Inside the Market’s roundup of some of today’s key analyst actions
Seeing its current valuation as “fair,” National Bank analyst Cameron Doerksen downgraded CAE Inc. (CAE-T) to a “sector perform” recommendation from “outperform” previously.
“We continue to see CAE enjoying a multi-year period of growth supported by positive end market backdrops for both its Civil and Defence segments,” he said.” However, since reporting fiscal Q2 results in mid-November, CAE shares are up 33 per cent. On our updated F2026 estimates, CAE is now trading at 11.4 times EV/EBITDA [enterprise value to earnings before interest, taxes, depreciation and amortization] and 24.9 times P/E [price to earnings]. CAE’s EV/EBITDA multiple is a slight discount to the peer group at 12 times, but on P/E, CAE is trading at a premium to the peers at 18-19 times forward earnings.”
In a research note released Wednesday, Mr. Doerksen warned the Montreal-based pilot training company continues to face near-term headwinds in its Civil segment, while also emphasizing margin improvements for its Defence business unit will “take time.”
“The long-term outlook for growth for CAE’s Civil segment remains positive, but aircraft availability issues and slow hiring in the U.S. represent near-term headwinds for pilot training growth that are persisting longer than anticipated,” he said. “The number of pilots hired at U.S. airlines in December was approximately 70 per cent lower year-over-year and for the full year 2024, hiring was 60 per cent lower than 2023.”
“CAE looks to be on track for Defence segment EBIT margins reaching the targeted 6-7 per cent in F2025; however, while we remain confident that margins will trend towards the longer-term target of 10 per cent plus as new better-margin contracts in backlog ramp, the margin improvement process could take through F2027 to play out. The Defence segment backdrop remains positive with defence spending globally potentially moving higher at the urging of the new U.S. Administration.”
While also pointing to uncertainty from the implementation of U.S. tariffs and its ongoing search for a new chief executive, noting “shareholders would like to see the next CEO have a strong track record of effective capital allocation, and we further believe that the share price resurgence for CAE in recent months partly reflects market optimism around a future CEO,” Mr. Doerksen raised his target for CAE shares to $38 from $34 after increasing his target multiple to “better reflect peer group valuations.” The average target on the Street is $34.54, according to LSEG data.
“With modest 7-per-cent upside from the current share price, we lower our rating to Sector Perform from Outperform,” he concluded. “Given our still positive long-term outlook for CAE, we would look to add to positions on share price weakness with a more attractive entry point in the low $30s.”
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Desjardins Securities’ Brent Stadler thinks Donald Trump’s policies promoting American energy should lead to more growth opportunities for Capital Power Corp.’s (CPX-T) “high-quality” gas platform south of the border.
He also thinks the the Edmonton-based company should benefit from the president’s desire to make the U.S. a global AI data centre leader with the tangible US$500-billion Stargate partnership investment driving further demand for power.
That led the analyst to reduce his discount rate on Capital Power’s U.S. gas assets by 100 basis points, which led him to increase his target for its shares by $3 to $69, keeping a “buy” rating. The average is $63.36.
“U.S. IPPs outperformed CPX by 6 per cent [Tuesday] and have outperformed CPX by 34 per cent year-to-date, and we believe CPX should have seen some of the Trump policy tailwind,” he said. ”Recall that half of CPX’s installed capacity is in the U.S., and it owns the largest gas asset in North America (the 1.6GW Midland cogen facility).”
“In our view, CPX offers investors deep value and exposure to a balanced approach to the energy transition, and is a top way to play the AI/data centre theme in the U.S. and Canada.”
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Seeing it “benefiting from an improved fundamental backdrop,” Desjardins Securities analyst Lorne Kalmar initiated coverage of Plaza Retail REIT (PLZ.UN-T) with a “buy” recommendation.
“As demand for retail space in Canada continues to accelerate, PLZ’s occupancy, rent growth and SP NOI [same-property net operating income] growth have all been improving and are now nicely above pre-pandemic averages,” he said. “We anticipate that the growing demand for retail space, coupled with a limited supply, including minimal new development, should position the REIT well to generate above-average top-line growth over our forecast period.
“Development is a key value-add strategy and an important differentiator for PLZ, in our view. Its retail developments have a much greater impact on earnings growth due to the REIT’s relatively smaller size vs its peers. By focusing on the intensification of already-owned land and initiating projects specifically in response to tenant requests, PLZ can generate yields which exceed its IFRS cap rate. We expect the REIT to selectively initiate new developments that are accretive to earnings, NAV and portfolio quality.”
In a research report titled Sympathy for the developer, Mr. Kalmar emphasized the Fredericton-based REIT’s “long track record of capital recycling, which complements its development and acquisition activity in the absence of access to the equity markets.”
“With an estimated $100-million of assets identified as being noncore (9 per cent of IFRS property value), we believe PLZ should benefit from a pick-up in the transaction market, as well as growing investor preference for the retail asset class,” he said. “The proceeds from dispositions are expected to be redeployed toward developments and acquisitions, with a focus on cleaning up the business structure by increasing its interest in partially owned assets to 100 per cent.”
The analyst set a target of $4.25 for Plaza units. The average is $4.19.
“While its relatively smaller market cap and high level of insider ownership limit the stock’s trading liquidity, we believe its 7.9-per-cent distribution yield (71-per-cent payout ratio) provides an attractive value proposition, particularly for yield-oriented investors,” he said. “Despite the improvement in its operating fundamentals, its mid-single-digit FFOPU [funds from operations per unit] growth outlook and the improvement in portfolio quality, PLZ trades at a wider gap to its retail peers than it has historically as well as vs its LTA valuation, which we view as unjustified. Further, as funds flows return to yield equities, we believe PLZ’s elevated distribution yield should position the REIT to benefit disproportionately, and ultimately narrow the current valuation gap.
“Our forecast calls for average FFOPU growth of 4.5 per cent through 2026, as top-line growth is set to benefit from a growing demand-supply imbalance and should be positively augmented by the REIT’s development and capital recycling programs. In consideration of the former, its 7.9-per-cent distribution yield and the current valuation discount, we believe the current unit price represents a compelling entry point.”
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Raymond James analysts Frederic Bastien and Steve Hansen are expecting a “constructive” 2025 for Infrastructure & Construction (I&C) stocks in their coverage universe.
“Supporting this outlook are the big efforts our management teams have expended to eliminate end-market concentration, reinforce balance sheets and tailor service offerings that answer critical infrastructure needs,” they said. “Even so, we are of the view diverging interest rates in major economies, Donald Trump’s first 100 days in office, ongoing geopolitical risks, and stretched valuations all make for a volatile first half of the year. For us, the word for 2025 is caution. The next 12 months are setting up as a stock picker’s market.
We offer high-conviction ideas for each of the I&C sub-groups: BIP, WSP, RBA, NOA and BDI. Brookfield Infrastructure’s decade-long history in digital infrastructure, combined with its scale and out-of-the-box thinking, position it at the forefront of the AI investing cycle. WSP Global is entering the first year of its new strategic cycle packing a one-two punch of growth and profitability, while RB Global continues to benefit from robust countercyclical tailwinds on both sides of its business in addition to the prospect of further IAA share gains. On the small-cap side, we selected North American Construction Group because its stock remains far too inexpensive in light of improving business prospects domestically, and Black Diamond Group for its ability to drive consistent rental revenue growth and rapidly expand its digital crew-travel platform (LodgeLink).”
In a research report released Wednesday, the analysts said their positive outlook comes on the heels of “solid” gains in 2024 with the companies they cover posting an average return of 21 per cent “that split the advances of the S&P 500 and TSX composites.”
“Performance was a tale of Haves and Have-Nots, however,” they added. “A pair of contractors (ARE, BDT) grabbed top honors as strong fundamentals and factors idiosyncratic to each tipped the sentiment scales back in their favour, while their peer (NOA) took one stumble after the other. Comeback story ATRL rounded out the return podium courtesy of its nuclear momentum, industry-leading organic growth and improved earnings consistency, whereas STN’s ascension stalled largely on account of moderating expectations for organic growth and margin expansion. Finally, the winners and losers of 2023 traded spots. BDGI and RUS disappointed as the US industrial complex waited out the results of the presidential election, and DXT finally rebounded following its exit from modular construction.”
Believing it is “the time for investors to jump back in the sandbox,” Mr. Bastien upgraded North American Construction Group Ltd. (NOA-T) to a “strong buy” recommendation from “outperform” previously.
“With the trials and tribulations of 2024 in the rearview, we expect 2025 to go down as one of North American Construction Group’s best ever,” he said. " From where we sit, concerns around the longevity of the firm’s relationship with Suncor have largely subsided, the recently acquired Australian business (MacKellar) is demonstrating profitable and exceptionally consistent growth, the 2025 guide offered last month leaves room for upside surprise, and valuation remains unfairly discounted at current levels. The shares notably trade at 6.9 times our EPS estimate for 2025, a big discount to the five-year average for a select group of Canadian and Australian contractors.”
Mr. Bastien’s target for the company’s shares remains $40, exceeding the average on the Street by 20 cents.
The analysts also made these target adjustments:
- AtkinsRéalis Group Inc. (ATRL-T, “outperform”) to $98 from $84. The average is $84.42.
- Brookfield Infrastructure Partners LP (BIP-N/BIP.UN-T, “strong buy”) to US$46 from US$44. Average: US$39.45.
- Colliers International Group Inc. (CIGI-Q/CIGI-T, “outperform”) to US$175 from US$160. Average: US$167.94.
- Dexterra Group Inc. (DXT-T, “outperform”) to $11 from $8.50. Average: $9.91.
- FirstService Corp. (FSV-Q/FSV-T, “outperform”) to US$225 from US$215. Average: US$204.33.
- Stantec Inc. (STN-T, “market perform”) to $130 from $120. Average: $132.55.
- WSP Global Inc. (WSP-T, “strong buy”) to $310 from $270. Average: $279.57.
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TD Cowen analyst Graham Ryding raised his fourth-quarter 2024 estimates for TMX Group Ltd. (X-T) to reflect improving trading and financial activity and his forecast through 2026 in response to an updated foreign exchange outlook.
“Trading stats indicate very strong volumes for equity and derivatives trading in Q4/24,” he said. “Capital formation activity was softer than expected for Q4/24 (# of listing transactions on the TSX was down 12 per cent year-over-year), and 2024 was the third consecutive year for a year-over-year decline in financing by value (TSX + TSX-V). We are modeling for an improvement in financing activity in 2025.
“Our Q4/24 EPS forecast of $0.43 (up from $0.42) is in line with consensus (implies 6-per-cent growth quarter-over-quarter and 15 per cent year-over-year). Our revenue forecast of $375-million implies 6-per-cent growth quarter-over-quarter and 13 per cent year-over-year organic (consensus is $371-million). Growth is being driven from equity/FI trading, GSIA (market data), and derivatives (capital formation is expected to be flat year-over-year).”
Mr. Ryding’s 2025 and 2026 revenue projections increased by approximately 2 per cent each, which he attributes to FX, and implies a “constructive” 7-per-cent organic growth rate.
“This implies solid high single-digit volume growth for derivatives (both MXX and BOX),” he said. “We have also increased our 2025 forecast for GSIA [Global Solutions, Insights and Analytics] to 12 per cent (from 9 per cent previously), entirely due to an updated FX forecast. This implies double-digit organic growth for Trayport and Vettafi, and low single-digit organic growth for TSX Datalinx. We have revised our capital formation forecast slightly (6 per cent year-over-year from 8 per cent previously due to lower margin income from a declining short-term interest rate forecast). Our EBITDA and EPS forecasts have increased by 2 per cent to 3 per cent for 2025/2026. Our EBITDA margin forecast is unchanged (implies some operating leverage in 2025 /2026).
“We will be looking for an update on strategic initiatives, including TMX rolling out its U.S. equity trading initiative, and the launch of its CDS clearing modernization project.”
Seeing the Toronto-based company’s valuation remaining “fair, to full,” Mr. Ryding bumped his target to $45 from $44, keeping a “hold” rating. The average on the Street is $48.25.
“TMX is trading at 17.2 times forward EV/EBITDA, which is a slight premium to its best international comparables group at 17.7 times,” he explained. TMX has made good progress on improving its revenue mix and adding growth, but valuation upside could be limited.”
“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.”
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While Capstone Copper Corp.’s (CS-T) fourth-quarter production fell short of expectations and its costs came in higher than projections, National Bank analyst Shane Nagle sees its Chilean operations poised to lead a “transformational growth year” in 2025.
“We reiterate our Outperform rating given our positive long-term growth outlook as we continue to see expansion opportunities and potential cost savings through the Mantoverde-Santo Domingo district integration plan in the coming years,” he said. “However, in the near-term our estimates have come down given softer Q4/24 production and adjusting our estimates for 2025. CS is in a unique position to benefit from an improved backdrop for copper prices given several transformational growth projects in the pipeline, further exploration success to better define longer-term growth opportunities will help support the premium valuation.”
On Monday after the bell, the Vancouver-based miner reported production 53,942 tons for the quarter, missing Mr. Nagle’s estimate of 59,690 tons, while cash costs of US$2.55 to $2.60 per pound were above his estimate of US$2.38. For the full year, Capstone produced 184,548 tons, below the low end of guidance of 190,000–220,000 tons and 3.1 per cent below the analyst’s projection of 190,420 tons.
With its guidance for the current fiscal year largely falling in line with his expectation, Mr. Nagle said he expects to see “a significant FCF inflection point through 2025, with production strengthening into H2 as Mantoverde production increases, Mantos Blancos sulphides operations normalize and Pinto Valley grades improve setting up a further step-change in FCF for 2026 (ahead of any significant development at Santo Domingo).”
“We have adjusted our 2025 production given the guidance of 220,000 - 255,000 tons at a cash cost of US$2.20-US$2.50/lb of copper (compared with NBF Estimates of 236,256 tons at US$2.40/lb),” he adde. “We continue to see potential for improved mill availability at Pinto Valley and continued ramp-up at Mantoverde (including the pending benefits from MV Optimized) to potentially support production being closer to the upper range of guidance for 2025.
“We continue to model MV Optimized in production by Q4/26 (anticipating permits by mid-2025) and Mantos Blancos Phase 2 expansion by Q2/27 with anticipated technical report by H2/25 and permits in H2/26. At Santo Domingo, CS plans to advance the partnership process by H1/25 and arrive at a sanctioning decision in 2026. We continue to model initial production in H2/29 to allow for time to complete a JV partnership and develop key infrastructure.”
Reiterating his “outperform” recommendation, Mr. Nagle reduced his target for Capstone shares to $11 from $11.50. The average is currently $12.92.
“We continue to believe CS will benefit from an improved backdrop for copper prices given several transformational growth projects in the pipeline and a management team in place to deliver its stated growth objectives,” he conclude. “Further exploration success is anticipated throughout 2025 as well as several other growth opportunities which will help support the Company’s premium valuation.”
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In a separate note, Mr. Nagle said Teck Resources Ltd. (TECK.B-T) will likely to “remain a core holding in the copper sector owing to its diverse its operating base, strong balance sheet liquidity and project pipeline,” however he sees “more compelling near-term opportunities” in his coverage universe following the announcement of its 2024 production results and 2025 guidance.
Shares of the Vancouver-based miner slid 1.5 per cent on Tuesday after the premarket release of 2024 production and sales results that came in ahead of Mr. Nagle’s estimates “highlighted by stronger production from QB, and Antamina as well as stronger sales from Red Dog to end the year.” Investor concern focused on the reduction of its 2025 copper guidance range by almost 5 per cent from previous forecasts and initial cost guidance that is 8 per cent higher the analyst’s projection.
“We incorporated 2024 copper production of 446,000 tons which was 2 per cent higher than the midpoint of Teck’s guidance range of 420,000 – 455,000 tons and above previous NBF Estimate of 439,700 tons,” he said. “Refined zinc production was above guidance/NBF, while zinc concentrate production was in line. In 2024, Teck executed $1.25-billion of the authorized $3.25-billion share buyback, and repurchased US$1.6-billion ($2.2-billion) in debt of the $2.65-billion debt reduction program.
“Teck provided 2025 production and cost guidance, as well as 2026-2028 production guidance. We have revised our copper production estimates lower and cost estimates higher to reflect Teck’s updated guidance impacting our near-term estimates.”
Mr. Nagle did emphasize Teck’s sanctioning of growth projects will likely add “incremental” capital beginning in the second half of the current calendar year.
“Teck expects lower capital expenditures in 2025 on lower capitalized stripping costs and on completion of QB2,” he said. “Growth capital aside from QB2 includes feasibility studies and progressing permitting and advancing detailed engineering work at Highland Valley Copper, San Nicolás and Zafranal. We have increased our 2025 capital expenditure estimate slightly and are modestly above Teck guidance range owing to anticipated sanctioning of HVC extension in H2/25 and Zafranel in 2026.”
Maintaining his “sector perform” rating for Teck shares, he trimmed his target to $75 from $77.50. The average on the Street is $72.23.
“Our Sector Perform rating stems from a fair valuation as Teck completes its ongoing share buyback and a pending reduction in FCF available for supplemental distributions at current copper prices,” he said.
Elsewhere, others making target adjustments include:
* Canaccord Genuity’s Dalton Baretto to $71 from $73 with a “buy” rating.
“Q4/24 production was in line with our forecast, and we note with pleasure a strong quarter from QB2. Copper production guidance was generally in line with our estimates for the 2025-2028 period, and we note that this does not include any incremental production from the brownfield or greenfield project portfolio. That said, C1 costs for 2025 were higher than we had forecasts, as was capex guidance. We note that elevated capex guidance is a theme we have seen from every copper producer we cover that has provided guidance thus far. We have taken our medium and long-term cost and capex estimates up accordingly,” said Mr. Baretto.
* Scotia’s Orest Wowkodaw to $73 from $75 with a “sector outperform” rating.
“TECK released better than expected Q4/24 operating results driven by a record performance at QB2,” he said. “However, the company’s updated three-year guidance was slightly below our expectations, particularly with respect to costs. To date, $1.25-billion (including $666-million in Q4) of the $3.25-billion share buyback has been completed. Overall, given our lower estimates, we view the update as a modest negative for the shares.
“We rate TECK shares SO based on near-term growth, large share buyback, and the re-rating opportunity of a new Cu focus.”
* Raymond James’ Brian MacArthur to $70 from $75 with an “outperform” rating.
“We believe Teck offers investors good exposure to energy transition metals with numerous internal growth options,” he said.
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In other analyst actions:
* Barclays’ Lauren Bonham downgraded BCE Inc. (BCE-T) to “underweight” from “equal weight” with a $30 target, falling from $41. The average on the Street is $36.69.
“The Canadian telecom operating environment may continue to see headwinds for a while and stretched balance sheets leave little room for error,” she said.
* Seeing its macro environment remaining “challenging,” Desjardins Securities’ Frederic Tremblay lowered his Goodfood Market Corp. (FOOD-T) target to 60 cents from 65 cents with a “hold” rating.
“At the risk of sounding like a broken record, net sales growth remained evasive while adjusted EBITDA was slightly better than expected in 1Q FY25,” he said. “While we like aspects of the FOOD story (positive adjusted EBITDA, improved cash flow profile, M&A opportunities), we maintain our Hold recommendation due to a challenging consumer environment (impacting the active customer count and order rates), organic revenue declines and our wait-and-see stance on FOOD’s nascent bitcoin treasury strategy.”