Inside the Market’s roundup of some of today’s key analyst actions
Following first-quarter 2025 earnings season for Canadian banks, TD Cowen’s Mario Mendonca thinks valuations “no longer looks rich,” however he cautions “multiples are not sufficiently low to step in front of the downside presented by tariffs.”
“Q1/25 was an unusual quarter, with near records on several metrics: positive earnings surprises (13 per cent); PTPP [pre-tax, pre-provision] growth (24 per cent) and operating leverage (5.2 per cent),” he said. “Much of the strength was driven by 40-per-cent growth in trading revenue, but we also took note of the 17-per-cent NII [net interest invome] growth which reflected stronger NIM, FX, and acquisitions. Despite the better-than-expected results, stocks generally traded down.
“PCLs [provisions for credit losses] were up 30 per cent year-over-year, led by a higher impaired PCLs ratio, which increased to 43 basis points. The banks all reported higher consumer PCLs and delinquencies, and several reported noticeably higher business losses, with BMO being the exception. Performing-loan PCLs were low at 6 basis points, but the focus is on what higher tariffs will do to Q2/25E performing reserves and impaired loan PCLs going into 2026.”
In a research report released Tuesday, the equity analyst said the quarter brought “strong” results compared to the Street’s expectations, driven by trading revenue, impressive year-over-year net interest margin expansion and “near-record” operating leverage. He continues to expect PTPP earnings growth to “remain strong” through the year, but nots “that is not the driving force behind bank stocks.”
“Underlying PTPP growth looks good heading deeper into 2025, but we expect the tariff narrative to dampen enthusiasm,” said Mr. Mendonca. “We expect PTPP growth to remain strong in 2025 supported by high single-digit growth in NII and fee income, and solidly positive operating leverage. We expect performing loan reserves to increase to 15 basis points in Q2/25 as the banks explicitly reflect the downside risk to the economy from tariffs or the threat of tariffs. We expect consumer impaired PCLs to continue to increase in line with the trends in card, auto and other personal loan delinquencies. The big questions are: 1) how will business impaired losses play out, and 2) does sector valuation reflect the downside risk?”
While emphasizing the notable change in valuations, he thinks multiples are “not low enough to step in front of the downside presented by a spike in business PCLs if economic growth falters.”
“At 10.7 times 2026 estimated EPS and an ERP of 6.8 per cent; we characterize valuation as average to slightly below average; but not enough to sway our cautious sector call,” he saidd. “Our approach is unchanged ... We continue to believe that when the range of outcomes is as wide as it stands today (we don’t know what the new U.S. administration will do, or how Canada will react), bank stocks (a close proxy to economic conditions) will be hard-pressed to deliver strong absolute and relative performance.”
Mr. Mendonca made a series of target price adjustments to shares of the Big 6 banks, excluding his own firm. They are:
* Bank of Montreal (BMO-T, “hold”) to $152 from $145. The average on the Street is $151.87, according to LSEG data.
Analyst: “We expect losses to be driven by corporate and commercial customers. We expect BMO’s PCLs to check back, but not fall below the group average. We believe the sharp correction in BMO stock price is highly leveraged to the expectation that BMO’s PCLs will fall well below the peer group average. In the context of a surprisingly high relative P/E, we are not comfortable getting constructive. We value BMO at a group average target P/E of 11.5 times and continue to rate the stock HOLD.”
* Canadian Imperial Bank of Commerce (CM-T, “buy”) to $99 from $100. Average: $95.03.
Analyst: “CIBC delivered another solid quarter of strong PTPP growth despite elevated U.S. spending. Recent results showcased good growth in market-sensitive, higher ROE business and the company reported solid credit metrics as well as credit guidance. Although the company lowered its ROE target to 15 per cent or more (16 per cent plus previously) in Q4/24, management has outlined various drivers to arrive at the target ROE including share repurchases. CIBC repurchased 5mm shares in Q4/24 and 3.5 million in Q1/25 through its NCIB initiated in Q3/24. We view CIBC’s current ROE favourably relative to several peers and we believe the bank’s business mix should support an ROE 100-150 basis points higher in the medium term.”
* National Bank of Canada (NA-T, “hold”) to $131 from $135. Average: $136.36.
Analyst: “The bank’s larger capital markets business and fast-growing Cambodian business do not support a premium valuation, in our view. While these two segments have contributed to solid results reported between 2021-Q3/24, Q4/24 and Q1/25 results point to softer loan growth and challenging credit conditions at ABA. We do acknowledge, however, that NA no longer trades at a premium to the group P/E”
* Royal Bank of Canada (RY-T, “hold”) to $178 from $180. Average: $181.39.
Analyst: “RY reported a good quarter with solid PTPP and NII growth, however, one very large credit in the utilities sector moved to impaired status and highlighted, what we view, as lapse in risk management. While lower interest rates are a headwind to NIM, RY’s structural deposit advantages and shifts in mix should continue to support stable to slightly higher NIM going into 2025E. We also like RY’s overweight in U.S. capital markets, a theme on display this quarter. Although RY’s announced share repurchase program could be used to lift its ROE, we do not expect material buybacks at current valuation levels, and we do not believe RY needs to use buybacks to support ROE expansion (Q1/25 ROE: 17.2 per cent). While our HOLD rating continues to reflect RY’s premium valuation, we do note that RY’s weak relative performance has returned the stock back to its long-term average premium of 10 per cent”
He kept a $81 target for shares of Bank of Nova Scotia (BNS-T, “buy”), which remains above the $79.32 average.
“In our view, BNS’ greater exposure to wholesale funding, LatAm exposure, and actions to protect NIM as interest rates declined are the structural reasons why the bank’s NIM performance lagged its peers materially until recently,” said Mr. Mendonca. “In the near term, we expect BNS’ quarter-over-quarter NIM performance to at least match its peers and likely outpace the group, particularly if interest rates continue to fall.
“BNS is the deep discount stock in the group reflecting weak fundamental performance in part associated with the material business transformation management is executing (hurting loan growth) and, more recently, the threat of tariffs on Mexico. Our BUY rating reflects a long-term positive outlook on the success of the transformation (better growth in 2026E) and the deep valuation discount.”
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Scotia Capital analyst John Zamparo lowered his forecast for Alimentation Couche-Tard Inc. (ATD-T) on “continued consumer softness,” while uncertainty over its bid to acquire Seven & i Holdings Co. lingers after reports the Japanese retailer is set to reject its latest offer.
“How this ends is any investor’s guess,” he said. “Seven’s May AGM retains some relevance for a timeline, but we place little value on this as well. For the moment, a potential equity overhang seems to weigh on ATD, despite the likely significant EPS accretion. We reiterate our view that deal or no deal, ATD has options available for capital deployment (M&A elsewhere, or a large buyback plan). We continue to like ATD here: 16 times P/E is a standard deviation below typical levels.”
Mr. Zamparo emphasized the presence of other options in the retail space, noting: “We estimate it takes 150+ stores to add 1-per-cent EPS accretion. Eight other operators with more than 1K stores exist in America, while Europe presents opportunities as well. With no deals, we estimate ATD can repurchase 15 per cent of its shares in the next three years if it increased leverage to 2.5 times (currently 2.1 times).”
Meanwhile, he reduce his merchandise same-store sales and same-store volume estimates to “reflect weakened consumer demand, elevated competition, and adverse weather across the U.S. during the quarter.”
“Comments from several large retailers, both within the c-store space (MUSA, ARKO) and outside it (WMT, MCD) point to pressure on consumers, particularly in the low-income cohort,” he said. “We do not expect ATD’s fresh food initiatives will be sufficient to offset this, though some positive drivers in FQ3 could be the broader nicotine category and alcohol sales in Canada.”
Maintaining a “sector outperform” rating, Mr. Zamparo trimmed his target for Couche-Tard shares to $85 from $91. The average is $88.68.
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Ahead of the April 3 release of its fourth-quarter fiscal 2025 results, RBC Dominion Securities analyst Irene Nattel reiterated her view that Dollarama Inc. (DOL-T) is “the best positioned Canadian retailer for pinched consumer budgets and the value-seeking spending backdrop that likely continues into 2025.”
“Although DOL is not immune to broader consumer spending pullback, in our view the stock remains highly attractive despite recent valuation expansion given excellent visibility and sustainability of the growth runway, further Dollarcity optionality and perennial return of capital to shareholders through both dividend growth and share buyback,” she added.
Ms. Nattel is currently projecting earnings per share for the quarter of $1.32, a gain of 15 per cent year-over-year and 2 cents ahead of the consensus forecast on the Street. Her same-store sales growth projection is 3.75 per cent, down from 8.7 per cent during the same period a year ago,
“Our forecasts for FQ4 are predicated on DOL achieving SSS [same-store sales] toward the high end of the annual guidance range 3.5-4.5 per cent, with F26/27 at the mid-high point, in line with F25E and normalizing from double-digit increases F23/24,” said Ms. Nattel. “We anticipate annual dividend increase 5 per cent and F26 guidance in conjunction with Q4 results.”
“DOL deep value positioning should sustain DOL as destination of choice for everyday household and seasonal items. Having said that, we continue to expect constrained consumer spending and modest SSS pressure relative to H1, offset slightly by shift in timing that saw two more days of Halloween sales shift to Q4, and generally supportive weather leading into both Halloween and Christmas.”
The analyst said her analysis indicates that “(modestly) rising unemployment and higher cost of living, notably debt service costs, should continue to drive consumer value-seeking behaviour into CY2025.”
While she made modest adjustments to forecasts, Ms. Nattel kept an “outperform” rating and $159 target for Dollarama shares. The average is $146.73.
“Our analysis indicates that in the increasingly uncertain macro backdrop, investors are placing larger premium on defensive, organic, quality growth names,” she said.
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National Bank Financial analyst Rupert Merer thinks Northland Power Inc. (NPI-T) is “is on track to restoring investor confidence, with execution on construction, a new experienced and disciplined CEO and commitment to its dividend.”
He said a recent investor meeting with new CEO Christine Healy brought “confidence in the vision for the company” with growth ahead.
“Operational excellence is core to NPI’s success, and the focus remains on delivering growth through NPI’s three in-construction assets on time and on budget,” Mr. Merer said. “However, with 3.2 GW in operating capacity today, there’s also more to be done to unlock value from the existing portfolio. For example, NPI has an opportunity near term with recontracting and refinancing its Nordsee One offshore wind facility (PPA expiring 2027) with the liquid German corporate PPA market.
“Many investors would like to see a clearer growth path beyond 2027E. NPI has an 12.4 GW development pipeline, offering growth potential across various geographies and technologies. Healy plans to drive internal competition for capital, to focus on the projects with the best returns. NPI is asset agnostic to its growth plans but highlights that natural gas generation holds a unique opportunity for NPI in Canada.”
Mr. Merer said he’s “comfortable” with Northland’s liquidity, believing its balance sheet should be able to support operations and fun long-term growth without a cut to its dividend.
“A step change in EBITDA and FCF reinforces that [dividend] support (approximately $600-million/yr and $200-million/yr, respectively, between the three in-construction projects by ‘27E),” he said. “Future sell-downs could come, with Healy showing a preference for JVs, noting the technical, regulatory and financial value they can bring to NPI in some markets.”
While he updated his estimates to reflect recent guidance update with its fourth-quarter results and to push his forecasts out to 2027 to capture the benefit of the completion of NPI’s two offshore wind JVs and its battery project in Ontario, Mr. Merer maintained an “outperform” rating and Street-high $32 target. The average target is $28.04.
“With shares trading at a 12.7-per-cent implied IRR, we believe shares represent an attractive opportunity for investors. NPI will host an investor day in late fall where we should get more details on its strategy for the next wave of growth. Our $32/sh target is based on long-term DCF with an 8.5-per-cent discount rate,” he concluded.
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In a report titled Saying all the right things, now time to execute, RBC Dominion Securities analyst Andrew Wong said he’s “encouraged” by Mosaic Co.’s (MOS-N) plans to improve operations and realize value from the company’s assets, hoping to hear details at its investor day event on March 18.
“We think Mosaic has started to lay out a plan to better realize value from the company’s assets, focused on — 1) evaluating all assets for long-term strategic fit and return on capital while monetizing non-core assets, with management indicating potential to monetize a portion of the Ma’aden ownership before the 3-year lock-up expires; 2) reducing any excess costs and capex spend, with SG&A expected down in 2025 and plans to reduce sustaining capex in the next several years; and 3) ensuring better operations, especially in the phosphates segment and Fertilizantes, which have seen challenged production and higher costs in recent years,” he said.
While calling its first-quarter phosphate production guidance “slightly disappointing.” Mr. Wong thinks operations could see better results later in the year, saying he’s “cautiously optimistic given the heavy focus on improving reliability across the phosphate system, but are wary of weather-related risks.”
“We expect potash markets to remain stable, with slightly tighter near-term S&D supporting current prices at $300/tonne globally,” he added. “However, tariffs could add near-term volatility if implemented and any lifting of Belarusian sanctions could lower cost curve support (although many unknowns and would take time). We think phosphate prices will likely remain well-above historical levels given tight market conditions, but demand remains limited by challenged affordability and a gradual increase in supply presents downside.”
Also believing cash flow should improve with better production and capex cuts, Mr. Wong increased his target for Mosaic shares by US$1 to US$29, reiterating a “sector perform” rating.
“We see potential for significant unlocked value that could help shares re-rate higher if these plans can be executed well and phosphate prices remain elevated for longer than expected,” he said. “For now, with shares currently trading at 9-10-per-cent FCF yield, we think Mosaic is fairly valued with modest upside.”
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In other analyst actions:
* Ahead of its March 19 earnings release, Canaccord Genuity’s raised his AutoCanada Inc. (ACQ-T) target to $17 from $15 with a “hold” rating. The average is $19.96.
“We continue to take a cautious approach on the near-term outlook for ACQ given the current macroeconomic environment and the company’s weakening balance sheet,” he said.
* Seeing “a more diversified business,” CIBC World Markets’ Scott Fletcher initiated coverage of Colliers International Group Inc. (CIGI-Q, CIGI-T) with an “outperformer” rating and US$160 target. The average on the Street is US$169.14.
“While the timing and extent of a commercial real estate (CRE) recovery remain somewhat uncertain, CIGI’s earnings profile has shifted materially in recent years and we believe there is valuation upside given reduced transactional exposure. CIGI has an established 10‑year track record of effective capital allocation and compounding earnings and cash flows, and we believe a more diversified business mix will support continued growth,” he said.
* CIBC’s Hamir Patel cut his target for Doman Building Materials Group Ltd. (DBM-T) to $9.50 from $11.50, below the $10.75 average, with an “outperformer” rating.
“We are reiterating our Outperformer rating on Doman but moderating our price target to $9.50 (from $11.50), reflecting reduced estimates and a 0.25 times decrease in our 2026E EV/EBITDA multiple to 7.5 times (given increased uncertainty on the extent the SYP/SPF price spread may narrow). We see DBM as well positioned to benefit from healthy medium- to long-term demand for treated lumber across North America due to elevated home equity levels and an ageing housing stock,” said Mr. Patel.
* Desjardins Securities’ Brent Stadler reduced his EverGen Infrastructure Corp. (EVGN-X) target to $3 from $4 with a “buy” rating. The average is $3.75.
“EVGN indicated it was able to renegotiate higher tip fees at PCR [Pacific Coast Renewables] to offset increased costs, which we expect to result in a net benefit; it also expects to receive final regulatory approval to begin the PCR RNG expansion in 2H25,” he said. “Meanwhile, EVGN has agreed to mutually terminate its PSO contract, which we have reflected in our model along with tempering some other assumptions. Due to inbound interest from multiple parties, EVGN has formed a special committee to review potential strategic transactions.”
* Calling it “a uniquely positioned high-growth play leveraging digital transformation in the Middle East,” Canaccord Genuity’s Aravinda Galappatthige initiated coverage of NTG Clarity Networks Inc. (NCI-X) with a “buy” rating and $3.25 target. The average is $4.11.
“NTG is a digital transformation services company that primarily provides outsourced software development to the Middle Eastern market, predominately the Kingdom of Saudi Arabia (KSA),” he said. “After years of laying groundwork in the region, the company’s efforts are paying off, with impressive revenue growth in recent years and exponential growth in contract sizes. Overall revenues have risen nearly 5x from 2021-2024 with recent quarters posting near 100-per-cent year-over-year growth. In parallel, the backlog of unbilled services has risen from under $20-million 9-12 months ago, to $105-million presently.”
* Desjardins Securities’ Doug Young raised his Power Corporation of Canada (POW-T) target to $53 from $49 with a “buy” rating. The average is $52.86.
“Our rating on POW (Buy–Average Risk) is unchanged,” he said. “The company has executed on various initiatives since the POW/PWF reorganization (in 2020): (1) achieving 100 per cent of targeted expense reductions; (2) launching new funds and raising third-party capital; (3) simplifying its corporate structure; (4) realizing value on certain core investments; and (5) realizing value in non-core investments. Further actions to surface value are a possibility. It has $600-million in excess cash, and it has levers it can pull to increase this by (1) monetizing standalone businesses (depending on market conditions); and (2) harvesting seed capital investments in various funds by selling into secondary offerings. It deployed $120-milllion to buy back 3.1 milion shares in 3Q24, $123-million to buy back 2.7 milion shares in 4Q24 and so far in 1Q25 it has purchased an additional 1.6 million shares for $71-million. The focus for deployment remains buybacks (it renewed its NCIB on February 27, 2025 for an additional 20 million shares). Lastly, we expect a 6-per-cent dividend increase with 4Q24 results.”