Inside the Market’s roundup of some of today’s key analyst actions
Desjardins Securities analyst Gary Ho sees TerraVest Industries Inc.’s (TVK-T) US$546-million acquisition of EnTrans International as “transformative” and puts “an under-levered balance sheet to work and adds a market leader in tank trailers at attractive multiples.”
On Monday, Terravest announced the close of the deal for the Tennessee-based market leader in tank trailers, heavy haul trailers and LPG transportation equipment in the United States. With additional manufacturing operations in Minnesota, Texas, Mexico, and Thailand, EnTrans posted more than US$500-million in trailing 12-month revenue and US$78-million in EBITDA after rent (14.6-per-cent margin).
In summarizing the deal, Mr. Ho said: “Positives. (1) Puts its under-levered balance sheet to work—we believe this is what investors had hoped for since the equity raise last year and adds to TVK’s M&A track record. (2) Acquires a market leader with 45-per-cent market share. (3) Attractive 7 times purchase multiple vs the more than 10 times at which TVK trades; with imminent synergies, we estimate this should drop to 6.3 times EBITDA. Near-term, with revenue/operational synergies and potential new contract wins, the multiple could fall to TVK’s historical 4–6 times acquisition range. (4) Acquires a motivated EnTrans management team while adding an organic growth angle.”
Also noting the risks stemming from U.S. tariffs and integration of EnTrans, Mr. Ho raised his target for Terraimminent unless its acquires another business near-term. He emphasized healthy free cash flow should help in deleveraging.”
Also noting the risks stemming from U.S. tariffs and integration of EnTrans, Mr. Ho raised his target for TerraVest shares to $150 from $125, keeping a “buy” rating. The average on the Street is $148.50, according to LSEG data.
“Our TVK investment thesis is predicated on: (1) its long runway of M&A growth potential; (2) its history of extracting value from procurement synergies; and (3) a management team keenly focused on FCF,” he concluded.
Elsewhere, other analysts making target changes include:
* National Bank’s Zachary Evershed to $134 from $126 with a “sector perform” rating.
“We believe that the integration opportunity set is both broad and substantial, with management having room to run their usual procurement and network utilization playbook as well as to attack further growth opportunities,” he said. “Synergies will primarily stem from three sources: 1) significant added volume to leverage purchasing power in the procurement of steel and other parts alone adding a 10-15-per-cent lift to EBITDA, 2) production flexing as Entrans’ spare capacity can be utilized to convert long lead times across the base business to high incremental margin sales, and 3) penetration into adjacent end markets and existing dealer & customer channels for further consolidation and cross-selling, respectively.”
* Scotia’s Jonathan Goldman to $140 from $126 with a “sector outperform” rating.
“We estimate the transaction is 52-per-cent accretive to our 2026 EBITDA and 9-per-cent accretive to EPS (but 43-per-cent accretive to our FCFPS before working capital as we believe maintenance capex is far lower than depreciation similar to the rest of TerraVest’s business),” said Mr. Goldman. “More importantly, we see upside to the deal as headline metrics – and our estimates – do not include potential synergies from procurement, insourcing, and commercial initiatives. Synergies are a large part of the value creation playbook with management aiming to take a turn off the initial purchase multiple (the track record is much better than that). Further, like the AEP and Highland Tank transactions, EnTrans provides access to new niches and relatively faster growing end-markets.”
* Canaccord Genuity’s Yuri Lynk to $170 from $132 with a “buy” rating.
“With a transaction value of US$546-million, in addition to a US$46-million earn-out, this is the company’s largest acquisition by a factor of five. We view the acquisition favourably given it is immediately accretive to EPS, has compelling synergy upside, opens additional potential growth pathways, diversifies TerraVest’s manufacturing base into Mexico, potentially mitigating tariff exposure, and positions the company as the largest manufacturer of tank trailers in North America,” said Mr. Lynk.
=====
Following weaker-than-expected fourth-quarter 2024 financial results, Ballard Power Systems Inc. (BLDP-Q, BLDP-T) is “sticking to its defensive positioning amidst hydrogen market turbulence,” said Citi analyst Vikram Bagri in a research note titled Focusing on the Controllables Amid Challenging Fundamentals.
On March 13, the Burnaby, B.C.-based fuel cell maker reported quarterly revenue of US$24.5-million, falling short of both Mr. Bagri’s US$31.9-million estimate and the consensus projection of US$28.7-million. With lower-than-anticipated expenses offset by weaker gross margins, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at a loss of US$36-million, down from a loss of US$44.1-million a year ago, which pleased investors, but still falling short of forecasts (losses of US$32-million an US$35.7-milllion, respectively).
“Cost reductions to preserve cash are starting to take effect with total Opex down 5 per cent year-over-year in the quarter,” he said. “FY25 guidance for both Opex and Capex came in below consensus with cost reduction initiatives expected to be achieved this year. However, headwinds including weakening financial position of certain customers, worsening financing environment, and policy uncertainty are unlikely to abate this year. FID [final investment decision] on TX Gigafactory remains planned for 2026, pending demand signals.
“While current valuation is below cash on B/S, we see potential for additional downside to estimates given uncertainty facing the H2 fuel cell industry. We model a 0.9 times conversion of the NTM [next 12-month] order book, equating to $92-million of revenues this year vs. consensus at $97-million.”
After making modest adjustments to his forecast to reflect the company’s guidance and commentary on the outlook for 2025, Mr. Bagri said he expects a similar revenue seasonality as in 2024 and “tempered” his margin forecast to reflect a slower revenue growth outlook.
That led him to trim his target for Ballard’s Nasdaq-listed shares to US$1.50 from US$2. The average is US$1.95.
“We rate BLDP shares Neutral/High Risk,” he said. “We like BLDP’s strategy of targeting the truck and bus market in Europe, California, and China. However, we think growth and profitability are likely back-end loaded. Furthermore, the company is reliant on the build-out of hydrogen delivery infrastructure.”
=====
After a first-quarter beat driven by favourable fuel prices, Desjardins Securities analyst Benoit Poirier sees Transat A.T. Inc. (TRZ-T) maintaining its trajectory “despite tariff hostility.”
“While TRZ has not been directly impacted by increased Canada-U.S. hostility given its limited exposure to the U.S. end market, we remain conservative with our estimates given some of the potential indirect effects of the volatility — a depreciating loonie (negatively impacts fuel, leasing and airport costs) and weaker consumer confidence, which could impact future travel demand,” he said. “Analyzing the weak 1Q results of some US airlines, it appears that the macro uncertainty has already begun to impact the industry.”
On March 13, the Montreal-based leisure travel company reported quarterly revenue of $830-million, up 5.6 per cent year-over-year above both Mr. Poirier’s $801-million estimate and the consensus of $814-million. Adjusted EBITDA of $20-million was also stronger than anticipated ($5-million and $9-million, respectively).
With yields turning positive for the first time in four quarters as it “began to lap easier comps while also benefiting from more disciplined capacity deployment,” Mr. Poirier emphasized “TRZ’s debt conundrum gets a breather.”
“In February, TRZ announced that it had agreed with the Canadian government to extend the maturity of its $312-million unsecured LEEFF [Large Employer Emergency Financing Facility] financing to April 2027 from April 2026,” he said. “Concurrently, the maturity of the $50-million revolving credit facility and $41-million LEEFF secured credit facility were also extended to November 2026 from February 2026. While this does not solve the company’s debt problem, we view it as positive as it gives management more breathing room to find a long-term viable solution while also securing commitments ahead of a potential change in government.”
After reducing his 2025 and 2026 earnings expectations, the analyst trimmed his Street-high target for Transat shares to $2 from $2.25. The average is $1.54.
“We prefer to remain on the sidelines as we await additional deleveraging as well as execution of the strategic plan,” he said.
=====
National Bank Financial analyst Zachary Evershed warns Adentra Inc. (ADEN-T) is likely to suffer through some short-term volatility as a “chilly winter tempers Q1 organic growth,” however he emphasized the Langley, B.C.-based distributor of architectural building products has very limited exposure to the impact of U.S. tariffs.
“Management notes January and February activity levels have yielded an organic decline of 6 per cent, primarily as a result of lower volumes (down approximately 4.5 per cent excluding harsh winter weather in January) with headwinds in the form of stubborn housing affordability issues (elevated mortgage rates, constrained supply),” he said. “Given month-to-date trends, partially offset by month/month volume improvements since December and stable pricing, we temper our Q1e organic growth to negative 4.9 per cent (was 1.3 per cent). Accordingly, we tweak our profitability estimates downwards to account for operating deleverage.
“Management indicated that tariff exposure was minimal, with only 8 per cent of product purchases exposed to tariffs. With ADEN’s unique sourcing advantage, supplier connections in 30+ countries and a cost pass through model, management expects minimal direct tariff impacts.”
On March 13, Adentra reported fourth-quarter 2024 revenues increased 3.1 per cent to $530.8-million, falling below Mr. Evershed’s $552.7-million forecast and the Street’s $543.2-million estimate. Adjusted EBITDA of $42.2-million on 7.9-per-cent margins also missed expectations ($44.2-million and 8 per cent an $44.1-million and 8.1 per cent, respectively). That led to an adjusted earnings miss (50 cents versus 58 cents an 57 cents).
“Given February-to-date organic growth trending near negative 6 per cent, but with month-over-month improvements in volumes since December supporting a positive trend, we temper our Q1e organic growth to negative 4.9 per cent (was 1.3 per cent),” the analyst said. “Accordingly, we tweak our profitability estimates downwards to account for the operating deleverage.”
“This pulls our full-year organic growth forecast down to 0.2 per cent (was 2.5 per cent), aligning with management noting that calibrating channel partner commentary and micro level customer conversations together translates to a nearly flat outlook for growth in 2025. A similar 2025 outlook was echoed by the two largest home hardware retailers in North America, Home Depot (NYSE: HD; Not Rated), calling for 1-per-cent same-store sales growth, and Lowe’s (NYSE: LOW; Not Rated), calling for SSSG of 0-1 per cent.”
Expecting management to “remain adept at managing gross margins,” Mr. Evershed said his investment thesis for Adentra did not change despite the weaker-than-anticipated results.
“Though the current operating environment is hardly constructive, given knock-on effects of the rapidly evolving trade war layered onto housing affordability issues leaving a chill on home sales and future construction activity, we remain bullish on the long-term prospects for the company, given the steady beat of household formation vs. arguably unsustainably low levels of home construction exhibited over the past decade,” he said. “We remain confident in management’s ability to navigate turbulent times via internal initiatives to capture share and maintain margins, performing accretive M&A, or rationally allocating capital (i.e., NCIB back in focus).”
Reiterating an “outperform” rating for its shares, he dropped his target to $53 from $60 following negative estimate revisions to his organic growth expectations. The average is $47.38.
“While the short-term remains clouded by elevated interest rates and volatile geopolitics, we remain bullish on ADEN’s long-term prospects, and with an entry point at 4.8 times EV/EBITDA and a 13.8-per-cent FCF yield on 2026e, we see an attractive opportunity for patient investors,” he added.
=====
“Building a bridge out of a trough year,” Mattr Corp.’s (MATR-T) new facilities “provide tariff optionality,” according to Mr. Evershed.
“Although currently 100-per-cent CUSMA compliant, MATR estimates 30 per cent of 2024 revenue (ex-discontinued ops) was generated by finished goods crossing the border and raw materials crossing at least one NA border represented 45 per cent of COGS,” he said in a separate report. “Should tariffs be implemented and remain for the long haul, the company would look to balance production between Canada and the U.S., making use of available floor space in its new facilities which were designed with expansion in mind, with current equipment occupying 50 per cent of available floor space. Additionally, management indicated willingness and ability to pass on price hikes to customers as well, noting that competitors similarly participate in a global supply chain and would need to take action as well.”
After the bell on March 13, the Toronto-based materials technology company reported fourth-quarter 2024 revenue of $207.8-million, up 8.5 per cent year-over-year and above both Mr. Evershed’s $198.2-million estimate and the consensus of $193.5-million. Adjusted EBITDA of $12.7-million and earnings per share of a 2-cent loss also topped expectations ($9-million and a 6-cent loss and $8.9-million and a 7-cent loss, respectively).
“Adding colour to 2025 guidance calling for year-over-year growth across sales, Adj. EBITDA and Adj. EPS, management guided to a 10-per-cent top-line growth target for all business units, excluding Flexpipe, whose growth outlook remains flat (taking share in a 10-per-cent declining market), which by our estimates would equate to 8-per-cent consolidated organic growth,” the analyst said. “We remain conservative on this front but nudge our growth forecast up to 5.8 per cent in 2025 (was 5 per cent). Recent macro setbacks occurring simultaneously as the company rounded out its capex cycle saw a deep trough in 2024, but as the new facilities ramp up to serve niche and critical infrastructure end markets and AmerCable is brought into the fold, the sizable step up in 2025 does not seem unreasonable.”
Maintaining an “outperform” recommendation for Mattr shares, Mr. Evershed reduced his target to $19 from $21. The average is $15.81.
“While we do not explicitly model tariff impacts given day-to-day volatility, we feel it is appropriate to reflect the risk in the more exposed segment, and therefore cut our valuation multiple for Composite Technologies in our sum-of-parts to 5 times (was 6 times), seeing our target fall to $19 (was $21), equivalent to a 6.0-per-cent FCF yield and replicated in our DCF using a 14.2-per-cent discount rate,” he concluded. “Despite cross-chop introduced by geopolitics and the company’s exposure to cross-border shipments, we reiterate our Outperform rating as the long-term thesis remains intact and valuation remains attractive.”
Elsewhere, RBC’s Arthur Nagorny lowered his target to $14 from $17, keeping an “outperform” rating.
“Q4 checked many of the right boxes, with results in line to ahead of consensus, the 2025 outlook calling for strong growth in the base business (+ contribution from the AmerCable acquisition ), and management outlining that all the company’s products are USMCA compliant (i.e., not currently subject to tariffs). Looking ahead, Mattr is one step closer to completing its facility transitions, and we see a path to progressively improving results in the base business in 2025 & beyond,” said Mr. Nagorny.
=====
In other analyst actions:
* Seeing a “new twist on a tried-and-tested treatment paradigm,” H.C. Wainwright’s Raghuram Selvaraju initiated coverage of Alpha Cognition Inc. (ACOG-Q), a Vancouver-based biopharmaceutical company focused on developing novel therapies for debilitating neurodegenerative disorders, with a “buy” rating and US$20 target.
““Alpha Cognition’s lead product, ZUNVEYL (benzgalantamine), is an optimized prodrug of galantamine — a well-known, long-marketed acetyl cholinesterase inhibitor originally launched in the U.S. by Johnson & Johnson (JNJ; not rated) in 2001 under the trade name Reminyl (later changed to Razadyne in 2005),” he said. “ZUNVEYL was approved by the FDA under the 505(b)(2) pathway in late July 2024. Alpha Cognition is now in the process of launching the drug into the U.S. long-term care (LTC) market. Cholinesterase inhibitors (ChEIs) are considered a mainstay of AD therapy, having been deployed for over three decades, but they are solely symptomatic treatments that cannot arrest or reverse cognitive decline. Nevertheless, given their well-known mechanism of action and clear short- to medium-term impact on cognition, ChEIs remain the most widely used anti-AD drugs. However, the existing marketed ChEIs—galantamine, rivastigmine (originally launched under the trade name Exelon) and donepezil (originally launched as Aricept) — are all associated with significant incidence of gastrointestinal (GI) side effects (i.e., nausea, vomiting and diarrhea) that typically occurs in 30-40 per cent of patients given these drugs. Existing marketed ChEIs are also associated with high incidence of sleep disturbances—poor sleep quality and insomnia are known to potentiate AD symptoms. Benzgalantamine has been shown to eliminate sleep disturbances, while also carrying a very low rate of GI side effects (only 1-2 per cent). We expect the drug to retain all the efficacy of the native molecule while significantly improving the safety and tolerability profile. In our view, this should enable Alpha Cognition to generate $540-million in peak annual sales for ZUNVEYL in the U.S. alone.”
“Stock price evolution appears to have been driven by transition from Canadian to U.S. listing and belies long-term promise, in our view. Alpha Cognition’s stock has been range-bound for the past several months (down 3.4 per cent year-to-date), while the benchmark XBI index is down roughly 2 per cent year-to-date. From our vantage point, the fact that Alpha Cognition’s share price does not seem to have increased in anticipation of the ZUNVEYL U.S. launch reflects the fact that the company is comparatively under-followed and unknown among U.S. institutional investors because Alpha Cognition was originally listed on the Canadian Securities Exchange (CSE) and voluntarily delisted from that exchange in December 2024 after securing its NASDAQ listing. We believe that Alpha Cognition’s modest sub-$50-million enterprise value belies the company’s considerable long-term promise and expect ZUNVEYL uptake and market penetration metrics to drive favorable sentiment going forward.”
* TD Cowen’s Tim James trimmed his target for AirBoss of America Corp. (BOS-T) by $1 to $7 with a “buy” rating. The average is $5.25.
“Defence showing signs of long anticipated momentum, but industrial end-market softness weighing on legacy rubber compounding and anti-vibration revenue. Tariff-related uncertainty risks further delaying industrial recovery,” said Mr. James.
* JP Morgan’s John Royall cut his Alimentation Couche-Tard Inc. (ATD-T) target to $86 from $89 with an “overweight” rating. The average on the Street is $88.10.
* Mr. Royall trimmed his Street-high target for Parkland Corp. (PKI-T) to $55 from $58 with an “overweight” rating. The average is $47.36.
* TD Cowen’s Michael Tupholme trimmed his Bird Construction Inc. (BDT-T) target to $33 from $36 with a “buy” rating. The average is $33.38.
“Overall, we see Q4/24′s release as supportive of our constructive stance on BDT-T,” he said. “Reported adj. EBITDA was 6 per cent ahead of consensus. Revenue growth was strong, and margins showed healthy year-over-year improvement, while management’s outlook commentary continues to be favourable. Further, BDT appears to be well-positioned to manage uncertainties created by recent tariff/non-tariff measures in N.A.”
* Canaccord Genuity’s Aravinda Galappatthige raised his Illumin Holdings Inc. (ILLM-T) target to $3.25 from $3 with a “buy” rating. The average is $3.40.
“ILLM’s Q4 highlighted a meaningful turnaround following its robust Q3, with revenue growth coming in at 34.1 per cent, taking the top line to $49.6-million, well ahead of our $40.7-million estimate,” he said. “Adj. EBITDA was up 41.6 per cent to $3.9-million, ahead of our $2.8-million estimate. The net cash position as of Q4/24 stood at $55.9-million ($1.09/sh).
“Our high level takeaway from the quarter is that recent initiatives of management, in particular around refocusing on customer needs and targeting sales and marketing efforts towards high-end customers, are yielding results. A central highlight was the strong turnaround in Managed Services which grew 28%, reflective of management’s decision to reprioritize this service in recognition of strong customer demand. With SelfService continuing to ramp up, we believe this could set the stage for a new phase of high growth for illumin. The company is also working on a number of enhancements to the product, including new features, with a view to increase the value add to customers and set apart its offering from peers.
* CIBC’s Todd Coupland cut his Quarterhill Inc. (QTRH-T) target to $2 from $2.30, under the $2.17 average, with an “outperformer” rating.
“Quarterhill’s Q4 results came in slightly below FactSet estimates for both revenues and adjusted EBITDA. The company attributed this miss to the timing of revenues received from ongoing projects, which can experience some fluctuations. These trends are contrasted by the company’s improving backlog, which reached $495-million in Q4 (vs. $475-million in Q3) and provides visibility into ~80% of its 2025 targeted revenue,” said Mr. Coupland.