Inside the Market’s roundup of some of today’s key analyst actions
Seeing a “more challenged” outlook for fiscal 2025 and believing its commitment to invest in sales and marketing initiatives brings added risk, National Bank Financial analyst Richard Tse downgraded Lightspeed Commerce Inc. (LSPD-N, LSPD-T) to “sector perform” from “outperform” previously.
“Lightspeed reported FQ3 results that were essentially in line with Consensus but short of our expectations,” he said. “In our opinion, the results show Lightspeed executing on its Payments focus this fiscal year. The issue, and why the stock is down [on Thursday] is with respect to broad incremental comments around the F25 outlook which to us, sounded cautious. Management pointed to (new, and in our view, unexpected) investment into sales and marketing to accelerate merchant (location) additions. Because of that investment, we think margins will compress in H1/F25 while adding uncertainty for its eventual conversion into location growth. Overall, we think that’s creating an overhang. Additionally, the increasing likelihood of new acquisitions also increases the risk profile.”
On Thursday, shares of Montreal commerce software vendor plummeted 24.4 per cent with the premarket release of its third-quarter 2024 financial results. Revenue of US$239.7-million and adjusted EBITDA of US$3.6-million were above the Street’s estimates (US$235.7-million and US$2.4-million, respectively) but below Mr. Tse’s projections (US$246.2-million and US$5.5-million).
While the results missed his forecast, Mr. Tse said they were still “positive,” pointing to a 26-per-cent year-over-year gain in subscription and transaction-based revenue stemming from growting payments penetration.
“Importantly, FQ3 marked the second consecutive quarter of positive Adj. EBITDA of $3.6-million with the Company reiterating breakeven or better Adjusted EBITDA in FY24 (Mar),” he said.
“Underneath the results, the 1.7-per-cent quarter-over-quarter decline in GTV was surprising in what was viewed as a strong seasonal quarter for the broad market. And while the Company attributed part of the moderation to normalized volumes in certain markets, we would have thought the scale of the remaining segments would be large enough to offset those normalizing segments.”
However, he thinks investments will likely weigh on both margins and growth moving forward, particularly in the first half of the year with “added uncertainty” for the second half.
“Our revised estimates reflect that new information from [Thursday’s] conference call – altogether, that new (and incremental) risk profile and its impact on our estimates has us downgrading the name,” said Mr. Tse.
He dropped his target for Lightspeed shares to US$20 from US$25. The average target on the Street is US$19.69, according to Refinitiv data.
Elsewhere, TD Securities’ Daniel Chan cut the stock to “hold” from “buy” and droppe dhis target to US$17.50 from US$25.
Other analysts making changes include:
* Scotia’s Kevin Krishnaratne US$20 from US$22 with a “sector outperform” rating.
“Was the 25-per-cent sell off in the stock [Thursday] warranted? We don’t think so,” he said. “Our target moves 10 per cent lower to US$20 (still valued at 4.5 times CY25 GP), but we acknowledge how expectations of better trends in the back half of FY25 as outbound sales investments kick in and software growth rebounds may have the stock trading rangebound near term. Q4 (March) is the seasonally weakest and sees a quarter-over-quarter step down in all key metrics, and the macro so far has shown no signs of improvement in GTV across both the hospitality and retail verticals. We view the valuation as compelling (2.9 times CY25 GP vs. Fintech/POS peers 7.9 times) and note several positives in the quarter which featured 7-per-cent year-over-year growth in the locations that matter most, est. double-digit software ARPU gains, and GPV/GTV on track (29 per cent) with no signs of unexpected churn, giving us confidence in LSPD’s product and opportunity.”
* ATB Capital Markets’ Martin Toner to $30 from $35 with an “outperform” rating.
“We expect a number of drivers to consistently contribute to robust revenue growth, including adding more merchants, ARPU growth, and growth in payments revenue, from an increasing penetration of Lightspeed Payments,” said Mr. Toner. “LightSpeed’s customer base are in the retail and hospitality industries, both of which are volatile. We use a beta of 1.5 to account for this inherent risk. The Company appears to be moving past the volatility and uncertainty that has come with COVID-19. New merchants and GTV growth have improved in North America and Western Europe, where vaccination rates are high, and COVID-19 cases have subsided. Lightspeed’s growth is driven by location growth, GTV per location growth, ARPU growth and an increase in payments penetration. We believe Lightspeed has a durable growing strategy and will be highly profitable over time with additional scale.”
* Barclays’ Raimo Lenschow to US$20 from US$23 with an “overweight” rating.
“LSPD’s Q3 results saw nice improvement on the payments strategy and further room for upside, given the still only 29-per-cent penetration,” he said. “However, GTV was down quarter-over-quarter which came as a surprise, and will likely raise some near-term questions around end-market health and industry dynamics.”
* BMO’s Thanos Moschopoulos to US$19 from US$21 with an “outperform” rating.
“We remain Outperform on LSPD and have reduced our target price following Q3/24 results, which were a slight beat on revenue and EBITDA. Management (essentially) reiterated FY2024 guidance, though its commentary suggests that FY2025 opex will be considerably higher than expected. We’ve modestly trimmed our FY2025E revenue forecast while significantly reducing EBITDA. We believe better software growth will be needed in order for the stock to work, and we don’t expect this to materialize until H2/25. We’re inclined to be patient, however, given the stock’s depressed valuation and attractive risk/reward,” he sai.
* CIBC’s Todd Coupland to $25 from $27 with a “neutral” rating.
* Raymond James’ Steven Li to $35 from $43 with an “outperform” rating.
* JP Morgan’s Tien-Tsin Huang to US$17 from US$19 with a “neutral” rating.
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Desjardins Securities analyst Jerome Dubreuil thinks the Street has already modelled most of the benefits from BCE Inc.’s (BCE-T) restructuring initiative, including a major restructuring plan and a slower dividend growth rate, but not its costs.
“The restructuring plan is NAV-positive and allows BCE to improve its profitability while leveraging its recent investments in technology. We believe a continued focus on costs could be required as it looks increasingly difficult for companies in the industry to differentiate their services. Management is betting on its winning segments and had a streamlining mindset in the quarter. In addition to its largest restructuring in 30 years and the already announced wind-down of The Source operations, BCE announced the sale of 45 of its 103 radio stations.”
David Berman: After layoffs, the bet on BCE shares rests on the dividend. And it’s a compelling bet
While he expects BCE’s dividend to be safe, Mr. Dubreuil warned “the high payout of FCF limits future distribution increases and makes it more difficult for the company to invest in certain projects.”
“Dividend payout should improve in 2025 but will remain high for several years. Despite this year’s lower dividend growth of 3.1 per cent and the $500-million expected reduction in capex, BCE’s payout ratio in 2024 should approach 120 per cent,” the analyst said. “This is in part due to the higher-than-expected working capital drag in the coming years. We forecast that the dividend payout will not drop below 100 per cent until 2026. Management expects the underlying FCF of its business to grow in the future and has the ‘ultimate objective’ of bringing the distribution below 100 per cent. We believe this represents a modest goal for a mature business. BCE’s leverage nonetheless remains lower than its Big 3 peers.”
With modest trims to his earnings expectations for fiscal 2024 and 2025, Mr. Dubreuil lowered his target for BCE shares to $55 from $58 with a “hold” recommendation, seeing “relative valuation downside.” The average is $55.13.
“Although BCE has better governance, lower leverage and better capex efficiency due to its network-sharing agreement with T, we think its valuation may trend toward RCI’s, which we expect will eventually have more balance sheet flexibility and a better FCF growth runway. BCE’s strong yield remains attractive to many, but the magnitude of outperformance we expect this year for RCI vs BCE is larger than the dividend yield gap between the companies,” he said.
“BCE’s dividend yield and stability are compelling amid the uncertain macro context, but its high exposure to legacy wireline and its lack of near-term catalysts keep us on the sidelines at this point.”
Others making target changes include:
* Scotia’s Maher Yaghi $55.50 from $57.25 with a “sector perform” rating.
“Canadian telcos are having to look inward to review operational costs due to increasing pressures from competition, regulation and interest costs. We believe that efforts started this year at BCE to re-base the cost of the business will likely spill over into 2025 as well. While painful in the short term the actions undertaken to restructure and to review the dividend growth model could not have been delayed, in our view. With a leverage ratio of 3.5 times we believe management should prioritize debt reduction instead of dividend growth until a clear path for sustainable FCF growth is re-established. ... FCF/share peaked already 4 years ago in 2019. ... We would welcome more bold actions by management to reduce leverage such as additional asset sales or ways to extract value from existing assets such as a combination of sports content and sports streaming. We have lowered our PT due to a reduced free cash production expectation affecting both 2024 and our medium term outlook negatively impacting our DCF and sum of the parts valuations.”
* BMO’s Tim Casey to $54 from $60 with an “outperform” rating.
“We believe there are two momentum drivers for BCE in the near term,” said Mr. Casey. “First, the accelerated capex program will increase broadband penetration, opex efficiencies and a step-up in FCF generation. Second, improving fundamental outlook for Wireless and base management strategy positions BCE for LSD-MSD EBITDA growth in 2024. BCE is a bellwether with attractive dividend yield and growth (3 per cent).”
* National Bank’s Adam Shine to $55 from $58 with an “outperform” rating.
* TD Securities’ Vince Valentini to $51 from $55 with a “hold” rating.
* RBC’s Drew McReynolds to $57 from $59 with a “sector perform” rating.
* Canaccord Genuity’s Aravinda Galappatthige to $55 from $57 with a “buy” rating.
* CIBC’s Stephanie Price to $54 from $56 with a “neutral” rating.
* JP Morgan’s Sebastiano Petti to $54 from $58 with a “neutral” rating.
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After Thursday’s release of “solid” results in an “eventful” fourth quarter of 2023, RBC Dominion Securities analyst Drew McReynolds sees Thomson Reuters Corp. (TRI-N, TRI-T) “meeting rising expectations” at its current valuation.
“We believe the bar to deliver consolidated organic revenue growth in excess of 6 per cent has risen with the organic revenue growth trajectory over the 2024-2026 period now taking centre stage,” he said.
“While we remain patient for more timely and/or attractive accumulation points, we believe current valuation levels (i.e., FTM [forward 12-month] EV/ EBITDA more than 20.0 times) are fundamentally justified provided: (i) management meets or exceeds a 7-8-per-cent organic revenue growth trajectory without meaningful changes to the company’s current margin, capex and FCF conversion profile; (ii) solid execution on the GenAI playbook continues with little change to the current GenAI narrative including perceived opportunities and risks; and (iii) the valuation impact of lower interest rate expectations/bond yields at worst is neutral. Thomson Reuters remains a high-quality, core holding in our coverage capable of generating average annual total returns of 10-15 per cent over the long-term.”
U.S.-listed shares of the Toronto-based information and software provider jumped 4.6 per cent on Thursday after it released new targets for investors on Thursday, predicting that its revenue will rise by about 6.5 per cent this year, which is comparable to its rate of growth last year. In 2025 and 2026, the company forecasts that revenue could increase by 6.5 to 8 per cent annually, signalling a faster pace of growth that investors have been anticipating.
“Our minor puts and takes on 2024 guidance and the 2025-2026 outlook. (i) relative to expectations in mid-2023, we believe underlying organic revenue growth is slightly more robust with Big 3 momentum (Westlaw Precision, GenAI, M&A) and new GenAI revenue at Reuters News mitigating Argentina peso weakness and pockets of softness (FindLaw, prolonged sales cycles within Corporates); (ii) while 2024 adjusted EBITDA margin guidance of 38 per cent and the outlook for margin expansion in 2025 and 2026 were in line with our estimates, heading into the quarter we did see downside risk to our margin forecast driven by reinvestment, M&A dilution and integration costs; and (iii) although capex intensity guidance of 8.5 per cent for 2024 was slightly higher than our estimate of 8.25 per cent, the step-down to 8.0 per cent under the 2025-2026 outlook is encouraging given what management expects to be a healthy level of ongoing GenAI investment,” said Mr. McReynolds, calling the outlook “solid.”
Pointing to “added earnings visibility through the medium-term,” he raised his target for Thomson Reuters shares to US$153 from US$149, reiterating a “sector perform” recommendation. The average on the Street is US$145.57.
Elsewhere, other changes include:
* National Bank’s Adam Shine to $210 from $201 with a “sector perform” rating.
“Our forecast hasn’t materially changed. The struggle remains around valuation and by how much an acceleration of growth as well as margin expansion should help to re-rate the stock. With this in mind, we added 100 basis points to our multiple, but still believe TRI is ahead of itself,” said Mr. Shine.
* BMO’s Tim Casey to $222 from $211 with an “outperform” rating.
“TRI’s US$7-billion revenue base is spread across 460k customers and is 80 per cent recurring,” said Mr. Casey. “As an info services provider with a leading position in the legal and T&A segments, we believe it offers a compelling mix of stability and growth. In our view, TRI is well positioned for the emerging impact of AI through its “Build, Partner and Buy” GenAI strategy. The company continues to monetize shares in LSEG.”
* Canaccord Genuity’s Aravinda Galappatthige to US$149 from US$147 with a “hold” rating.
* CIBC’s Scott Fletcher to US$146 from US$138 with a “neutral” rating.
* TD Securities’ Vince Valentini to US$165 from US$155 with a “hold” rating.
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After stronger-than-anticipated fourth-quarter results from Sun Life Financial Inc. (SLF-T), RBC Dominion Securities analyst Darko Mihelic is expecting “good” earnings per share growth and high return on equity (ROE) in the year ahead, predicting “‘normalization’ might be a theme in 2024.”
“Although Canada results were good, we think experience should normalize (lower), and at the same time, we believe U.S. results can improve as redeterminations ease and dental earnings improve,” he said. “We think that wealth earnings are ‘fine’ and somewhat dependent on equity markets. Asia results were a little weak relative to our estimates, but even here, we think that stronger growth can occur later in 2024 as negative experience fades. Manjit Singh will transition from CFO to President of SLF Asia, so it may be that we see a strategic “refresh” in Asia by the end of 2024. All in, the diversified nature of SLF’s business helps keep solid EPS growth/ROE expectations as some segments will normalize in different directions in 2024. Following our model updates, our core EPS estimates increase to $6.90 (was $6.73) for 2024 and $7.71 (was $7.55) for 2025. We update our model for more normalized experience gains in Canada, slightly higher Corporate losses, and other tweaks.”
Shares of the Toronto-based firm were narrowly higher on Thursday after it revealed underlying earnings per share for the quarter of $1.68, topping both Mr. Mihelic’s $1.52 projection and consensus of $1.58, due largely to stronger-than-anticipated results in North America. U.S. earnings were up 37 per cent from the third quarter and 10 per cent year-over-year at $253-million, above the analyst’s $200-million forecast.
“The U.S. segment did better than we expected despite Medicaid redeterminations,” said Mr. Miheloc. “As redeterminations ease and dental sales improve, we think the U.S. could see stronger growth later in 2024. Asia’s results were weak versus our estimates, though Hong Kong sales were strong. We think Canada’s strength fades as Asia normalizes higher.”
Maintaining an “outperform” recommendation for Sun Life shares, Mr. Mihelic raised his target to $77 from $76 with an “outperform” rating. The average is $74.92.
“We continue to see SLF’s ROE as the strongest among the group at 18.0 per cent vs the peer average of 15.7 per cent for 2024,” he said.
Elsewhere, others making adjustments include:
* Desjardins Securities’ Doug Young to $77 from $75 with a “buy” rating.
“Overall, it was a good quarter; however, real estate returns will likely remain under pressure, potentially widening the gap between underlying and reported EPS, at least through 1H24,” he said.
* CIBC’s Paul Holden to $77 from $75 with an “outperformer” rating.
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In other analyst actions:
* TD Securities’ Graham Ryding upgraded Canaccord Genuity Group Inc. (CF-T) to “buy” from “hold” and raised his target to $10 from $8.50. The average is $10.38.
“We were encouraged with the return to profitability for the capital markets platform this quarter, and we expect the wealth platform to continue to deliver stable and growing earnings. We forecast earnings to gradually improve through F2025, which should support share price upside,” said Mr. Ryding.
“While we may be early in getting more constructive with our target price and rating, we believe the potential for capital markets activity/earnings to improve over the NTM [next 12 months], and in turn share-price sentiment, is reasonable.”
* Canaccord Genuity’s Matt Bottomley upgraded Aurora Cannabis Inc. (ACB-T) to “buy” from “hold” with a 80-cent target. The average is 84 cents.
* RBC’s Paul Quinn raised his target for Acadian Timber Corp. (ADN-T) to $18, above the $17.83 average, from $17 with a “sector perform” rating.
“We continue to see better risk-adjusted value in other names under our coverage as we wait for Acadian to build momentum in monetizing carbon credits and develop its pipeline of renewable energy-related opportunities for upside, and reiterate our Sector Perform rating,” he said.
* Raymond James’ Brian MacArthur cut his target for Barrick Gold Corp. (GOLD-N, ABX-T) to US$24 from US$25 with an “outperform” rating. The average is US$21.50.
* Ahead of the Feb. 21 release of its quarterly results, RBC’s Douglas Miehm cut his Bausch + Lomb Corp. (BLCO-N, BLCO-T) target to US$19 from US$20 with an “outperform” rating. The average is US$19.55.
“We estimate Q4/23 revenue of $1,159-million (cons. $1,105-million) and adj. EBITDA of $224-million (cons. $228-million),” he said. “Q4/23 will continue to be influenced by FX headwinds ($6-million RBC estimate vs. management guidance of $26-million). We expect the focus to be on 2024 guidance and outlook for Xiidra and Miebo. We have incorporated updated FX, updated our outlook for Miebo and Xiidra utilizing the latest Rx data and have increased investment spending to support the new launches.”
* RBC’s Walter Spracklin lowered his Bombardier Inc. (BBD.B-T) target to $95 from $98 with an “outperform” rating. Other changes include: Desjardins Securities’ Benoit Poirier to $96 from $104 with a “buy” rating and Scotia’s Konark Gupta to $85 from $90 with a “sector outperform” rating The average is $76.
“We are very surprised by the negative market reaction to the strong Q4 beat and 2024 guide. Very likely the market is focused on the weaker 2024 FCF guide vs consensus and the interpretation that this leads to a lower systemic level of cash flow post 2024 (and the view that 2025 guide of more than $900-million is at risk). On our call back with management, walked us through the bridge to that $900-million guide, which we consider reasonable. Accordingly, we view the reaction as unwarranted and would be aggressive buyers of the stock on this weakness,” said Mr. Spracklin.
* CIBC’s Dean Wilkinson increased his Brookfield Corp. (BN-N, BN-T) target to US$52 from US$46 with an “outperformer” rating. Other changes include: TD Securities’ Cherilyn Radbourne to US$62 from US$61 with an “action list buy” rating, BMO’s Sohrab Movahedi to US$44 from US$42 with an “outperform” rating, Canaccord Genuity’s Mark Rothschild to US$42.50 from US$41 with a “hold” rating and Scotia’s Mario Saric to US$50 from US$49 with a “sector outperform” rating. The average is US$49.27.
“The key takeaway from Q4 results is that BN expects to repurchase at least $1billion in stock over the next few months, an acceleration from $0.6-billion throughout 2023,” said Mr. Movahedi. “2024 earnings growth prospects appear favorable with the continued scaling of asset management and insurance earnings alongside potential for improving real estate fundamentals. The net result is BN’s discount to NAV has narrowed to 15 per cent, an improvement from 40 per cent a year ago.”
* Expecting a “tough” backdrop for the fourth quarter of 2023 and first quarter of 2024, Scotia’s George Doumet lowered his Canadian Tire Corp. Ltd. (CTC.A-T) target by $2 to $158 with a “sector outperform” rating. The average is $161.10.
“We are below consensus for Q4 (and Q1) given the particularly challenging weather, softening macro and tough comparisons. That said, we believe CTC.a is doing a good job managing the controllables - with the recently announced opex and capital preservation measures,” said Mr. Doumet.
“While we acknowledge that visibility around the timing of trough earnings is cloudy, we see significant value in CTC.a shares today (trading at 9 times 2025 estimated EPS), especially when accounting for a potentially positive outcome from the CTFS strategic review.”
* Mr. Doumet raised his target for Gildan Activewear Inc. (GIL-N, GIL-T) to US$40.50 from US$39.50 with a “sector outperform” rating. The average is US$38.44.
“We are largely in line for Q4 and are looking for $3+ of EPS for 2024,” he said. “While we acknowledge that there’s lots of noise in the interim, we like the valuation and expect financial performance to be robust ($3+ of EPS in 2024). In the absence of a notable change to the GSG strategy, we believe GIL shares should continue to gain ground, in the interim. Lastly, with the soft-landing narrative gaining traction, we are pretty comfortable with our 2024 sales assumption (up low single digits), with destocking likely not a headwind and new retail wins.”
* Canaccord Genuity’s Aravinda Galappatthige lowered his Cineplex Inc. (CGX-T) target to $13 from $13.75 with a “buy” rating, while RBC’s Drew McReynolds cut his target to $14 from $15 with an “outperform” rating. The average is $12.67.
“Looking past Q4/23 results that were below our forecast in a strikeimpacted quarter, we see upside in the shares as box office fully normalizes beginning in H2/24 and management executes on the newly announced refinancial plan. Following several minor changes to our forecast, our price target is trimmed,” said Mr. McReynolds.
* RBC’s Jimmy Shan hiked his Colliers International Group Inc. (CIGI-Q, CIGI-T) target to US$150 from US$121 with an “outperform” rating. Others making changes include: BMO’s Stephen MacLeod to US$137 from US$129 with an “outperform” rating and Raymond James’ Frederic Bastien to US$145 from US$140 with a “strong buy” recommendation . The average is US$139.50.
“Q4 was slightly ahead. 2024 guide was largely in line,” Mr. Shan said. “That said, there were more positive takeaways from the call. CIGI struck a reasonably confident tone in its outlook. Buyer sentiment seems to be improving while CIGI is gaining market share in CM in a tough market. Importantly, CIGI seems to be busy on the acquisition front with a full pipeline. Our target multiple is increased to 13 times from 12 times to better reflect private market valuation of its IM platform.”
* Canaccord Genuity’s Doug Taylor raised his target for Computer Modelling Group Ltd. (CMG-T) to $11 from $10.50 with a “buy” recommendation. The average is $11.17.
* Stifel’s Cody Kwong cut his Enerplus Corp. (ERF-T) target to $27.75 from $30.50 with a “buy” rating. The averae is $24.31.
* Ahead of its Feb. 13 earning release, Desjardins Securities’ Gary Ho hiked his Goeasy Ltd. (GSY-T) target to $185 from $165 with a “buy” rating. The average is $193.78.
“We expect loan book growth, revenue yield and NCO to be in line with guidance. On the rate cap, we believe that 35 per cent will be implemented mid-2024, with no further step-down in the near term,” he said. “GSY will refresh its three-year outlook while introducing 2026 guidance. We expect a 10-per-cent dividend hike this quarter. We upped our EPS estimates, reflecting lower financing costs and better operating margins.”
“Our investment thesis is predicated on: (1) its ability to manage in the current challenging macro environment through its robust credit underwriting platform, supported by its creditor insurance program; (2) rate cap has a manageable impact on future revenue yield and profitability; (3) solid loan book growth, particularly on secured products; (4) credible management team; and (5) the business has consistently generated a 20-per-cent-plus ROE.”
* Scotia’s George Doumet bumped his Restaurant Brands International Inc. (QSR-N, QSR-T) target to US$81 from US$80 with a “sector outperform” rating. The average is US$82.02.
“We are largely in line with consensus for Q4 and we’ll be keeping a close eye at BK USA traffic (flat last q) and comp trends (which disappointed last q),” he said. “Despite the expectations for moderating SSS growth in 2024 (cycling tough pricing comparables), we believe we could still see upside in QSR shares, aided by: (i) upside to valuation (shares trading at a modest discount to its IHF peers) if QSR is able to hit its 5-per-cent-plus NRG target and (ii) quicker than expected normalization of Tims supply chain margins (we model 20 per cent for 2024 vs. the street closer to 18.8 per cent). QSR remains one of our preferred ‘defensive growth’ names.”
* National Bank’s Zachary Evershed bumped his target for Rogers Sugar Inc. (RSI-T) to $6 from $5.50 with a “sector perform” rating. The average is $6.15.
“With valuation feeling full as the company embarks on a capex cycle with a payoff in 2026, we rate Rogers Sugar Sector Perform as we await a better entry point, despite the attractive dividend,” said Mr. Evershed.
* After “strong” quarterly results, BMO’s Devin Dodge bumped his Russel Metals Inc. (RUS-T) target to $46 from $44 with an “outperform” rating. The average is $48.81.
“We believe RUS is executing well and the pending acquisition of seven facilities from Samuel, Son & Co should provide attractive growth opportunities in its service center division,” said Mr. Dodge. “In addition, the balance sheet remains strong and provides RUS with significant capital deployment flexibility. However, with the P/B ratio currently above its historical average, we believe much of the optimism is reflected in valuation and believe the risk/reward is balanced.”
* National Bank’s Shane Nagle trimmed his Sherritt International Corp. (S-T) target to 50 cents from 55 cents with a “sector perform” rating. The average is 58 cents.
“We have maintained our Sector Perform rating, now at a $0.50 target price, as 2024 guidance shows marginally higher production at a stable cash cost, with wary sentiment given depressed nickel prices,” he said. “Our Sector Perform rating accounts for an improving operational outlook at the Moa JV offset by a challenging nickel market as well as lower fertilizer/cobalt by-product prices, the company’s ongoing debt commitments and need for delivering anticipated growth initiatives at Moa.”
* Scotia’s Phil Hardie raised his Trisura Group Ltd. (TSU-T) target to $56 from $54, above the $52 average, with an “outperform” rating.
“There was likely some investor trepidation heading into the release of Trisura’s year-end results, however, the quarter played out largely in line with our expectations with no new surprises or significant unexpected charges,” said Mr. Hardie. “The quarter saw some final clean-up related to run-off programs and a bit slower-than-expected top-line growth across the U.S. platform as management likely repositions its book to set up for a clean 2024 with improved profitability expected to be a key growth lever. With no new developments or charges related to Vesttoo, we believe risks that have caused an overhang on the stock are receding which bodes well for multiple expansion over the coming months.
“Operating results were in line with expectations with higher-than-expected investment income offsetting weaker-than-forecast U.S. profitability. That said, we believe there is limited read-through from the U.S. result, but expect the step-up in interest & dividend income to be sustainable and have raised our estimates and target price.”
With a file from James Bradshaw
David Leeder