Inside the Market’s roundup of some of today’s key analyst actions
Stifel analyst Martin Landry recommends investors do not wait for the spin-off of Maple Leaf Foods Inc.’s (MFI-T) pork processing operations to acquire shares “given the compelling valuation and earnings growth momentum.”
“While MFI’s shares are up 21 per cent since the announcement of the spin-off on July 9, 2024, we believe there is further value to surface,” he said. “In our view, the recent share price performance has been dictated more by the financial results rather than excitement about the spin-off. There is a scenario where investors use their proceeds from the spin-off to reinvest in MFI, potentially pushing shares higher.”
In a report titled Chop it like it’s hot!, Mr. Landry initiated coverage of Maple Leaf with a “buy” recommendation, seeing it currently in the “middle of a significant earnings recovery which has seen earnings bottom in Q1/23 and financial leverage peak at 6 times TTM [trailing 12-month] EBITDA.” He also emphasized it is benefiting from “improved market conditions in its pork operations and from a consolidation of its manufacturing footprint following large CAPEX investments.”
“The spin-off of Canada Packers should improve MFI’s comparability with brand-led CPG companies,” he said. “Valuation of brand-led CPG companies, at 11 times forward EBITDA, is almost twice as high as commodity food processors, which trades at 6 times forward EBITDA. Hence, with the current earnings momentum and declining financial leverage, MFI’s valuation should re-rate closer to 10 times forward EBITDA post the spin-off. This would represent a valuation of $32.00/ share. We believe that Canada Packers could be valued at 5.5 times forward EBITDA, a valuation of $4.50 per MFI’s shares. Hence, on a sum-of-the parts basis, we see a potential value creation of $36.50 post the spin-off.”
While touting its “strong” valuation re-rating potential from the divestiture, Mr. Landry also sees the potential for Maple Leaf to more than double its earnings per share over the next four years with a free cash flow inflection point becoming apparent.
“Looking at the MFI post the spinoff, according to our four-year scenario analysis (2026-2029), we expect EPS to more than double from 2025 levels,” he said. “Our revenue assumptions reflect historical trends of mid-single digit growth. We assume a margin expansion to 14.5 per cent, up from 12.5 per cent in 2025, which is lower than the mid-point of management’s aspirational target of 14-16 per cent. We have assumed that excess cash flows are channeled towards share buybacks.
“Maple Leaf has completed a large CAPEX program of over $1-billion constructing/upgrading three facilities. Hence, the combination of lower CAPEX and higher profitability levels should translate into strong free cash flow growth for the coming years. Under our base case scenario, we believe that post the spin-off MFI could generate $1.1-billion in cumulative FCF from 2026 to 2029, providing management with flexibility to return capital to shareholders and potentially engage in bolt-on acquisitions.”
While emphasizing restoring investor confidence could take time, Mr. Landry set a target for the company’s shares of $36.50 per share. The current average on the Street is $33.36, according to LSEG data.
“In the last decade, MFI has set ambitious strategic goals, while the execution has fallen short of expectations,” he explained. “These have contributed to a degree of investor skepticism that could take time to reverse. The new CEO, Curtis Frank, appointed two years ago, brings a different voice which could help rebuild investors confidence.”
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TD Cowen analyst Craig Hutchison lowered his forecast for Ivanhoe Mines Inc. (IVN-T) after continued seismic activity at one of its anchor operations in the Democratic Republic of Congo forced it to pull its copper production and cost forecast .
“While the situation remains very fluid, we now model 2025 production of 447kt down from 555kt,“ he said. ”The seismic issues remain a risk to our forecasts and will likely weigh on the shares in the near term, but we believe most the downside is already captured in the share price.”
Despite the cut to his 2025 and 2026 expectations, Mr. Hutchison thinks the current discount to the Vancouver-based company’s net asset value presents a “buying opportunity, but investors will likely need to be patient over the near term.”
“Shares in Ivanhoe have fallen 20 per cent since first announcing the seismic issues at Kakula on May 20th,” he explained. “Shares are now trading at 0.74 times our $10.87/sh. 8-per-cent NAV and 0.70 times consensus. This is well below its five-year average of 0.9 times and peak multiple of 1.4 times NAV.
While we made fairly large cuts to our near term production estimates, the overall impact to NAV was more modest (down 4 per cent) given the long mine lives at Kamoa-Kakula combined with the significant exploration upside and growth potential across Ivanhoe’s portfolio. In our view the current share price presents a buying opportunity, although investors will likely need to be patient as the near-term outlook could be volatile."
Believing Ivanhoe has “sufficient liquidity to get through the balance of 2025, although cash could get tight later this year, subject to outcome of the eastern mine restart at Kakula,” Mr. Hutchison cut his target for its shares by $1 to $16 with a “buy” rating. The average is $20.03.
“The company is unique among its peer group, with a growing copper production profile that will see the company’s Kamoa-Kakula copper mine producing 600ktpa of copper by 2027, the excellent exploration potential within Ivanhoe’s 60-100-per-cent-owned Western Forelands property located adjacent to Kamoa-Kakula, a significant zinc project at Kipushi and a potential Tier 1 asset at the Platreef mine in South Africa,” he added.
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Following first-quarter earnings season in Canada’s energy sector, Desjardins Securities analyst Chris MacCulloch updated his oil price assumptions, raising his 2025 WTI price deck to US$62.50 per barrel (from US$60) to reflect stronger-than-expected second-quarter pricing to date but dropping his 2026 projection to $55 per barrel (from US$60) based on an “increasingly bearish outlook.”
“Our growing bearishness stems from aggressive supply additions by OPEC+ as output quotas were increased by 411 mbbl/d for three consecutive months (May, June and July), a significant acceleration from the 138 mbbl/d monthly pace previously outlined,” he said. “At face value, the acceleration is a response to continued output quota cheating by several member states. However, it is increasingly difficult to ignore the negative signalling by Saudi Arabia in the face of a global supply glut which could trigger another price war. Meanwhile, the demand outlook remains murky, due in part to global trade tensions sparked by President Trump’s ‘Liberation Day’ tariffs, although we have been encouraged by the de-escalation in rhetoric. Unfortunately, the negative impact of softer oil prices is exacerbated by our strengthening 2025 and 2026 loonie forecast of C$0.73/US$1 and C $0.74/US$1 (from C$0.72/US$1), respectively, although we have tightened our Canadian oil differential assumptions at the margins. Notably, we have also increased our 2025 and 2026 New York Harbor 3-2-1 crack spread to US$22.50/bbl (from US$20.00/bbl).”
For natural gas, Mr. MacCulloch reiterated his 2025 and 2026 NYMEX price forecast of US$4.00 per thousand cubic feet and US$4.50/mcf, respectively, “with a positive upward bias as we expect softer oil prices to limit supply growth through reduced drilling activity while LNG feedgas demand is poised to continue ramping from several new export projects.”
“By extension, we have also increased our 2026 AECO price forecast to C$4.25/mcf (from C$4.00/mcf), reflecting our expectation for further compression of NYMEX– AECO basis differentials as the first phase of LNG Canada begins commissioning this summer, which is expected to tighten western Canadian natural gas markets," he added.
In a report Tuesday before the bell, Mr. MacCulloch said his updated commodity price assumptions resulted in target price reductions for most oil-weighted producers in his coverage universe and prompted him to downgrade three stocks due to decreased projected returns.
“We retain a clear bias toward integrated and natural gas– weighted producers which offer downside protection in a softer oil price environment," he said. “We highlight SU, ARX, TPZ and SDE as top picks.”
The analyst lowered his ratings for these companies:
* Imperial Oil Ltd. (IMO-T) to “sell” from “hold” with an $89 target (unchanged). The average on the Street is $98.96.
Analyst: “IMO has been one of the best performing stocks within the Desjardins E&P coverage universe in recent years, reflecting its strong operational results, pristine balance sheet and shareholder-friendly capital allocation. However, with our more bearish oil price outlook, we believe that many of the benefits that shareholders have come to expect will no longer be attainable in a subdued commodity price environment. Based on current strip prices, we see the company generating sufficient FCF to retire only 1.5 per cent of outstanding shares through buybacks in 2026 after funding the 2.9-per-cent dividend yield, a far cry from recent years when it routinely exhausted a 5-per-cent NCIB while executing the occasional SIB, an unfortunate byproduct of softening oil prices and a lofty valuation. To the latter point, the stock now commands an eye-watering 12.5 times strip DACF (2026E) multiple, which represents a six-turn premium vs its large-cap oil sands peers, while offering a muted FCF yield of 4.1 per cent that we view as untenable given the limited support from buybacks going forward. Furthermore, we remain cautious on elevating sustaining capex and the potential sanctioning of growth projects as management continues telegraphing its pipeline of opportunities to deploy solvent technology in the oil sands, with an overriding desire to capitalize on spare market egress while it remains available.”
* Tamarack Valley Energy Ltd. (TVE-T) to “hold” from “buy” with a $5 target, down from $5.25. The average is $5.61.
Analyst: “Our downgrade is primarily commodity price-driven, reflecting our more bearish commodity price outlook through 2026 which disproportionately weighs on the company’s FCF generation relative to peers given its elevated heavy oil exposure and balance sheet leverage. Although TVE is well-positioned to continue funding its 3.4-per-cent dividend yield with an 80-per-cent capex-adjusted payout in 2H25 and 2026 based on current strip prices, the company’s return of capital framework is currently allocating 40 per cent of FCF toward debt reduction, providing limited scope for share buybacks in the absence of further asset dispositions which may be forthcoming. Going forward, we acknowledge recent operational and capital cost improvements stemming from waterflood development in the Clearwater ahead of the planned investor day on June 25, which will likely include an updated multi-year plan. However, we ultimately believe that supportive corporate developments will be overshadowed by macro headwinds pushing investors to rotate exposure toward larger-cap and natural gas–weighted producers."
* Whitecap Resources Inc. (WCP-T) to “hold” from “buy” with a $10 target, down from $11.50. The average is $12.91.
Analyst: “To be clear, we remain supportive of the recent combination with Veren Inc. given the natural operational fit between the two companies and the potential synergies on offer, which we continue to view as understated. However, our updated commodity price deck has materially weighed on our outlook, particularly with respect to the dividend; it now appears increasingly stretched with a 2026 capex-adjusted payout ratio of 110 per cent based on current strip prices, even assuming a more conservative $2.4-billion capital program next year vs the $2.6-billion level previously telegraphed by management. By extension, we see limited opportunity for meaningful debt reduction, let alone share buybacks, in the absence of further asset dispositions which may be forthcoming. Bottom line, we view a rightsizing of the 8.4-per-cent dividend yield as a painful but necessary step for WCP in a softer commodity price environment, which would ultimately improve corporate sustainability.”
For large-cap stocks, Mr. MacCulloch’s other target changes are:
- Arc Resources Ltd. (ARX-T, “buy”) to $36 from $35.50. Average: $33.94.
- Canadian Natural Resources Ltd. (CNQ-T, “buy”) to $50 from $51. Average: $51.39.
- Cenovus Energy Inc. (CVE-T, “buy”) to $25 from $23.50. Average: $25.89.
- Suncor Energy Inc. (SU-T, “buy”) to $60 from $62. Average: $59.58.
- Tourmaline Oil Corp. (TOU-T, “hold”) to $74 from $75. Average: $76.41.
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Desjardins Securities analyst Kyle Stanley moved his recommendation for InterRent Real Estate Investment Trust (IIP.UN-T) to “hold” from “buy” in response to its deal to be acquired by Carriage Hill Properties, seeing a superior third-party offer as unlikely but predicting “a potential sweetener could be in store.”
“The $13.55 bid (approximately 4.8-per-cent cap rate, $300,000/door, 8-per-cent discount to our NAV) sits at the low end of what we previously communicated as a fair valuation range of $13.50–15.00,“ he said in a report titled “Closing time, turn all of the lights on”. ”An evaluation of recent private market transaction activity across IIP’s core markets yielded cap rates in the 4.6–4.8-per-cent range and a weighted average per door valuation of $325,000. While the days of hefty portfolio premiums were a product of zero interest rate policy, which are behind us, a valuation closer to our $14.80 NAVPU estimate would offer compensation for IIP’s sector-leading operating platform, in our view”
“While we do not believe many investors had IIP’s units returning 36 per cent through 1H25 on their bingo card, feedback thus far has indicated a desire for more. The go-shop period could unearth additional suitors; however, in the event none emerge, potentially as a result of the agreement structure highlighted above, we get the sense that additional compensation given the quality of IIP’s operating platform and the timing in the apartment market cycle might be required.”
Mr. Stanley reiterated his $14 target for InterRent shares. The average is currently $13.52.
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National Bank Financial analyst Vishal Shreedhar expects to see “solid top line momentum” when Groupe Dynamite Inc. (GRGD-T) reports its first-quarter 2025 financial results on June 17.
“GRGD indicated that sssg [same-store sales growth] was approximately 6 per cent over the first 9 weeks of Q1/F25 and the company is still seeing traffic growth while continuing to raise prices in line with historical levels,” he said. “Our analysis of industry trends suggests solid momentum in the U.S., with particularly strong data in April.
“Apparel inflation remains tepid, notwithstanding potential tariff impacts. We believe apparel retailers will begin to pass through pricing, at least in part, as they sell through existing inventory. We understand that GRGD has already begun to increase AUR (GRGD is not a price follower). We expect GRGD to outperform the broader apparel retail industry. In Canada, clothing and clothing accessories retailers’ sales in Canada (Statistics Canada; data until March 2025) grew 10.3 per cent year-over-year (from 7.8 per cent last quarter). In the U.S., retail sales: women’s clothing stores (Bureau of Labor Statistics; data until March 2025) was flattish year-over-year (from down 1.5 per cent last quarter).”
Mr. Shreehar is now expecting the Montreal-based firm behind the Garage and Dynamite retailers to report earnings per share of 22 cents, a penny above the consensus forecast on the Street but a penny below the result of a year ago. He attributes that 6.4-per-cent decline to “SG&A deleverage (incremental public company costs among other factors), higher D&A and higher lease expense, partly offset by double-digit sales growth (high-single digit sssg and net new store openings in the last 12 months) and slight gross margin expansion (higher pricing mostly offset by new U.S. store openings in more expensive locations and rent renewals at higher rates).”
“We maintain a favourable disposition on GRGD,” he adde. “Investment in GRGD is differentiated by strong financial metrics, with an EBITDA margin and ROIC that is amongst the highest in our coverage universe (F2024 EBITDA margin of 31.6 per cent and ROIC of 47.4 per cent). As GRGD establishes a successful track record, we expect upward pressure on the valuation multiple over time.”
Mr. Shreedhar reiterated an “outperform” recommendation and $23 target for Groupe Dynamite shares. The average on the Street is $21.20.
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In other analyst actions:
* BMO’s John Gibson downgraded Parkland Corp. (PKI-T) to “market perform” from “outperform” and dropped his target to $42 from $44. The average on the Street is $45.
“Texas-based Sunoco LP (SUN-NYSE; not covered) has offered to acquire Parkland for US$9 billion (optional mix of cash and shares). In our view, SUN’s offer represents the best near-term outcome for PKI shareholders, particularly given ongoing shareholder overhang and recent operational challenges. Additionally, we view the pro forma yield as being attractive (5 per cent). Post update, we are decreasing our target price to $42 ($44 prior), which reflects the equity offer price based on SUN’s current trading price. We are also downgrading PKI shares to Market Perform (from Outperform),” said Mr. Gibson
* Piper Sandler’s Anna Andreeva raised her Lululemon Athletica Inc. (LULU-Q) target to US$315 from US$280 with a “neutral” rating. The average on the Street is US$337.48.
* Desjardins Securities’ Jerome Dubreuil bumped his target for shares of Québecor Inc. (QBR.B-T) to $44 from $43. with a “buy” rating. The average is $41.15.
“QBR’s management has recently shared its aspirational wireless market share objective at investor events,” said Mr. Dubreuil. “We present here some calculations to address the question of ‘when will QBR be satisfied by its market share?” Many factors will influence QBR’s pricing approach in the future, but management being more satisfied with its market share outside of Québec, which we think is still several years away, is one of the key considerations. We believe QBR has a long runway of profitable growth.”
* In response to its US$40-million deal to acquire DermapenWorld, an Australian provider of microneedling devices and dermatological cosmetics, Acumen Capital’s Jim Byrne raised his Richards Packaging Income Fund (RPI.UN-T) target to $40 from $38 with a “buy” rating. He’s currently the lone analyst covering the Toronto-based fund.
“We like the deal as the company expands its healthcare portfolio and expands its manufacturing revenue base. The gross margins and EBITDA margins for Dermapen are accretive and we anticipate strong free cash flow in the coming quarters,” said Mr. Byrne.
* Resuming coverage following its recent financing, Mr. Byrne raised his K-Bro Linen Inc. (KBL-T) target to $54 from $52 with a “buy” rating. The average is $48.67.
“We believe the shares are attractively valued at current levels given the long-term nature of the company’s contracts and stable cash flows. We like the Star acquisition for the company as it expands their presence into England, adds to their healthcare exposure, and enhances their growth opportunities,” he said.