Inside the Market’s roundup of some of today’s key analyst actions
Desjardins Securities analyst Doug Young expects Canadian banks to “come through these turbulent times, but it could be a bumpy ride over the next little while.”
Ahead of the start of first-quarter 2025 earnings season later this month, he warned new obstacles continue to cycle through the sector.
“On one side, several uncertainties have abated — the U.S. election is settled, and the path of rate cuts has become clearer,” said Mr. Young. “However, tariffs from the new U.S. administration are now a reality and add risks to Canada’s economic outlook; the upcoming Canadian elections add further uncertainties.”
For the Big 6, he is currently forecasting 1-per-cent cash earnings per share growth on average, driven by a 9-per-cent year-over-year increase in adjusted pretax, pre-provision (PTPP) earnings, partially offset by higher provisions for credit losses (PCLs) and taxes.
“On a PTPP earnings basis, we expect solid contribution from Canadian banking, capital markets and wealth management, while U.S. banking activity is expected to be muted,” said Mr. Young. “We expect positive trends in NIMs and loan growth, partially offset by higher efficiency ratios.
“We forecast an average PCL rate of 46 basis points for the Big 6, broadly in line with 4Q FY24. When it comes to credit, the trends at BMO on an impaired and performing loan PCL rate basis will be the focus. And clearly another focus will be on the potential impacts from a prolonged tariff/trade war with the U.S.”
The analyst made a pair of target adjustments on Wednesday:
- Toronto-Dominion Bank (TD-T, “hold”), which is No. 3 in his pecking order of preference in the sector, to $85 from $80. The average on the Street is $85.75, according to LSEG data.
- Bank of Montreal (BMO-T, “hold” and No. 4) to $147 from $140. Average: $144.93.
His other ratings and targets are:
- Canadian Imperial Bank of Commerce (CM-T, “buy” and No. 1) at $100. Average: $96.09.
- Royal Bank of Canada (RY-T, “buy” and No. 2) at $190. Average: $178.33.
- National Bank of Canada (NA-T, “hold” and No. 5) at $140. Average: $141.62.
- Bank of Nova Scotia (BNS-T, “hold” and No. 6) at $79. Average: $80.63.
- Laurentian Bank of Canada (LB-T, “sell” and No. 7) at $29. Average: $28.82.
“CM and RY remain our top picks. We believe both banks can build on last year’s strong performance, each with catalysts to drive further progress in FY25. We also moved TD up to third in our pecking order as the recent announcements and shifts by the bank of late are encouraging,” said Mr. Young.
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Scotia Capital analyst Konark Gupta thinks “uncertainty” continues to grow in Canada’s aviation sector as the potential for U.S. tariffs lingers.
“We have been relatively cautious on the aviation sector for this year, owing to normalization in airline yields after post-pandemic revenge air travel and ongoing OEM supply chain challenges,” he said. “While our concerns are taking time to resolve, we are growing incrementally more cautious due to direct or indirect effects of U.S. President Trump’s pro-America policies.
:As we have written recently, we see Canadian aerospace companies at a greater risk of potential tariffs or trade barriers, while Canadian airlines could suffer collateral damage due to potential headwinds related to consumers and fuel/FX. Against this backdrop, we are generally reducing estimates, valuation multiples, and target prices for our coverage, assuming some tightening of U.S.-led international trade policies. There could be further downside risk to our estimates or valuations if the U.S. actually implements full-on tariffs against Canada, China, and the EU and these regions retaliate. Relatively speaking, we would expect CAE and EIF to be far less impacted by a large-scale trade war vs. AC, BBD, MDA, and TRZ. Thus, we are reducing our targets for the latter. Our individual stock ratings remain intact, pending clarity on the trade situation.”
Mr. Gupta made these target adjustments:
* Air Canada (AC-T, “sector outperform”) to $23 from $29. The average is $27.02.
* Bombardier Inc. (BBD.B-T, “sector perform”) to $109 from $120. Average: $119.40.
* MDA Space Ltd. (MDA-T, “sector outperform”) to $28.50 from $33. Average: $32.56.
* Transat AT Inc. (TRZ-T, “sector underperform”) to $1.25 from $1.50. Average: $1.81.
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While seeing TMX Group Ltd.’s (X-T) fundamentals improving after “strong” fourth-quarter results that capped a “solid” 2024, TD Cowen analyst Graham Ryding thinks that optimism is already priced into its shares.
“We have increased our estimates, primarily reflecting a more constructive top line forecast (all product lines),” he said. “Our multiple is also moving higher to reflect the business momentum and improving balance sheet (TMX looks positioned to execute on further acquisitions in 2025). Valuation appears fair, to full, and we maintain our HOLD rating.”
Shares of the TSX parent surged 8.3 per cent on Tuesday following the release of a better-than-anticipated quarterly report and a 5-per-cent increase to its dividend. It announced adjusted earnings per share of 48 cents, topping the Street’s expectation by 4 cents as organic revenue surged 17 per cent year-over-year. The beat came despite higher-than-expected expenses (up 9 per cent from fiscal 2023).
“This was a strong quarter with revenue growth above expectations, and contributions from all revenue lines,” said Mr. Ryding. “While expense growth in Q4/24 (2024) was elevated, top line growth more than offset. TMX continues to move towards its targeted revenue mix (further M&A is likely required to meet its targets, in our view). We were encouraged to see leverage move lower q/q. We have increased our estimates to reflect the business momentum. We have also increased our multiple by 1.0 times (17.0-17.5 times 4QF EBITDA ending Q4/25) to reflect the improving revenue mix, and the potential for further acquisitions in 2025/2026 (could be positive for valuation if incremental to the growth profile and revenue mix).
“Our revised estimates reflect a higher revenue outlook (2 per cent higher in both 2025 and 2026). EBITDA and EPS move up by 3-6 per cent (lower interest expense a factor for EPS). We are modeling organic revenue growth of 8 per cent in 2025 and 6 per cent in 2026 (7 per cent for both in constant currency), and EPS growth of 17 per cent and 11 per cent, respectively. We are forecasting debt/ EBITDA to end 2025/2026 at 2.2 times/1.9 times (we do not forecast acquisitions, though we see potential).”
With its market data and derivatives businesses continuing to drive top-line growth and equities having “surprised” to the upside, Mr. Ryding emphasized TMX is “executing against revenue and earnings targets.”
“Long-term targets include: 1) mid-to-high single-digit revenue growth (10 per cent in 2024); 2) double-digit EPS growth (15 per cent in 2024); 3) recurring revenue more than 67 per cent (now 55 per cent, up from 51 per cent year-over-year); and 4) GSIA revenue more than 50 per cent (now 41 per cent, up from 35 per cent year-over-year).”
With his higher forecast, the analyst raised his target for TMX shares to $49 from $45. The average on the Street is $52.25, according to LSEG data.
“That said, at 17.8 times 2025 EV/EBITDA (25.7 times P/E), we think valuation appears full, to fair, and we maintain our Hold rating,” he said.,
“TMX’s diversified business model and strong competitive positioning have defensive merits, in our view. We believe that the addition of VettaFi improves the growth profile. We are comfortable with the higher debt as we see a path to deleveraging through 2025. Valuation appears fair, to full, in our view.”
Elsewhere, other analysts making target adjustments include:
* Canaccord Genuity’s Aravinda Galappatthige to $52 from $47 with a “buy” rating.
* CIBC’s Nik Priebe to $55 from $46 with a “neutral” rating.
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National Bank Financial analysts Shane Nagle and Rabi Nizami are expecting few surprises from fourth-quarter 2025 earnings season for Canadian copper producers given many of the companies in their coverage universe pre-released production results and 2025 guidance that largely fell in line with expectations.
“HBM and ERO are the two names that did not pre-release,” they noted. “For HBM, we are modelling production at the lower end of 2024 guidance for copper, offset by strong gold production and continue to see modest growth into 2025 (within the range of previous guidance for the year). Similarly, for ERO we anticipate 2024 production at the lower end of the most recent guidance range; however, we are modelling 15 per cent below the midpoint of previous 2025 production guidance owing to delays at Tucumã and production challenges at Caraíba.”
In a report released Wednesday, the analysts incorporated several negative provisional pricing adjustments into their forecasts for the quarter, noting copper averaged US$4.27 per pound and ended the year at US$4.03 while most provisionally priced concentrate sales would’ve been booked at a Sept. 30 at US$4.55.
With those changes, they made target price adjustments to shares of five companies. They are:
* Capstone Copper Corp. (CS-T, “outperform”) to $10 from $11. The average is $12.86.
Mr. Nagle: “While our Q4 estimate is below Consensus, operating results have been pre-released. Where we think the market will continue to exercise caution with CS is the continued ramp-up of production at Mantoverde - a detailed progress update on YTD throughput and recoveries would go a long way in easing the nerves of investors wary of the project’s ramp-up given precedent projects to date.”
* Ero Copper Corp. (ERO-T, “sector perform”) to $27 from $28. Average: $30.50.
“While we model an increase in production Q/Q, power availability challenges impacting the ramp-up of Tucumã and increased grade dilution at Caraíba lead to our lower-than-Consensus forecasts. We continue to see risks to 2025 consolidated production guidance providing some headwinds for the quarter; however, a 2025 outlook in line with NBF Estimates would make us more constructive given the currently discounted valuation of 4.9 times EV/2025E CF (vs. peers at 6.5 times).”
* First Quantum Minerals Ltd. (FM-T, “outperform”) to $24 from $26. Average: $21.15.
Mr. Nagle: “With strong Q4 operating results pre-released, we see some scope for a beat on costs owing to strong by-product sales throughout Q4/24. More important than Q4 results will be updates on the possible sale of a minority stake in Zambia and any progress updates on a potential restart of Cobre Panamá - both unlikely to deliver any negative headline shocks alongside Q4 results.”
* Hudbay Minerals Inc. (HBM-T, “outperform”) to $17 from $16.75. Average: $15.80.
* MAC Copper Ltd. (MTAL-N, “outperform”) to US$14 from US$15. Average: US$18.38.
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Stifel analyst Ingrid Rico sees the potential for “a new golden year ahead.”
“Worth a repeat – ‘Gold, the only asset that survives every war, every conflict and every crisis’ as Trade War becomes a 2025 theme,” she said. “Gold continues to benefit from increasing geopolitical and trade-related uncertainty reinforcing its safe-haven appeal and its strategic place in a well-diversified portfolio. Looking back, 2024 saw a welcoming global investor appetite for gold ETFs, while robust central bank buying, particularly in emerging markets, continued its trend. Gold was up almost 26 per cent last year and its strong momentum in the face of global volatility reinforces a constructive view on the gold sector, as we are now well above $2,800 per ounce.”
In a note previewing earnings season for precious metals equities, Ms. Rico upgraded Wheaton Precious Metals Corp. (WPM-T) to “buy” from “hold” with a $107 target, up from $102. The average is $104.25.
“WPM offers investors exposure to the streaming business model primarily focused on precious metals.” she said. “The uniqueness of the business model provides good upside, including metal price leverage and exploration/mine expansion benefits (generally at no extra cost to WPM), while limiting risks inherent to mine operators (predictable costs that limit inflationary costs pressures). The company has built a portfolio of streaming assets on mostly low-cost, long-life mines. Over 93 per cent of WPM’s attributable production from streams comes from mines that fall in the lowest half of the cost curve and are operated by some top precious metals and diversified miners. WPM has a dividend policy linked to operating cash flow (set at a 30-per-cent payout of the average cash flow of the prior four quarters).”
For large-cap producers, Ms. Rico made these target adjustments:
- Agnico Eagle Mines Ltd. (AEM-T, “buy”) to $154 from $140. Average: $138.32.
- Kinross Gold Corp. (K-T, “buy”) to $19.50 from $18. Average: $18.11.
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While National Bank Financial analyst Vishal Shreedhar’s channel checks are suggesting an underwhelming retail environment, he sees Gildan Activewear Inc. (GIL-N, GIL-T) still gaining market share ahead of its fourth-quarter earnings release, which he expects will display “continued execution” on its plan.
“We believe that wholesale channel POS trends were tepid in Q4/24 (similar to Q3/24), although we believe that Gildan is taking market share,” he said. “We understand that January industry trends have improved, and wholesalers are optimistic for improved performance in 2025. (2) Gildan guides for 2024 EBIT margin of more than 21 per cent (NBF estimate is 21.4 per cent, in line with consensus). Looking forward, we expect continued improvements in operating margin from, among others: (i) the ongoing optimization of the yarn facilities, (ii) filling up capacity at the facilities in Central America, among other factors, from a higher mix of fleece and (iii) the ongoing ramp up of the Bangladesh Phase 1 facility.”
For the quarter, Mr. Shreedhar is projecting consolidated sales of US$797-million, up from US$783-million during the same period in fiscal 2023 but narrowly below the Street’s expectation of US$802-million. He attributes that gain to Activewear sales growth of 6.5 per cent year-over-year “aided by higher fleece sales due to a sewing capacity relocation to Nicaragua and market share gains.” His earnings per share estimate is 80 US cents, up 6 US cents year-over-year and a penny below the consensus forecast.
“We believe that Gildan is well positioned in our discretionary universe for continued EPS growth in 2025 (NBF models $3.43, higher by 14.8 per cent year-over-year; cons. is $3.46) given: (i) revenue growth (new capacity, market share growth, product innovation, etc.), (ii) improving costs (input costs, efficiency initiatives, etc.), and (iii) share repurchases,” said Mr. Shreedhar. “Given that Gildan generates 90 per cent of sales in the U.S., and Honduras/Caribbean basin is not targeted for higher potential tariffs, it’s more insulated from trade disruption (vs. our discretionary coverage). F/X translation to the Canadian stock is helpful, though possible economic weakness related to trade disruption could offset.”
Maintaining his “outperform” recommendation and “top pick” designation, the analyst raised his target to $78 (Canadian) from $74 to reflect a roll-forward to his valuation period and foreign exchange considerations. The average on the Street is $85.93.
Elsewhere, TD Cowen’s Brian Morrison raised his target to US$62 from US$60 with a “buy” rating.
“We forecast the Q4/24 results to illustrate year-over-year EPS growth and attractive FCF,” said Mr. Morrison. “We attribute this to textile/yarn capacity increases, innovation, and its industry leading cost structure, driving market share gains specifically within its ringspun/fleece verticals. This should support mid-teen EPS growth through 2027, and warrant a valuation at the upper end of its forward P/E range.”
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RBC Dominion Securities analyst Paul Treiber reaffirmed his view of Celestica Inc.’s (CLS-N, CLS-T) “strong new program momentum and product differentiation with hyperscalers” after a recent meeting with chief financial officer Mandeep Chawla.
In a note released Wednesday, he said the valuation multiple on the Toronto-based electronics manufacturer’s shares is likely to continue to re-rate upwards, pointing to potential upside to consensus estimates, expanding margins, and the increasing mix of higher quality revenue.
“Celestica appears well positioned with hyperscalers in both networking and custom ASIC servers,” said Mr. Treiber. “Over the coming quarters, we believe Celestica may announce additional 1.6T Ethernet switch programs along with new custom ASIC programs. Existing customers of Celestica’s 400G/800G switches are candidates for 1.6T, while hyperscalers and digital natives are opportunities for custom ASICs.
“Increasing complexity strengthens Celestica’s market position. Celestica is the market leader in 400G switches. The company appears likely to take more share with 1.6T, as it has already secured three 1.6T programs. Celestica’s new program wins involve more complexity and are shifting increasingly towards turnkey solutions, which have a higher mix of Celestica’s design services (i.e. HPS). Manufacturing high performance products at scale is another competitive differentiator for Celestica.”
The analyst also thinks a shift in Celestica’s mix should drive further margin expansion and pointed to other levers for additional valuation creation.
“Margins at Celestica’s hyperscaler programs (both networking and custom ASICs) exceed Celestica’s corporate average,” he said. “The faster growth of these segments is likely to drive further margin expansion. Celestica’s high performance switches incorporate Celestica’s proprietary IP, while custom ASIC programs involve a high degree of manufacturing complexity, which limits competition and potential pricing pressure.”
“Organizationally, Celestica has shifted internal incentives to prioritize EPS growth, balancing large new programs with margin expansion opportunities. Management anticipates deploying excess FCF on opportunistic share buybacks and strategically complementary acquisitions. Celestica’s manufacturing footprint (i.e. low mix of China) appears well positioned amidst tariff uncertainty. Celestica has visibility to hyperscaler demand for the next 3 quarters; Celestica’s historically conservative guidance implies potential upside to CY25 consensus estimates, in our view.”
Maintaining his “outperform” recommendation for Celestica shares, Mr. Treiber raised his target to US$160 from US$140. The current average is US$138.91.
“Celestica is trading at 27 times NTM [next 12-month] P/E, which is towards the high-end of its historical range (5-28 times),” he said. “We believe Celestica’s valuation re-rating will continue, given the likelihood of upside to consensus estimates and Celestica’s increasing mix of HPS/ODM, which we believe warrants a higher valuation multiple. "
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In other analyst actions:
* Believing “rising cash flow (and higher prices) set a new floor,” RBC Capital Markets’ Michael Siperco raised SSR Mining Inc. (SSRM-Q, SSRM-T) to “sector perform” from “underperform” with a US$8 target, rising from US$5.50. The average on the Street is US$7.80.
“We upgrade SSRM to Sector Perform from Underperform (and remove our Speculative Risk qualifier) on our view that rising prices and cash flow from the portfolio (now including Cripple Creek & Victor ahead of expected deal close in 1Q25, 20 per cent of NAV) limit downside even as we continue to model no value/production for SSRM’s Turkish assets,” he said. “Despite the better outlook and potential upside, we think investors need more clarity on the outcome in Turkey (costs and any path to production) before getting more comfortable with the valuation and outlook.”
* Ahead of fourth-quarter results for Canadian tech companies, Scotia’s Kevin Krishnaratne made three target price changes: Altus Group Ltd. (AIF-T, “sector perform”) to $55 from $54, Kinaxis Inc. (KXS-T, “sector outperform”) to $200 from $190 and Well Health Technologies Corp. (WELL-T, “sector outperform”) to $8 from $7. The averages are $60.25, $194.28 and $8.68, respectively.
“Our Top Pick remains LMS leader Docebo, one of the fastest growing Enterprise SaaS firms in our coverage that we see delivering an in-line Q4 for revenue, but with potential upside to profits as has historically been the case,” he said. “The Descartes Systems Group is well positioned to outperform on multiple angles, including the increase in supply chain & logistics complexities due to rising trade wars and on e-commerce strength via recent M&A, such as SellerCloud. While we remain SP-rated on Shopify largely due to valuation (22.4 times CY26 GP, more than 2 times peers), we expect a Q4 beat given its outperformance during BFCM and consumer spending trends which remain resilient, in addition to the company’s ability to gain share across larger Enterprises, Offline, and Internationally.”
* In a report titled We are fashionably late to the party, but we think there are still good times to be had, Stifel’s Ian Gillies initiated coverage of AtkinsRéalis Group Inc. (ATRL-T) with a “buy” rating and $98 target. The average is $87.92.
“There are near-term items that can drive share performance such as (1) bolt-on M&A and (2) further margin improvement,” he said. “However, we remain transfixed on the $4.6-billion of capital flexibility after the sale of the company’s interest in Highway 407 ETR, which could provide a pathway to $123/sh over the medium term. This would result in a share price return profile of 18-20 per cent per annum, which we view as attractive given its market cap and stability of earnings.”
* Desjardins Securities’ Brent Stadler trimmed his Boralex Inc. (BLX-T) target to $45 from $46 with a “buy” rating. The average on the Street is $40.20.
“We expect a weaker quarter for wind resources,” he said. “Our EBITDA estimate is 4 per cent below consensus. BLX remains our Top Pick based on (1) its discounted valuation vs recent peer transactions; (2) the 1.5GW contracted pipeline includes very strong return projects; and (3) its solid retained FCF should drive best-in-class growth and provide flexibility around funding growth. In our view, BLX is a bargain, trading well below our operating asset NAV (ie excluding even contracted growth) of almost $33.00/share.”
* Mr. Stadler also reduced his Northland Power Inc. (NPI-T) target to $28 from $29 with a “buy” rating. The average is $28.38.
“We have reduced our 4Q estimates after updating for lower offshore wind speeds and curtailments at the German offshore wind facilities. Our normalized EBITDA estimate is $285-million,” he said. “Our estimate on a comparable basis to headline EBITDA is $295-million, which is 7 per cent below consensus of $317-million. For the full year, we expect NPI’s results to be around the midpoint of its guidance. With 4Q results, we will be looking for updates on Baltic Power, Hai Long and Oneida as NPI derisks its large construction program.”
* Raymond James’ Brad Sturges initiated coverage of CT REIT (CRT.UN-T) with a “market perform” rating and $16.25 target. The average is $15.42.
“CT’s long-term, triple-net leased cash flows that contractually grow over time with fixed-rent escalators or CPI-linked adjustments provide the REIT with defensive investment characteristics that are similar in nature to long-term bonds with residual value exposure. At its current NAV discounted value, we believe CT provides an attractive risk-adjusted total return profile,” he said.
* Calling it “a mispriced senior care leader,” Canaccord Genuity’s Tania Armstrong-Whitworth initiated coverage of Extendicare Inc. (EXE-T) with a “buy” rating and $13 target. The average is $11.40.
“EXE is uniquely positioned as the largest long-term care (LTC) operator in Canada, with a network of 122 homes with 16,900 beds (approximately 8 per cent of Canada’s capacity), 51 of which are owned and 71 managed,” she said. “This enables it to share its scale economies and expertise with third-party LTC homes, which it does via its managed services business. EXE has also established itself as one of the largest home health care (HHC) providers in Canada. In our view, its leadership position, coupled with its recent transition to a capital-light business model and focus on high-margin managed services, positions EXE to capitalize on Canada’s growing LTC and HHC demand in a lucrative way. With a pristine balance sheet, we believe EXE is undervalued, presenting a compelling opportunity for investors.”
* Ventum Capital Markets’ Phil Ker initiated coverage of Vancouver-based Luca Mining Corp. (LUCA-X) with a “buy” rating and $1.50 target, exceeding the $1 average.
“We see its optimization efforts at its flagship Campo Morado operation in Mexico driving positive cash flow, which has already triggered debt repayments and investment into new exploration initiatives,” he said.
“With rising cash flow, optimization efforts, and new exploration all providing upcoming catalysts, we see Luca in the midst of a turnaround and valuation re-rating.”
* “With its balance sheet shored up by the pending sale of its European assets and the formation of the Vicuña JV with BHP,” Lundin Mining Corp. (LUN-T) is “transforming into a large cap copper pure play with district-scale growth projects in its pipeline,” according to TD Cowen analyst Craig Hutchison. He resumed coverage with a “hold” rating, citing limited upside to his target of $13. The average on the Street is $16.12.
* Desjardins Securities’ Alexander Leon initiating coverage of Morguard North American Residential REIT (MRG.UN-T) with a “buy” rating and $21.50 target price.
“MRG is an externally managed Canadian listed multifamily REIT which uniquely offers concentrated geographic exposure to high-growth markets in Toronto and the U.S. Sun Belt,” he said. “We forecast that MRG should deliver mid-single-digit FFOPU [funds from operations per unit] growth in 2025, while generating low-double-digit annualized NAV growth and trading at a significant discount to peers and LTA valuation metrics.”
* CIBC’s Hamir Patel bumped his target for Winpak Ltd. (WPK-T) to $54 from $52 with a “neutral” rating. The average is $53.67.