Inside the Market’s roundup of some of today’s key analyst actions
Following the release of stronger-than-anticipated first-quarter 2025 financial results, TD Cowen analyst Mario Mendonca thinks Bank of Montreal’s (BMO-T) valuation now reflects a “rosy picture for credit, loan growth and U.S. generally.”
“BMO beat estimates on very strong trading revenue and lower PCLs [provisions for credit losses],” he said. “BMO’s greater exposure to capital markets, U.S. exposure, & strong capital levels (supporting buybacks) continue to drive strong stock price performance. Our more muted outlook reflects relative valuation (approaching Royal Bank of Canada levels), stubbornly high GIL [gross impaired loans] formations, and what we view as unrealistic ROE [return on equity] guidance for the U.S. and total bank.”
Shares of BMO rose 4.7 per cent on Tuesday after it reported adjusted earnings per share for the quarter of $3.04, an increase of 18 per cent year-over-year and exceeding both Mr. Mendonca’s $2.54 estimate and the consensus forecast of $2.41 driven by lower-than-expected PCLs. Pre-tax, pre-provision (PTPP) earnings jumped 31 per cent, which was 12 per cent higher than the analyst aniticipated due to stronger trading revenue & fee income.
“PCLs declined abruptly, and came in better than our estimate and management’s outlook on the Q4 call,” he said. “While management continued to guide to high 40 basis points impaired PCLs in 2025, this quarter would suggest PCLs are recovering faster than expected. U.S. commercial and capital markets PCLs showed significant improvement, while domestic unsecured consumer credit indicators continued to soften (a theme across the group). The bank also offered that growth in the credit watchlist has slowed.”
“While management was clear that Q1/25 trading revenue was unusually strong, management did express confidence that the investments in capital markets, position the bank to capture the upside as trading/IB opportunities present themselves going forward.”
Maintaining a “hold” recommendation for BMO shares, Mr. Mendonca raised his target to $152 from $145. The average target on the Street is $151, according to LSEG data.
“BMO has precisely what the market favors at this time: a) improving credit outlook, b) U.S. exposure (in the context of tariffs), c) strong capital levels (supporting buybacks) and d) overweight capital markets,” he said. “Our more muted view on the stock reflects relative valuation (approaching RY’s valuation) and our view that BMO will not be immune to effects of tariffs on Canadian and U.S. loan growth and PCLs. In our view, BMO presents material downside risk if any one of the above themes on the stock is called into question over the next few quarters.”
Elsewhere, other analysts making target adjustments include:
* RBC’s Darko Mihelic to $163 from $161 with an “outperform” rating.
“BMO’s higher than expected results this quarter were mainly due to strength in revenues and lower than anticipated PCLs,” he said. “Both performing and impaired PCLs were lower than we expected, as BMO did not include the impact of tariffs this quarter. We reflect higher PCLs in Canada P&C and subdued loan growth tempered by higher NIMs in the retail segments. We think BMO’s PCLs may be higher than previously anticipated but still benefiting from lower commercial/corporate loan losses.”
* National Bank’s Gabriel Dechaine to $161 from $153 with an “outperform” rating.
“BMO stated that capital deployment decisions by individuals and businesses are being hampered by trade uncertainty on both sides of the border,” said Mr. Dechaine. “However, management also said that conditions are relatively more optimistic in the U.S., which we believe has led to greater optimism vis-à-vis the eventual delivery of US$450-500mln of anticipated revenue synergies from the Bank of the West acquisition. Synergies and operating performance are important components for BMO to deliver on its 12-per-cent ROE objective in the U.S. (and 15-per-cent consolidated), along with normalized credit performance and balance sheet optimization. The relative divergence of U.S. versus Canadian growth outlooks will be an important driver of BMO’s stock performance, in addition to improvement in credit performance.”
* Desjardins Securities’ Doug Young to $155 from $147 with a “hold” rating.
“Adjusted pre-tax, pre-provision (PTPP) earnings were 16 per cent above our estimate; while all operating divisions beat, capital markets, wealth and corporate contributed 56 per cent of the outperformance,” said Mr. Young. “The impaired PCL rate improvement was encouraging; however, similar to the other Canadian banks, the overhang from tariffs will likely linger.”
“We maintain our Hold rating, although we are warming up to the name.”
* Canaccord Genuity’s Matthew Lee to $165 from $154 with a “buy” rating.
“BMO reported a significant Q1 earnings beat, combining better-than-expected credit with strong revenue growth across all its business lines. While we expect that there could still be some lumpiness in PCLs, the bank’s performance this quarter reinforces our expectation of a normalization of credit, particularly in the second half of the year. On the revenue side, our forecasts are increased across the board, but particularly for Canadian P&C (stronger loan growth) and Wealth (higher AUM). Overall, the net impact of our changes increases our EPS forecasted growth to 18 per cent for F25 and 16 per cent for F26, including the benefit of continued share buybacks,” said Mr. Lee.
* CIBC’s Paul Holden to $156 from $154 with an “outperformer” rating.
“BMO posted an excellent quarter supporting our Outperformer rating. We expect continued EPS momentum based on lower PCLs, U.S. NIM expansion, elevated trading activity, and realization of expense efficiencies. BMO is trading at an 11.4 times P/E (2026 consensus), an 8-per-cent premium to the group average. While BMO does not typically trade at this type of premium, we think this is simply a reflection of potential EPS upside,” said Mr. Hoden.
* Jefferies’ John Aiken to $155 from $140 with a “hold” rating.
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While he summarized Bank of Nova Scotia’s (BNS-T) as “solid,” RBC Dominion Securities analyst Darko Mihelic made modest reductions to his forecast due to credit concerns.
”BNS had stronger than expected results reflecting strength in revenues and performing PCLs versus our estimates,” he said. “The large performing PCL build due to tariff risk did not happen this quarter as we expected, and we now expect this to occur in Q2/25. We also expect to see an increase in impaired PCLs through 2025 and we raise our impaired PCL ratio assumptions in both retail segments. We expect capital markets strength to recede somewhat and we assume lower loan growth (in Canada and IB).”
On Tuesday, Scotia reported adjusted earnings per share of $1.76, exceeding Mr. Mihelic’s estimate of $1.49 as well as the consensus of $1.65. The beat was attributed to higher-than-forecasted total revenues and lower-than-expected stage 1 and 2 (performing) provisions for credit losses (PCLs).
“We expected banks would try to ‘get ahead’ of potential credit losses that may arise from the impact of tariffs by at least recognizing significant uncertainty in the environment and using a management overlay to record higher stage 2 PCLs,” said Mr. Mihelic.”BNS did not take this option in Q1/25, and we therefore expect this may be accomplished in Q2/25, though we will refine our estimate for Q2/25 stage 2 PCLs in due course.”
“We are also increasing underlying PCLs (stage 3) modestly, but we suspect that here too, stage 3 PCLs may become a moving target. Segmented results were stronger than we expected in Canadian Banking, International Banking, and Global Banking and Markets (GBM). Better than expected Canadian Banking earnings were mainly driven by lower than expected performing PCLs and in International Banking, non-interest revenue was $142 million higher than our forecast and performing PCLs were lower than we anticipated as well. Strength in GBM versus our forecast was mostly due to higher than expected revenues; trading revenues increased QoQ across all products.”
With that view, Mr. Mihelic trimmed his core EPS estimates to $6.77 (was $6.94) for 2025 and $7.75 (was $7.90) for 2026 to reflect reduced expectations in Canadian and International Banking.
“In Canadian and International Banking, we increase our stage 3 (impaired) PCL ratio assumptions for the next 4 quarters as we believe we have seen signs of weakness in consumer loans, and we lower our net interest margin (NIM) assumptions and assume the loan book to remain relatively the same size for the next 2 quarters. Our reduced earnings forecasts for Canadian and International Banking more than offset higher expectations in GBM despite our expectation for a quarter-over-quarter decline in revenues.”
Maintaining a “sector perform” rating for Scotia shares, the analyst lowered his target to $81 from $83. The average on the Street is $79.44.
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National Bank Financial analyst Rupert Merer sees Innergex Renewable Energy Inc.’s (INE-T) definitive agreement to be acquired by Caisse de dépôt et placement du Québec (CDPQ) for $13.75 per share as “a good outcome” for shareholders, resulting in a fair price with the probability of a better offer appearing to be slim.
Accordingly, he moved his rating for the Longueuil, Que.-based company to “sector perform” from “outperform” previously.
“While we believe that INE could see interest from other investors over the next 65 days, we believe a better deal is unlikely,” said Mr. Merer. “The deal is subject to a non-solicitation agreement and CDPQ has the right to match any other offers. The deal has a termination fee of $83.9-million and given the importance of the Quebec market to INE’s current operations and future growth, the asset is likely worth more in the hands of CDPQ. The new owners would lower INE’s cost of capital and support aggressive growth plans across Canada, backed by success in recent RFPs.
“The transaction is subject to 2/3 approval by INE’s common shareholders (approximately 27-per-cent declared support) and other customary closing conditions, and is expected to close in Q4′25. We believe that a shareholder vote should come by May 1st. Shareholders could see up to three more dividends (9 cents per quarter). We do not believe that regulatory approvals should be a challenge, but would include the Competition Bureau Canada, FERC (U.S.) and potentially some approvals in Chile and France (where INE operates).”
Mr. Merer moved his target for Innergex shares to $13.75 from $16 to fall in line with the offer price. The average target is $11.53.
“The target implies an 8.75-per-cent equity discount rate, which is above our previous discount at 8 per cent ($16 per share),” he explained. “Although INE could be worth more, we believe the offer would be hard to ignore given recent trading activity well below $8/sh. With a 4.7-per-cent return to target, we are moving to Sector Perform.”
Elsewhere, others making rating revisions include:
* Raymond James’ Daniel Magder to “market perform” from “outperform” with a $13.75 target, up from $11.50.
“Given what we believe to be an attractive transaction multiple of 11.7 times relative to INE’s pre-announcement trading multiple of 9.5 times, we expect this transaction to close in 2H25 and therefore believe INE shareholders are best served tendering shares,” said Mr. Magder. “As such, we are moving to a Market Perform rating and adjusting our target price to the announced purchase price of $13.75/sh. With INE’s Canadian peers trading at or near historical lows, and increased M&A activity in the sector (including Brookfield’s recently announced acquisition of National Grid’s U.S. renewable arm), we believe there is the possibility of additional M&A in the sector.”
* Desjardins Securities’ Brent Stadler to “tender” from “buy” with a $13.75 target, down from $14.50.
“We estimate INE is being taken out at an attractive 11.5 times EV/EBITDA multiple, a 58-per-cent premium over the prior close; this provides a compelling value proposition for current shareholders and better reflects the fair value of INE’s portfolio of assets. In our view, this is another datapoint highlighting that the valuation disconnect between public and private markets is simply too wide. We believe a competing offer is unlikely and we therefore recommend investors Tender their shares,” said Mr. Stadler.
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National Bank Financial analyst Gabriel Dechaine applauded EQB Inc.’s (EQB-T) credit trend improvement following a first-quarter earnings beat, calling it “a positive surprise.”
After the bell on Tuesday, the Toronto-based bank reported adjusted earnings per share of $2.98, exceeding both Mr. Dechaine’s $2.84 estimate and the consensus forecast of $2.74. The beat was attributed to lower-than-expected provisions for credit losses and taxes.
“Trucking sector losses decline, Total adjusted PCLs were 30 per cent below forecast, reflecting a 33-per-cent quarter-over-quarter drop in Stage 3 provisions in the equipment finance loan book (and a 40-per-cent quarter-over-quarter drop in impaired balances in this portfolio),” the analyst said. “We note that losses in this portfolio have been an overhang on EQB stock since the end of fiscal 2023, thus the shift is a positive surprise.”
“Mortgage growth outlook will be a focus item Total personal loans under management were flat sequentially, despite a 4-per-cent quarter-over-quarter drop in the insured mortgage portfolio. We view this decline as a deliberate part of EBQ’s strategy to preserve margin. Meanwhile, uninsured alternative mortgages that represent nearly half of total loans under management were up 1 per cent quarter-over-quarter. We believe one of the biggest questions facing EQB will be how tariff uncertainty has affected its mortgage growth outlook.”
Increasing his 2025 forecasts to reflect lower PCLs offset by higher expenses, Mr. Dechaine raised his target for EQB shares to $117 from $109, reiterating an “outperform” recommendation. The average target is $119.33.
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National Bank’s Maxim Sytchev thought the conference call with analysts that followed Stantec Inc.’s (STN-T) quarterly earnings release on Tuesday displayed “confident body language” from the Edmonton-based engineering firm’s management, resulting in view that “visibility is good and tariffs are likely a non-event while M&A optionality is solid.”
“Protectionist political rhetoric is not weighing on the outlook,” he added. “Stantec’s overall revenue exposure to U.S. Federal funding is in the 5-per-cent range, while exposure to the more scrutinized programs such as USAID is minimal. Organic growth in the U.S. backlog was almost up 10 per cent year-over-year, and momentum remains broad-based. IIJA funding continues to flow almost entirely without interruption, and delays/cancellations have been minimal (unsurprisingly, EV-related). The administration’s drive towards deregulation could prove to be an incremental positive with the pace of project approvals speeding up, while exposure to sectors most likely to be affected by tariffs is also minimal.
“Water business continues to benefit from thematic tailwinds; Energy & Resources segment is rebounding. The UK’s AMP 8 program is set to officially begin in April and the £104-billion capital program represents a massive 75-per-cent jump over AMP 7. Stantec has already been awarded early-phase consulting/design work and top line momentum is expected to ramp up significantly. The Energy & Resources segment also saw a rebound as new projects ramped up and comps were more manageable and the positive momentum is expected to continue for the remainder of the year, split evenly between opportunities in the power and mining space. The Buildings sector is also seeing broad-based momentum in healthcare, civic, education, data centres and semis.”
Shares of Stantec jumped 10 per cent on Tuesday after it reported quarterly revenue of $1.478-billion, up 19 per cent year-over-year and above the $1.426-billion estimate on the Street. Adjusted earnings per share of $1.11 was 11 cents higher than the consensus forecast, driven by double-digit organic revenue growth in the United States. The company also announced a 7-per-cent dividend increase
In a research note earlier in the day, Mr. Sytchev said he thought the company’s shares had further “room to run.”
“Sentiment on the group has been dampened as investors are trying to assess whether DOGE-like initiatives and generally slower macro growth could be impacting the space after several years of robust growth,” he said. “Recall that STN’s exposure to U.S. Federal is only 5 per cent and the company’s guide certainly implies there is more than enough growth to go around. With an under-levered capital structure of only 1.2 times net debt to EBITDA and a relatively long time since a sizable deal was executed, we believe STN is closer than others to capital deployment, if the right opportunity presents itself. STN is our preferred vehicle to play the consulting space at the moment given attractive valuation and solid execution. Shares are up 9 per cent thus far [Tuesday] and we see further upside ahead given strong visibility for revenue and earnings growth as well as an opportunity for significant multiple expansion (shares trade at a 6 times turn P/E discount to WSP on 2026 estimates).”
With modest adjustments to his forecast to reflect the company’s formal guidance, Mr. Sytchev raised his target for its shares to $143 from $140, reaffirming an “outperform” rating. The average on the Street is $140.
“Given the consistency of results and prescriptive three-year targets outlined at the company’s Investor Day in December 2023, our 2025 forecasts were already directionally aligned with management’s 2025 guidance earlier [Tuesday] morning,” he explained. “As such, our adjustments largely involve fine-tuning to reflect the most recent quarter and are not structural in nature. That said, given the under-levered balance sheet, we believe M&A could provide incremental upside later in the year.”
Elsewhere, Raymond James’ Frederic Bastien upgraded Stantec to “outperform” from “market perform” with a $140 target, up from $130.
“Our decision to downgrade STN on valuation last August played out well,” said Mr. Bastien. “In the six-plus months that followed, Stantec’s 4-per-cent advance has materially lagged the respective gains of 20 per cent and 35 percent posted by its Canadian peers, WSP Global and AtkinsRéalis (even after yesterday’s impressive 10-per-cent bounce). But with organic revenue growth reaccelerating, the setup for M&A particularly favourable, and the new U.S. administration’s priorities unlikely to upset the industry’s strong secular tailwinds, it is time for us to support STN again. We are moving back to an Outperform recommendation.”
Others making target adjustments include:
* Desjardins Securities’ Benoit Poirier to $148 from $138 with a “buy” rating.
“Despite [Tuesday’s] run-up in the shares, we view STN as poised to outperform its peers over the short term in light of its now best-in-industry balance sheet (following recent deals at WSP and ATRL), increased confidence in its insulation from U.S. budget cuts, highly visible growth posture for 2025 (secured by a strong backlog of work over the next 13 months) and underperformance/valuation catch-up (shares up only 6.0 per cent over the last 12 months vs 21.1 per cent for WSP, 63.6 per cent for ATRL and 17.7 per cent for the S&P/TSX),” he said.
* RBC’s Sabahat Khan to $138 from $128 with an “outperform” rating.
“Stantec reported Q4 results and 2025 guidance ahead of consensus. Overall, the 2025 guide points to another year of good organic growth + margin improvement (with potential for upside from future M&A) and puts the company well on track to achieve the targets laid out in the 2024-2026 Strategic Plan. The guide also helps alleviate some of the recent investor concerns related to Stantec’s U.S. exposure (given headlines related to potential federal spending cuts),” said Mr. Khan.
* TD Cowen’s Michael Tupholme to $145 from $139 with a “buy” rating.
“While Q4/24 EBITDA was only slightly above consensus and 2025 EBITDA guidance was essentially in line, both Q4/24 adj. EPS and 2025 adj. EPS guidance were notably above consensus. Further, STN’s Q4/24 results exhibited solid growth, backlog reached a new record, and 2025 guidance implies another strong year. Overall, we see the results and guidance as supportive of our constructive stance on STN,” said Mr. Tupholme.
* Scotia’s Jonathan Goldman to $141 from $129 with a “sector outperform” rating.
“Nothing like a 9-per-cent organic print (10 per cent in the U.S.) on equally elevated comps to dispel any concerns around an industry slowdown and skew growth expectations above the midpoint for 2025,” said Mr. Goldman. “We had been fielding lots of inbounds about slower end-market activity and potential federal funding cuts. Stantec in particular was subject to higher scrutiny given U.S. public exposure (despite only 5 per cent of U.S. revenues coming from federal) and moderating growth rates in 3Q. The reacceleration of U.S. organic growth in conjunction with the 7-per-cent sequential backlog build (in a seasonally weak q) indicates continued momentum and that generational infra needs remain the overarching driver of the outlook.”
* Stifel’s Ian Gillies to $144 from $135 with a “buy” rating.
“One of the simple investment philosophies we have for the engineering firms in our coverage is to own the stock that has the longest passage of time since a sizable acquisition. Acquisitions for engineering firms tend to create positive share price reactions and relative outperformance. Of the three engineering firms in our coverage, Stantec appears to be next up to execute M&A since WSP acquired Power in the fall and AtkinsRealis acquired David Evans in February 2025. On top of the M&A setup, we continue to like the fundamentals (7.0 per cent plus organic growth and margin expansion), in combination with a reasonable 2026E P/E of 20.8 times (peer group 17.0 times) given M&A prospects,” said Mr. Gillies.
* ATB Capital Markets’ Chris Murray to $135 from $125 with a “sector perform” rating.
“STN delivered better-than-expected results and remains positioned to capitalize on strong demand conditions across its core markets and potential M&A activity given moderate leverage levels. However, we continue to see current valuations adequately reflecting the Company’s growth outlook, keeping us neutral on the shares,” said Mr. Murray.
* Canaccord Genuity’s Yuri Lynk to $138 from $135 with a “buy” rating.
“By combining an organic growth and margin improvement focus with a disciplined acquisition program, Stantec has become one of better compounders in our industrials coverage. With initial 2025 adjusted EPS growth guidance between 16 per cent and 19 per cent (after putting up 20-per-cent growth in 2024 and 17 per cent in 2023), Stantec is one of the fastest growing engineering consultants in North America. Keep in mind, acquisitions could be incremental to these numbers with management noting its pipeline is very strong. Despite these positives, Stantec’s valuation is not overly demanding,” said Mr. Lynk.
* CIBC’s Krista Friesen to $139 from $134 with an “outperformer” rating.
“With strong momentum in its Water business, and ample capacity for M&A, we believe STN is well-positioned for continued growth in 2025. The company’s record backlog, expanding AMP8 opportunities, and robust balance sheet provide a solid foundation to execute on its strategic plan. While federal policy shifts present some uncertainty, STN’s diversified revenue streams and state-level infrastructure demand mitigate risk,” she said.
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Desjardins Securities analyst Chris Li thinks Aritzia Inc. (ATZ-T) is “well-positioned” to achieve 40-per-cent earnings per share growth in fiscal 2026 and 20 per cent in 2027, pointing to “mid-single-digit industry growth, increasing brand awareness, new store openings, store expansions/repositions and outsized e-commerce growth.”
In a research report released Wednesday titled Stiching together a fashionable future, he initiated coverage of the Vancouver-based clothing retailer with a “buy” recommendation, seeing its premium valuation “supported by its industry-leading growth expectations, a strong balance sheet and increasing FCF, with the possibility of increased share buybacks in the future.”
“While ATZ is well-known in Canada, we believe there is significant upside to brand awareness in the U.S.,” said Mr. Li. “ATZ provides a compelling investment opportunity supported by attractive industry growth and market share gains through new store openings, store expansions/repositions, strong e-commerce growth (improved website, new mobile app expected end of FY26), continued product innovation, investments in digital marketing and an experienced management team.
“Key share price catalysts include solid execution on elevated expectations after two consecutive beat-and-raise quarters, better visibility on reaching management’s FY27 targets, further visibility on continued growth in the US as well as international, and increasing brand awareness. ATZ has a healthy balance sheet with strong FCF conversion; an increase in share buybacks would also be viewed positively.”
Seeing it “well-positioned to achieve industry-leading EPS growth, supported by a strong balance sheet.” mr. Li set a target of $82 per share. The average target on the Street is $75.70.
“The biggest risks are inflationary pressures from tariffs causing a prolonged macroeconomic downturn and a pullback in consumer discretionary spending. While there are a lot of unknowns on future trade developments, negative consumer sentiment and uncertainty will likely put pressure on demand for the overall fashion industry. Stress-testing our SSSG and margin assumptions, we derive FY26 EPS which is 20 per cent below our base case, implying a downside valuation of $48,” he concluded.
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In other analyst actions:
* In response to Tuesday’s announcement of the sale of a 50-per-cent stake in its Malian mines to UAE-based Ambrosia Investment Holdings, CIBC’s Anita Soni downgraded Allied Gold Corp. (AAUC-T) to “neutral” from “outperformer” with a $5.30 target, down from $5.90. The average is $7.29.
“Year to date, AAUC has been one of the top performers in the sector, up 30 per cent,” she said. “With the revised price target, there is insufficient return to target; thus, we are downgrading AAUC from Outperformer to Neutral.”
“AAUC remains undervalued relative to peers. At spot prices, AAUC trades at 3.5 times 2025 estimated CFPS and 0.3 times NAVPS, below peers at 6.8 times and 0.6 times. We believe the market is temporarily more cautious than normal around geopolitical risk, in light of the uncertainty around U.S. tariffs and the resulting global macro-economic impact. We could see renewed interest in West African stocks with added clarity on the macro-economic backdrop in H2/25.”
* After adjusting his forecast ahead of its March 6 earnings release, National Bank’s Zachary Evershed bumped his Dexterra Group Inc. (DXT-T) target to $11.50 from $11, exceeding the $10.41 average, with an “outperform” rating.
“We reiterate our OP rating as with a clean balance sheet sitting at approximately 1 times Net Debt/EBITDA and mid-teens FCF yields, the company can comfortably accommodate both full NCIB utilization and opportunistic M&A in niche markets to strengthen the IFM [Integrated Facility Management] segment,” he said. “DXT remains our top pick for 2025.”
* Desjardins Securities’ Gary Ho initiated coverage of Diversified Royalty Corp. (DIV-T) with a “buy” rating and $3.75 target. The average is $4.06.
“DIV is in the business of acquiring a diversified portfolio of trademarks and collecting top-line royalties from high-quality businesses and franchisors,” he said. “We view this as a unique model which enables DIV to steadily increase revenue and distributable cash, the franchisors to monetize their business without forgoing equity, and DIV shareholders to reap a growing dividend stream (attractive 9-per-cent yield currently). Given a potential 42-per-cent return to our $3.75 target, we are initiating coverage with a Buy.”
He added: “DIV’s business model is simple — it buys trademarks, collects royalties and pays out distributable cash in the form of dividends to shareholders. Its portfolio currently consists of eight royalty partners, with Mr. Lube being the largest contributor (45 per cent of revenue). Mr. Lube is Canada’s largest quick lube brand and a leading automotive service provider in terms of locations, range of services and brand recognition. We are positive on DIV for several reasons: (1) high-quality franchise revenue stream; (2) business model enables partners to have their cake and eat it too; and (3) accretive acquisitions pave the way for growing dividends and distributable cash.”
* National Bank’s Matt Kornack moved his target for units of InterRent REIT (IIP.UN-T) to $12.25 from $12 with an “outperform” rating. Other changes include: Canaccord Genuity’s Mark Rothschild to $12.50 from $12 with a “buy” rating, Raymond James’ Brad Sturges to $12.50 from $13 with an “outperform” rating, Scotia’s Mario Saric to $12.25 from $12.50 with a “sector outperform” rating, RBC’s Jimmy Shan to $14.50 from $15 with an “outperform” rating and CIBC’s Dean Wilkinson to $13.50 from $15 with an “outperformer” rating. The average is $12.84.
“Despite trading weakness going into the quarter, IIP’s results were solid,” said Mr. Kornack. “Operating stats were fairly resilient with a peer-leading increase to occupancy sequentially, although new leasing spreads have been moderating (slotting where we would expect, behind KMP and CAP but ahead of BEI). The depth of the renter pool remains intact, although price point is an area of contention. IIP expects to outperform its broader markets given relative portfolio quality and locations. That said, capex spend was historically low which makes the operating performance that much more impressive, and MTM remains high, although the mix of tenants turning has changed. On capital allocation, the REIT will be a net seller in 2025 ($200-250 mln) and active on the buyback.”
* Seeing “muted” expectations to start fiscal 2025 after in-line fourth-quarter 2024 results, Stifel’s Martin Landry lowered his Leon’s Furniture Ltd. (LNF-T) target to $27 from $30, keeping a “hold” rating, while RBC’s Ryland Conrad trimmed his target to $31 from $32 with an “outperform” rating. The average is $33.57.
“Leon’s reported Q4/24 results, which were in-line with our expectations,” Mr. Landry said. “EPS came in at $0.74, up 2 per cent year-over-year, and in-line with our expectations of $0.73 and consensus estimates of $0.72. Same-store-sales decreased by 3.2 per cent year-over-year, the worst performance of the last six quarters. The strike at Canada Post prevented the company from distributing its flyers ahead of Black Friday or Boxing Day, two important events for the industry. The macro-economic outlook does not appear favorable short-term as consumer confidence is impacted by concerns over a trade war with the United States. In addition, we expect that the unfavorable weather in Ontario and Quebec recently will have an impact on traffic patterns in Q1/25. Hence, we have decreased our 2025 EPS estimates by 4 per cent to reflect these macro headwind.”
* Mr. Landry also dropped his target for Spin Master Corp. (TOY-T) to $40 from $45 with a “buy” rating. Other changes include: Canaccord Genuity’s Luke Hannan to $35 from $44 with a “buy” rating, RBC’s Drew McReynolds to $41 from $43 with an “outperform” rating, TD Cowen’s Brian Morrison to $38 from $46 with a “buy” rating and National Bank’s Adam Shine to $32 from $35 with a “sector perform” rating. The average is $38.29.
“Spin Master reported Q4/24 results which were below expectations with EPS of $0.55, lower than our expectations of $0.60 and consensus estimates of $0.68,” said Mr. Landry. “The company introduced a 2025 EBITDA guidance which was lower than expectations calling for EBITDA to reach $487 million (mid point) lower than our previous expectations of $511 million and consensus of $509 million. Investors sent TOY’s shares down 10 per cent on the day in reaction to lower than expected guidance. In addition, we believe that comments on elevated CAPEX for the next three years, limited appetite to accelerate share buybacks and potential M&A activity did not please investors. However, TOY’s 2025 revenue guidance up 4-6 per cent is better than Mattel (up 2-3 per cent) and Hasbro (up slightly), suggesting potential market share gains if management achieves its guidance. "
* National Bank’s Vishal Shreedhar raised his Maple Leaf Foods Inc. (MFI-T) target to $27 from $26 with an “outperform” rating. Other changes include: RBC’s Irene Nattel to $30 from $29 with an “outperform” rating and CIBC’s Mark Petrie to $32 from $30 with an “outperformer” rating. The average is $31.
“Our upside/downside review suggests opportunity, although we recognize that MFI’s restructuring/track record underscore uncertainty,” said Mr. Shreedhar. “Optimistically, assuming normalized multiples and the midpoint of MFI’s 14-16-per-cent EBITDA percentage target by 2028, we calculate a stock price of $38 today (more than 50-per-cent upside). Conversely, assuming the 5-year historical low valuation and a 2028 EBITDA margin rate equal to LTM [last 12 month] Q4/24, we calculate a stock price of $17 today (30-per-cent downside).
“MFI’s spin-off is expected in H2/25 (circular May 2025). We are open-minded on this split — in our view the most material opportunity for MFI is to demonstrate consistent progress against achieving its targets vs. engaging in non-cash generating activities.”
* National Bank’s Don DeMarco reduced his Pan American Silver Corp. (PAAS-N, PAAS-T) target to $45.25 from $47.25 with an “outperform” rating. The average is $40.50.
* CIBC’s Mark Petrie cut his Pet Valu Holdings Ltd. (PET-T) target to $29 from $31, below the $31.64 average, with an “outperformer” rating.