With that, and expanding confidence in its program, the company has expanded its 2026 capital program by 30 per cent ($55-million to mid-point $235-million), which is expected to deliver 35-per-cent year-over-year production growth within the context of a 140-per-cent payout ratio ($76/bbl WTI & $2/gj AECO; vs. prior $60/bbl & $3/gj, respectively) and 1.0x trailing D/CF (largely unchanged). Significant associated value creation to note, as its guided production is expanded by 6 per cent to a mid-point of 17.5 mboe/d (41-per-cent liquids), while its H2 volumes should reflect a ramping exit (up 5 per cent from prior) to average 19.5 mboe/d (44-per-cent liquids). The incremental development capital will see the company add five wells at Pouce Coupe and Simonette, to come on stream in the fourth quarter and support that expanded potential (10 wells to come through the duration).”
Also noting Logan’s investment in new lands at Simonette should “positively compound value through an expanding duration and increased operating leverage of its asset base,” Mr. Payne bumped his target for its shares to $1.75 from $1.50, keeping an “outperform” rating, based on “expanded momentum of development and value creation.” The average target is $1.30.
RBC Capital Markets analyst Logan Reich is concerned about the near-term prospects for Restaurant Brands International Inc. (QSR-N, QSR-T) “given macro pressures in Canada, where Tim Hortons makes up 41 per cent of the company’s operating profit” while expecting Burger King’s momentum to continue.
“We’re somewhat cautious on the stock given that macro pressures in Canada appear to be having an outsized impact on consumers relative to the U.S.,” he said in a note. “TH made up 41 per cent of the company’s operating profit in Q1, where we think investors are increasingly focusing on the brand’s and country’s performance.
“Further, competition is increasing, primarily from MCD (SP) and SBUX (SP), particularly on cold beverages, where we estimate TH’s hot beverage sales declined in Q1. Positively, BK momentum appears to be continuing, and we see a long runway remaining, though the brand made up only 18 per cent of the company’s EBIT in Q1, less than half of TH’s.”
Mr. Reich warned Tim Hortons is facing increased headwinds from growing domestic coffee and beverage competition.
“Tim Horton’s has been the dominant coffee brand in Canada with 70-per-cent share in hot coffee, 65 per cent in baked goods, 60 per cent-plus in breakfast sandwiches and wraps, and 25 per cent-plus in cold beverages,” he said “Their market position is starting to see more competition, primarily from SBUX and MCD. As of end of calendar Q1, MCD and SBUX had 1,520 and 1,441 stores (2,961 combined) vs. Tim Horton’s 3,900. On SBUX, the business is accelerating in North America as new management is right-sizing store operations, which has translated to transaction growth. While TH is more value-oriented than SBUX, directionally, we think SBUX is more effectively competing for caffeine transactions. On MCD, the recent launch of their new cold beverage platform introduces more options for Canadian consumers in a segment that has been a key driver of TH’s comp growth. If we assume the cold beverage mix was 23 per cent in Q1 (it was 27 per cent in 4Q and Q1 is typically the seasonal low for cold), this implies SSS hot beverage declined 1.4 per cent in Q1 (backing out 1-per-cent unit growth from 10-per-cent cold beverage growth and 2% total beverage growth).
“Lastly, Dunkin’ recently signed a master franchisee agreement in Canada in efforts to reenter the market after exiting the country in 2018. We don’t view them as a near-term risk to estimates, but this will be something to monitor going forward.”
Reiterating his “outperform” rating, Mr. Reich cut his target for the company’s shares to US$85 from US$90. The average is US$86.53.
“While there’s macro and competition risk to topline growth which lead us to lower our estimates, a constructive perspective would be a) the company’s loyalty partnership with Canadian Tire (CTC/A.CN) is set to launch some time in 2H26. Canadian Tire has 12 million loyalty members vs. TH’s 7 million, which could be a boost to membership. After consumers join TH loyalty they spend 50 per cent more vs. prior to joining, though we think incrementality will be lower for members who join from Canadian Tire vs. organically. And b) the brand is rolling out fountains across the system (25 per cent complete as of 5/6 earnings call) and will be finished over the next few quarters, giving the brand additional flexibility to innovate on cold beverages to compete with MCD’s platform for example and improve speed of service,” he added.
“We adjust our SSS [same-store sales] estimates, raising BK by 119 bps for FY26 and bringing Q2 to 7.0 per cent, well ahead of consensus at 4.4 per cent. We lower TH by 88 bps for FY26 and are below the Street for Q2 by 110 bps (0.5 per cent vs. 1.6 per cent). We also lower our international and PLK estimates slightly due to higher gas prices and mismodeling, respectively. For FY26, revenue estimates come up slightly and our AOI [adjusted operating income] comes down 0.3 per cent. For the out years, our revenue is largely unchanged but our AOI and EPS estimates come up as we better account for the wind down of the RH segment. On lower TH SSS estimates and multiple, we lower our PT to $85.”
Diversified Royalty Corp.’s (DIV-T) $57.5-million bought deal “replenishes [its] acquisition facility capacity, giving it greater flexibility and dry powder to deleverage and pursue accretive franchise acquisitions both north and south of the border,” according to Desjardins Securities analyst Gary Ho.
On Monday, the Vancouver-based company announced the close of the deal with proceeds to be used to repay outstanding amounts under its acquisition facility drawn in connection with the recent acquisition of Mr. Lube + Tires franchisor business.
“We factored in the proceeds from the equity raise in our forecast, including deleveraging and an increase in share counts of 12.3 million shares,” said Mr. Ho after resuming coverage. “We maintained our adjusted revenue and adjusted EBITDA forecast for FY26 and FY27. Our model assumes DIV paying down outstanding debt from the $57.5-million (gross proceeds) equity raise, bringing leverage down by 0.5–0.6 times to 3.9 times for FY26 (was 4.5 times) and 3.6 times for FY27 (was 4.1x). Our distributable cash flow per share marginally decreases by 2–3 per cent given the higher shares outstanding.
“Along with the equity raise, DIV provided an update on Sutton royalty restructuring. DIV is in non-binding talks with Sutton to replace fixed royalty payments with a variable structure; Sutton currently benefits from a 33.3-per-cent royalty relief through December 2026 and, absent a new arrangement, may require further relief. DIV has flagged a potential write-down of Sutton-related intangible assets for 2Q (Sutton represents an immaterial 3 per cent of DIV portfolio).”
Keeping his “buy” rating, Mr. Ho bumped his target to $5 from $4.75. The average is $6.10.
“Our investment thesis is predicated on: (1) DIV’s high-quality franchise revenue stream with acquisition upside; (2) a royalty structure which enables successful franchisors to monetize their EBITDA without forgoing future upside; and (3) an attractive 5.9-per-cent dividend yield,” he said.
Elsewhere, ATB Cormark’s Jeff Fenwick reduced his target to $7.25 from $7.50 with an “outperform” rating.
“We continue to place DIV’s valuation in the context of North American franchise peers, and note how attractively valued it is on a FCF yield basis, particularly versus key comparables such as Valvoline (VVV-NYSE). We believe the market has yet to appreciate the material evolution of DIV’s business model, but expect this to be progressively realized as DIV reports full quarters with Mr. Lube consolidated into results, making the higher growth rate more evident and triggering a re-rating. We continue to utilize a 5-per-cent FCF yield to underpin valuation, reflecting this expected progression,” said Mr. Fenwick.
In other analyst actions:
* Previewing second-quarter earnings season for Canadian telecommunications companies, Scotia Capital’s Maher Yaghi made these target changes: BCE Inc. (BCE-T, “sector outperform”) to $39 from $41, Quebecor Inc. (QBR.B-T, “sector perform”) to $63.50 from $58, Rogers Communications Inc. (RCI.B-T, “sector outperform”) to $61 from $60.50 and Telus Corp. (T-T, “sector perform”) to $19 from $20. The averages on the Street are $40.24, $66.12, $59.73 and $19.95, respectively.
“We expect Q2 results to show early signs that Canadian fundamentals are stabilizing around wireless pricing,” Mr. Yaghi said. “However, we do not think the evidence is strong yet to support a broad-based sector re-rating given soft subscriber growth. In that context, Rogers screens well given improving FCF, lower capex, and MLSE optionality, while BCE shares are supported by attractive valuations, with upside from Ziply and AI. By contrast, Cogeco remains weighed down by U.S. broadband pressure, TELUS still needs a credible new action plan to address dividend sustainability, and Quebecor continues to execute well, but its valuation leaves little room for error. Overall, we remain neutral on the group, as improving industry discipline is encouraging but not yet enough to resolve company-specific debates around leverage, capital allocation, and whether valuations adequately reflect the longer-term risk of non-traditional broadband competition. We made a few target adjustments lowering multiples on T given growth path, lifted valuations on MLSE for RCI and medium term growth in DCF for QBR..”
* In a report titled Take Once Quarterly, or as Directed, Stifel’s Justin Keywood became the first analyst to initiate coverage of Vancouver-based Custom Health Holdings Inc. (CHLT-T), which began trading on the TSX on June 24, with a “buy” rating and $12 target.
“Medication non-adherence in the U.S. is a $0.5-trillion annual problem with only 50 per cent of Rx taken as prescribed, leading to enormously costly healthcare intervention. Custom Health’s end-to-end platform results in proven 98-per-cent medication adherence through its pill-dispensing at-home monitoring device (Spencer), proprietary software-AI (AdhereNet) and network of automated pharmacies, serving as critical healthcare infrastructure. Recognizing the value of Custom’s solution, including for opioid management, U.S. payors are providing widespread referrals and reimbursement for US$1,800/patient clinical ARR, at 60-per-cent GM. Paired with traditional pharmacy dispensing (20-per-cent GM), a compelling high-growth double-stack revenue model develops. New patient growth will drive the stock, with industry-leading margins inflecting profitability. We expect 6k current patients to expand to 17k next year (out of 100k contracted) with more than 100-per-cent revenue growth, driven by the acquisition of InnovativeRx, while further M&A opportunities remain abundant. We initiate with a BUY-rating and $12 target, noting upside potential to $18/share.”
* ATB Cormark’s Nicholas Boychuk reduced his Street-low target for shares of Kraken Robotics Inc. (PNG-X) to $5 from $6.50 with an “underperform” rating. The average is $11.67.
“Recent M&A activity in subsea defence tech and robotics has further highlighted the strategic importance of these assets and their growth potential over the coming years. The price discovery from these deals, however, also exposes a disconnect with PNG’s prevailing valuation. This disconnect wasn’t a factor in our initial downgrade thesis, which focused on the geopolitical and technical headwinds facing PNG, but now can’t be ignored. When we combine these data points with the headwinds we think the business faces (which have likely strengthened post this consolidation), we arrive at our updated $5.00 Price Target (from $6.50). The strength of the platforms being assembled by peers and their recent execution make it hard to justify a relative premium valuation for PNG. We believe there is more near-term compression in PNG’s share price as a result and maintain our Underperform rating.”
* In response to Rogers Communications Inc.’s (RCI-B-T) deal to buy the remaining 25-per-cent stake in Maple Leaf Sports & Entertainment from Kilmer Sports Inc. for $4.35-billion, National Bank’s Adam Shine trimmed his target for its shares to $62 from $63, keeping an “outperform” rating. The average is $59.73.
“Striking a deal with Kilmer Sports was the first key step at start of 2H, with work to be done now on preparing for recapitalization of company’s sports and media (S&M) assets which will see MLSE joined by the Blue Jays, Rogers Centre and Sportsnet into a platform Rogers estimates is worth over $25-billion. In our May 11 note, we put together a sum of the parts of this platform which offered a range of value between $21.7-billion and $25.3-billion to which we talked about applying a 25 per cent rather than higher discount,” he said.