Inside the Market’s roundup of some of today’s key analyst actions
In response to several Canadian precious metals producers having pre-released fourth-quarter 2024 operating results, National Bank Financial equity analysts are expecting a “mixed” earnings season in the sector.
“We would expect lower cash costs quarter-over-quarter given the large number of companies that have back half-weighted production,” they said. “The weakening of global currencies against the USD in Q4 will likely prove to be a tailwind, with the exception of the Turkish Lira due to the current extreme rates of inflation in the country. We are looking for management commentary around capital allocation plans, and we expect the overall financial leverage of the sector to come down as debt is likely to be repaid with some of the expected strong cash flows. By our estimates, 4Q24 should mark the highest and fourth consecutive quarter of rising FCF/GEO sold.”
“Consensus estimates remain fluid, thus modest differentials vs. NBF may be explained, while larger gaps are a source for our conviction beats/misses. At the time of writing, we have conviction in Eldorado Gold (ELD.TO), and Torex Gold (TXG.TO) beating consensus Adj. EPS estimates, while we expect Centerra (CG.TO), Aya Gold and Silver (AYA.TO) and Wesdome (WDO.TO) to miss. Details behind our conviction calls are presented later in this report. For concentrate producers, provisional pricing adjustments are expected to be a modest net negative for 4Q24 earnings.”
In a research report released Tuesday, the firm maintained its price deck for all metals is unchanged while updating both their near and long-term foreign exchanges rates. Alongside those changes, the analysts made a series of target price adjustments to stocks in their coverage universe.
“Companies with target price changes of 10 per cent or more include: SSR Mining (up 27 per cent), G Mining (up 25 per cent), Aura Minerals (up 19 per cent), Calibre (up 18 per cent), Wesdome (up 18 per cent), Equinox (up 16 per cent), Alamos (up 15 per cent), New Gold (up 14 per cent) Barrick (up 13 per cent), IAMGOLD (up 13 per cent), Lundin Gold (up 13 per cent), Allied Gold (up 12 per cent), Agnico Eagle (up 11 per cent), Artemis (up 11 per cent), Coeur (up 11 per cent), Kinross (up 10 per cent) and Montage (down 11 per cent),” they said.
For their top picks, the analysts made these changes:
Seniors
* Kinross Gold Corp. (K-T, “outperform”) to $22 from $20. The average on the Street is $18.65.
Analyst Mike Parkin: “Kinross maintains significant opportunities for growth within its North American portfolio, which should help to further improve its geopolitical risk profile. This includes the Great Bear project (Ontario), the potential Curlew Basin restart (Washington State) and the Round Mountain U/G project (Nevada) that is under development.”
* Pan American Silver Corp. (PAAS-T, “outperform”) to $47.25 from $45. Average: $39.41.
Analyst Don DeMarco: “Improving operational performance marked by FCF of $151-million in Q3/24, expected to continue, with flagship La Colorada ventilation fixed lifting throughput and grade, and Jacobina optimization study on deck.”
Intermediates/Juniors
* Aya Gold & Silver Inc. (AYA-T, “outperform”) to $20.75 from $21.25. Average: $21.31.
Mr. DeMarco: “We have a negative bias on AYA for Q4/24, modeling EPS of a loss of 1 cent (consensus a profit of 1 cent) and CFPS of 1 cent (consensus 3 cents), both below consensus. While production is expected to be Q4-weighted, annual output should track the lower end of revised guidance. We model TCC at $19.37, down quarter-over-quarter on anticipated higher production.”
* Calibre Mining Corp. (CXB-T, “outperform”) to $4 from $3.40. Average: $3.64.
Mr. DeMarco: “Valentine mine development in the homestretch, first pour approaching in Q2/25 and de-risking advanced, with final capex revision, a site visit showing well and led by a strong management team with a track record of success. We highlight visibility for a valuation re-rate to reflect increased production in Tier 1 jurisdiction.”
* G Mining Ventures Corp. (GMIN-T, “outperform”) to $20 from $16. Average: $17.91.
Analyst Rabi Nizami: “G Mining remains a long-term Top Pick, as the team has demonstrated their ability to deliver projects on time and on budget, with the TZ mine (approximately 200koz/year) now completed and quickly ramping up to full capacity. The company is positioning for another re-rating in years ahead as attention turns toward the upcoming development of much a larger project in Oko West (350koz/year), targeting combined output of 500koz/year by 2028.”
* IAMGOLD Corp. (IMG-T, “outperform”) to $13.50 from $12. Average: $10.36.
Mr. Parkin: “We came away from the recent Côté site tour pleased with the ramp-up progress at the new mine and believe there is strong potential for the mill to outperform nameplate capacity (36ktpd) through the installation of a second secondary crusher expected in 2H25 at a relatively low capital cost of US$15 million (attrb.).”
Royalty Companies
* Osisko Gold Royalties Ltd. (OR-T, “outperform”) to $34 from $35. Average: $33
Analyst Shane Nagle: “Given the royalty sector is expected to generate strong FCF at current gold prices, a competitive deal environment is likely to contribute to consolidation within the industry. We view several companies in the sector motivated to acquire OR’s high-quality diversified portfolio with key assets operated by Senior/Intermediate counterparties located in politically stable jurisdictions. We see several companies in the sector with motivation to acquire OR’s high-quality portfolio given its strong near-term growth pipeline, largely derived from stable mining jurisdictions, including: Canadian Malartic, Island Gold, Mantos Blancos and the CSA mine.”
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Despite rising on average by 18 per cent thus far in 2025, the outlook for gold equities “remains constructive, supported by attractive valuations, low crowding, and a supportive macro outlook for gold,” according to RBC Capital Markets analysts Josh Wolfson and Michael Siperco.
“However, RBC estimates are broadly below-consensus in 2025 and we emphasize some caution into near-term updates,” they added. “We adjust our target multiples higher by 5-10 per cent, supported by earnings momentum and the improving macro backdrop.”
In a report released late Monday, the analysts predicted fourth-quarter earnings reports will likely contain a “barrage of information” and see full-year 2025 guidance as the focus of the Street.
“Results for producers will contain 4Q earnings, 2025 guidance, long-term guidance, year-end reserves/resources, and project updates,” they said. “2025 guidance in our view represents the primary focus, where we see risks vs. consensus across the majority of our large cap coverage — RBC production is down 3 per cent and AISC [all-in sustaining costs] up 4 per cent vs. consensus (see p.20).
“Costs are rising, underscoring near-term risks, but margins are set to expand. For 2024 (excluding-NEM due to M&A), we estimate coverage production declined by 1 per cent, AISC increased 10 per cent, and fully-loaded costs increased 17 per cent to $1,990/oz. In 2025, we forecast production will increase 2 per cent year-over-year (ex-NEM), AISC will increase 7 per cent to $1,475/oz, and fully-loaded costs will increase by 10 per cent to $2,080/oz. Despite continued cost inflation, margins are still improving given gold’s stronger performance.”
While the analysts acknowledged fourth-quarter results are normally “a lower focus” for investors, they cautioned “don’t overlook this quarter.”
“In 4Q, we forecast 4 per cent higher quarter-over-quarter production and 5 per cent lower AISC, supporting senior producers achieving more than 30 per cent higher earnings and FCF,” they said. These changes are driven by traditional 4Q seasonal strength and guided sequencing changes. In our view, fundamentals no longer require a leap of faith, given the sector’s current cash generation (6.9 per cent FCF/EV for senior producers in 2025 at spot). Given low financial leverage, improving FCF, and a lower focus on growth investment, we expect return of capital will be a prominent theme.”
The analysts’ target price changes include:
- Agnico Eagle Mines Ltd. (AEM-N/AEM-T, “outperform”) to US$105 from US$96. The average on the Street is US$103.57.
- Alamos Gold Inc. (AGI-N/AGI-T, “outperform”) to US$27 from US$25. Average: US$24.91.
- Franco-Nevada Corp. (FNV-N/FNV-T, “sector perform”) to US$155 from US$145. Average: US$147.12.
- Kinross Gold Corp. (KGC-N/K-T, “sector perform”) to US$13 from US$12. Average: US$12.30.
- Lundin Gold Inc. (LUG-T, “sector perform”) to $35 from $31. Average: $37.
- Newmont Corp. (NEM-N/NGT-T, “sector perform”) to US$52 from US$47. Average: US$54.91.
- Osisko Gold Royalties Ltd. (OR-N/OR-T, “outperform”) to US$24 from US$23. Average: US$21.28.
- Pan American Silver Corp. (PAAS-N/PAAS-T, “outperform”) to US$30 from US$28. Average: US$28.65.
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National Bank Financial analyst Rupert Merer thinks record low prices for renewable power should lead to further consolidation in the sector in 2025, emphasizing public market valuations remain low.
“As highlighted in our 2025 outlook, the sector is consolidating, largely driven by private capital,” he said. “With its Q4 results, Brookfield Renewable (BEP) highlighted a strong M&A market, anticipating an active year for capital deployment in 2025. The average implied IRR across our coverage is 11.8 per cent, while we believe some private equity buyers are satisfied with a 7.5-8.5-per-cent return. If the valuation gap remains, we believe the industry should look to find lower cost sources of capital (including asset sales) to fund growth and reward shareholders.”
“Since our last valuation update, NBF’s 12-month forecast for the Canadian 10-yr bond yield has moved from to 2.65 per cent to 2.75 per cent (and for the U.S. from 3.65 per cent to 3.90 per cent), with our IPP coverage down 11 per cent on average in the same timeframe to record low levels. We have tweaked our discount rates to reflect these changes, and raised our target Betas by up to 0.1 times to account for a higher perceived market risk with renewable IPPs. Despite lowering our targets, with discount rates moving up 50 basis points, our returns to target remain high. Our top picks on return to target are INE, NPI, BLX and PIF.”
In a report released Tuesday, Mr. Merer noted share prices in his coverage universe remain “depressed” despite rates moving lower, providing potential opportunities for investors as he sees “ample growth opportunities outside the U.S. and data markets.”
“To start 2025, renewable power infrastructure stocks have come under pressure from further negative market sentiment and uncertainty. While the Canada 10-year now trades at a 3-per-cent yield, most of our stocks are close to 5-year lows,” he said. “However, with contracted cash flows that are largely CPI-indexed, traditionally strong negative correlations to falling rates and visibility on growth, renewable IPPs should perform better.”
“Since the U.S. elections, negative sentiment has continued to weigh on renewable energy stocks. However, our coverage has little exposure to U.S. development, and growth is not a major driver of our IPP valuations (contributing just 14 per cent on average). Power demand should continue to grow despite AI concerns, so if new renewable developments are slowed, we believe power prices could go higher. For our coverage, growth opportunities in Canada are the best the industry has seen in over a decade and BLX and INE were the biggest winners in recent RFPs. In ‘25E, key developments should include details on Ontario’s LT2 RFP, Hydro-Québec’s 10+ GW wind plan, SaskPower’s solar RFP and FortisBC’s RFEOI. Catalysts in ‘25E could also come from asset sell-downs, share buybacks, rate cuts, and potential for M&A.”
Seeing “attractive” returns to his targets, Mr. Merer made these changes:
- Algonquin Power & Utilities Corp. (AQN-N/AQN-T, “outperform”) to US$6.25 (Street high) from US$6.75. The average on the Street is US$5.44.
- Boralex Inc. (BLX-T, “outperform”) to $43 from $46. Average: $40.20.
- Brookfield Renewable Partners LP (BEP-N/BEP.UN-T, “outperform”) to US$30 from US$32. Average: US$30.09.
- Innergex Renewable Energy Inc. (INE-T, “outperform”) to $16 (Street high) from $17. Average: $11.45.
- Northland Power Inc. (NPI-T, “outperform”) to $32 from $34. Average: $28.38.
- Polaris Renewable Energy Inc. (PIF-T, “outperform”) to $22 from $23. Average: $24.08.
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Desjardins Securities analyst Doug Young initiated coverage of EQB Inc. (EQB-T) with a “buy” recommendation on Tuesday, seeing it comparing “favourably in many ways” to the Big 6 domestic banks.
“Most strikingly its adjusted ROE has been in line with the Big 6 bank average over the last 10 years, and we expect it to be higher going forward despite EQB holding on to more capital,” he added.
Mr. Young thinks the Toronto-based bank can generate faster growth than its largest peers on average in four ways: adjusted earnings per share; adjusted PTPP earnings; Canadian loans and dividends.
“Additionally, we forecast an adjusted ROE above and a dividend payout ratio below the Big 6 bank average (over the medium term),” he said.
“EQB is focused on diversifying its business. Growth in fee income and in insured multi-unit residential loans should diversify its revenue sources by increasing noninterest income as a proportion of total revenue.”
The analyst also sees EQB, which is currently Canada’s seventh largest bank by assets and seventh largest trust company, possessing “a strong capital position with a big CET1 cushion.”
“The eventual transition to AIRB advanced internal rating-based risk model] will increase the capital available for deployment and enable faster organic growth,” he said “Potential inorganic opportunities will be focused on further diversifying its business and filling obvious gaps (such as wealth, but more on the advice side).”
Seeing its valuation as “interesting,” Mr. Young set a target of $130 per share, exceeding the $120.17 average on the Street.
“EQB trades at 1.4 times book value and 7.8 times our FY26 adjusted/cash EPS estimate (vs 1.6 times and 10.6 times, respectively, for the Big 6),” he said. “We believe multiples could expand should management hit its medium-term targets and credit headwinds abate.
“Our two main concerns centre around EQB’s lack of business diversification and credit.”
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While shares of Brookfield Corp. (BN-N, BN-T) “enjoyed a good run” in 2024, TD Cowen analyst Cherilyn Radbourne thinks “substantial upside optionality” remains ahead of Thursday’s release of its fourth-quarter 2024 results.
“BN’s franchise has been resilient over the past 2 years, despite headwinds that are now becoming tailwinds,” she said. “We expect DE [distributable earnings] before realizations to post strong growth in 2025, although carried interest will probably lag a bit, and step up more meaningfully in 2026/2027+.”
In a note released Tuesday, Ms. Radbourne “slightly” reduced her quarterly DE estimate to reflect a somewhat lower earnings contribution from Brookfield Asset Management (BAM-T), as well as a lower carried interest assumption. Her revised DE estimate sits at 89 US cents per share, which is 2 US cents higher than the Street’s forecast and represents high single-digit year-over-year growth.
“We have also reduced our carried interest assumption in 2025, because BN recognizes carried interest on each fund in its entirety, not on the back of individual asset sales, as many/most of its North American peers do,” she added. “We view BN’s approach as more conservative, although it does create a lag, because it is back-end-loaded. We are still expecting a big step up in realized carry, but we think that is more likely to come in 2026/2027+.
“We expect BN’s DE before realizations to re-accelerate meaningfully in 2025+, as the franchise benefits from improving industry fundamentals and company-specific factors. There is a broad-based consensus that deal velocity is picking up, which should result in higher capital returns to LPs, and in turn, a more robust fundraising environment. On a company-specific level, BN should benefit from a full year contribution from AEL, including the continued rotation of that float into higher-yielding strategies, plus international expansion of its wealth solutions/insurance business (U.K./Japan, etc.).”
Maintaining her “buy” recommendation for its shares, she raised her target by US$1 to US$75, which is currently the high on the Street. The average is US$65.75.
“After subtracting the market value of BN’s stakes in BAM/BEP/BIP/BBU, the market is implicitly assigning only $5.25/share of value against unlisted assets that have an IFRS value of $17.00/share if we take in the on-balance sheet real estate portfolio at 100 per cent of IFRS value; and/or which are worth $11.00/share if we discount the IFRS value of the on-balance-sheet real estate portfolio by 30 per cent, as we do in our target NAV,” she explained. “In addition to the unlisted investments, BN also has an accumulated but unrealized carried interest balance of $4.50/share.”
In a note released before the bell on Monday, Ms. Radbourne raised her Brookfield Asset management target to US$66 from US$64 with a “buy” rating. The average is US$57.92.
“We have trimmed our Q4/24 DE estimate but see BAM as well-positioned for industry/company-specific momentum in 2025,” she said. “We have increased our FRE multiple again to reflect a re-accelerating industry flywheel, anecdotal evidence of investors looking beyond 2026, BAM’s improved eligibility for U.S. index inclusion, and our view that BAM is better leveraged to digitalization/decarbonization vs. peers.”
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In other analyst actions:
* Desjardins Securities’ Chris Li lowered his Alimentation Couche-Tard Inc. (ATD-T) target to $84 from $87 with a “hold” rating. The average is $89.38.
“We believe near-term results will reflect ongoing macro pressures weighing on merchandise SSSG, fuel SSV and margins. Accordingly, we have lowered our estimates. Our 3Q EPS of US$0.61 is below consensus of US$0.75. Recent underperformance partly reflects expectations for a soft quarter. We expect ATD to remain range-bound pending improved macros and more clarity on Seven & i. Our positive view is based on ATD’s attractive long-term growth and strong financial position,” he said.
* National Bank’s Cameron Doerksen raised his Andlauer Healthcare Group Inc. (AND-T) target to $49 from $45 with a “sector perform” rating. The average is $48.67.
“We remain positive on AHG’s market positioning in Canada and the secular growth outlook for the company which remains positive for 2025. With low leverage and solid free cash flow, the company is also well positioned for M&A, and we expect the company could be more active in 2025. Our neutral stance on the stock is primarily driven by valuation, which we still consider to be relatively fair,” he said.
* TD Cowen’s Tim James raised his Chorus Aviation Inc. (CHR-T) target to $25 from $24, while he lowered his Transat AT Inc. (TRZ-T) target to $2 from $2.25 with “hold” ratings for both. The averages are $26.55 and $1.76, respectively.
“For CHR, we believe Q4 will continue to demonstrate predictability of Air Canada CPA and Voyageur growth,” he said. “For TRZ, financial leverage, narrow margins, engine issues, and other factors expected to limit short-term share price upside, though signs of competitive discipline and its impact (positive) on yields could provide some optimism.”
“We prefer CHR to TRZ due to its valuation, superior balance sheet, predictability, capital return program, and lack of exposure to economic and cyclical factors at this time of heightened economic uncertainty for Canada. We believe TRZ revenue could eventually offer more leverage to air travel demand strength but potential labour cost inflation in 2025 could limit impact on earnings.”
* Jefferies’ John Aiken cut his Goeasy Ltd. (GSY-T) target to $215 from $228, below the $235.22 average, with a “buy” rating.
* To reflect its agreement to be acquired by World Wide Technology for $24.50/share in cash, RBC’s Paul Treiber moved his Softchoice Corp. (SFTC-T) target to $24 from $23 with a “sector perform” rating. The average is $24.50.
“We believe the takeout is likely to proceed and we do not expect any competing proposals,” he said.
* TD Cowen’s John Mould increased his TransAlta Corp. (TA-T) target by $1 to $19 with a “buy” rating. The average is $19.18.