June 30, 2022

Contained in the Market’s roundup of a few of at present’s key analyst actions

Believing each its execution and outlook at the moment are correctly mirrored in its valuation, BoA Securities analyst David Barden downgraded BCE Inc. (BCE-T) to “impartial” from “purchase” on Monday in response to its current “speedy” appreciation and seeing a scarcity of “incrementally new catalyst drivers.”

“BCE has executed properly in an unsure setting,” he mentioned in a analysis notice. “Wi-fi subscriber progress was sustained via COVID lockdown restrictions by leveraging digital distribution channels. Broadband progress was sustained via fiber footprint growth driving subscriber web provides. Trying ahead, the wi-fi enterprise will profit from a return of wi-fi roaming, a rising immigration tempo, and continued penetration progress. This momentum is now pretty mirrored in BCE’s all-time excessive ahead a number of 9.5 instances, surpassed solely by TELUS which has a sooner rising asset combine and is a number of years forward when it comes to fiber deployment.”

Trying forward, Mr. Barden expects “moderating” capital spending in 2023 ought to help dividend progress.

“BCE delivered secure outcomes via the pandemic and shared constructive 2022 steerage that features 2-5-per-cent year-over-year adjusted EBITDA progress,” he mentioned. “The wi-fi unit is delivering secure progress in each subscriber and ARPU [average revenue per user and is poised to benefit from the return of international roaming and an uptick in immigration to Canada. Overall, we see BCE executing well and on the cusp of benefiting from a capex step-down in 2023. The 2022 21-per-cent capital intensity guidance includes an incremental $0.9-billion of accelerated capex that won’t repeat in 2023 clearing a path to free cash flow growth, bolstered by pension funding savings.

“Inside the capex enveloped, BCE should add 600k fiber passings per year through 2025 as it pushes cover over 10 million homes and businesses (83 per cent of total) with its FTTH or WTTH network. Falling capex beyond ‘22E will enable BCE to maintain its 5% dividend growth while moving the dividend payout ratio (as a percent of FCF) closer to the targeted 65-75-per-cent range while maintaining flexibility to acquire spectrum in upcoming auctions (likely 2023) and pay down maturing debt in a rising interest rate environment.”

Mr. Barden maintained his $69 target for BCE shares. The average on the Street is $67.13, according to Refintiv data.

“Our $69 price objective is based on a forward EV/EBITDA multiple of 9.3 times compared to a 5-year average of 8.5 times. We believe a higher-than-historical multiple is supported by BCE’s advanced fiber deployment (6.2 million direct FTTH passings at year end ‘21) heading to 7.1 million FTTH by year-end 2022. The fiber investment is driving market share growth, higher penetration and improved ARPU, churn and costs. In our view, the current multiple fairly reflects our positive outlook.”


In reaction to “significant” share price appreciation, Scotia Capital analyst Orest Wowkodaw lowered his recommendation for Labrador Iron Ore Royalty Corp. (LIF-T) to “sector perform” from “sector outperform” on Monday, seeing a limited return to his revised target for its shares.

His move came following Friday’s release of better-than-anticipated fourth-quarter financial results. Adjusted earnings and cash flow per share of $1.22 and $1.27, respectively, exceeded his estimates of 92 cents and $1.20.

“Although spot Fe prices are tracking well above our expectations, and we have increased our target multiples accordingly, the risk/reward profile for LIF shares appears more balanced at current levels. LIF shares are trading at a spot 2022 estimated CFPS yield of 11 per cent, largely in line with the historical average,” said Mr. Wowkodaw, calling its dividend outlook “robust.”

He raised his target for Labrador Iron Ore shares to $50 from $43. The average on the Street is $41.43, according to Refinitiv data.


Ahead of Tuesday’s release of its third-quarter 2022 financial results, National Bank’s Vishal Shreedhar remains optimistic about the future prospects for Alimentation Couche-Tard Inc. (ATD-T), however he expects rising inflation to weigh on near-term performance.

For the quarter, he’s projecting earnings per share of 68 cents, up from 56 cents during the same period a year ago and 6 cents above the consensus estimate on the Street. He attributed the gains to elevated fuel margins in North America, year-over-year fuel volume growth, contributions from acquisitions and share repurchases.

While seeing fuel margins remaining “solid,” Mr. Shreedhar emphasized the Quebec-based company has “an inverse relationship” with the price of oil, which could weigh on results moving forward.

“We highlight the impacts to ATD as follows: (1) Consumer volume/demand may be suppressed; (2) Fuel margins could be temporarily negatively impacted as rack costs increase faster than retail prices; (3) Electronic payment fees could rise as petroleum prices increase; (4) A strengthening Canadian dollar (vs. the U.S. dollar) could negatively impact ATD’s shares (which are Canadian exchange traded; earnings are denoted in USD). Some of these factors may not manifest as they historically have given uncertainty related to the macroeconomic backdrop,” he said.

After making narrow increases to his revenue and earnings expectations for 2022 and 2023, Mr. Shreedhar trimmed his target for Couche-Tard shares to $53 from $55 to reflect “increased uncertainty regarding inflation.” The average on the Street is $58.41.

“Though we believe that Couche-Tard has solid longer-term growth prospects (network development, merchandising improvement, fuel optimization, capital return to shareholders and potential acquisitions), limited near-term growth expectations keep us on the sidelines,” said Mr. Shreedhar, keeping a “sector perform” rating, .

Elsewhere, Scotia’s Patricia Baker raised her target to $64 from $61 with a “sector outperform” rating.

“We remain constructive on the outlook for ATD and view the company as well positioned to capture incremental growth and share. ATD appears well on track to deliver on its “Double Again” five-year plan, which, in turn, should support the share price,” she said.


After “another strong quarterly result,” Scotia Capital analyst Patricia Baker sees Empire Company Ltd.’s (EMP.A-T) valuation as “compelling” with its shares trading at a “sizable” discount to peers.

On Feb. 10, the parent company of Sobeys reported third-quarter earnings per share of 77 cents, up 16.7 per cent year-over-year and exceeding the estimates of both Ms. Baker and the Street (68 cents and 67 cents, respectively).

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“On a two-year basis EPS growth was an impressive 67 per cent,” she said. “The solid Q3 performance reflects strong retail execution and underscores a growing momentum in the business. Looking over the past several years what is notable is the fact that Sobeys has been driving a consistent performance quarter after quarter with respect to its ability to balance sales and margin.

“Q3F22 built on the strong contribution from Project Horizon strategic initiatives in Q3F21 delivering a 41 basis points improvement in the GM rate. Sobeys navigated well through the many challenges in Q3 including supply chain disruptions and labour issues associated with omicron. The quarter also benefited from a strong year-over-year contribution from the Investments & Other segment, primarily driven by gains at Crombie Reit.”

Ms. Baker emphasized the impact of inflation on grocers is “ubiquitous at present and is showing up everywhere and that includes the cost of food.” However, she sees Empire having done a “good job working through this challenge.”

Keeping a “sector outperform” rating for its shares, she raised her target to $50 from $48, which is the current average on the Street.

“In our view EMP.a shares offer compelling value with the shares trading at only 13.8 and 13 times P/E multiple on our F22 and F23 forecasts, respectively,” said Ms. Baker. “The NA group average is 15.3 and 14.5 times. The shares are also trading below their five-year average, which to us represents a clear disconnect given the massively improved market position over the last five years and the clearly sharpened execution, not to mention the consistent results profile. The domestic peers are trading at 6.9 times and 17.2 times, and in our view, this is far too wide a gap, particularly in the context of the strong execution at EMP.a and the promise of more to come in the final year of Project Horizon.”


RBC Dominion Securities analyst Greg Pardy came away with a recent update with Ovintiv Inc. (OVV-N, OVV-T) CEO Brendan McCracken with a “reinforced confidence” in its “game plan to meet its production guidance while living within its $1.5 billion capital program.”

“The company pivoted its drilling plan from the Montney in British Columbia to the Pipestone area in the Alberta Montney and Bakken in North Dakota during the fourth-quarter of 2021 due to the ongoing Blueberry First Nations issue in B.C.,” he said in a research note released Monday. “In terms of mitigating oilfield cost inflation beyond longer lateral lengths and level loaded completions activity, Ovintiv is continuing to enhance its D&C speed (faster cycle-times) and supply-chain management.”

Mr. Pardy expects shareholder returns to rise as it executes “a disciplined game plan to reduce its leverage via absolute debt reduction.”

“Once the company reaches its $3.0 billion net debt target (expected in the second half of 2022), it plans to increase quarterly shareholder returns to 50 per cent of the previous quarter’s free cash flow after base dividends,” he said. “We peg Ovintiv’s free cash flow (before dividends) at $4.2-billion in 2022 ($98 WTI, $3.85 Henry Hub).”

Calling its current relative valuation as “attractive,” Mr. Pardy raised his target for Ovintiv shares by 6 per cent to US$53 (from US$50), keeping an “outperform” recommendation. The average is

“Ovintiv is trading at a discount 2022 estimated debt-adjusted cash flow multiple of 2.2 times (vs. our North American E&P peer group average of 3.8 times) and elevated 36-per-cent free cash flow yield (vs. our peer group at 19 per cent). We believe the company should trade at a modest discount to our peer group given its solid execution capability partially offset by its unconventional strategic moves in the past,” he said.

“Although its market performance has suffered from its strategic choices over the years, we get the sense that Ovintiv has no plans for any hard left-hand turns.”


National Bank’s Endri Leno expects to see evidence of a series of difficult obstacles facing K-Bro Linen Inc. (KBL-T), including a moderation in revenue from its healthcare business and a signs of a longer-than-anticipated road to recovery in hospitality, when it reports fourth-quarter financial results after the bell on Tuesday.

The analyst is projecting revenue of $59.5-million, up from $50.4-million a year ago. However, he expects adjusted earnings before interest, taxes, depreciation and amortization and distributable cash flow per share to fall to $10.8-million and 59 cents, respectively, from $11.1-million and 77 cents.

“In Q4/21, we expect Healthcare revenues [to] decline 4 per cent year-over-year to $40.2-million because of 1) moderation in Covid testing in early This fall partially offset by a pickup in Dec; and a pair of) B.C. climate disrupting entry to some websites,” he mentioned. “We additionally anticipate elevated prices from the AHS quantity transition (wraps up mid-2022), vitality and labour. The latter two doubtless stretch into 2022 as pure fuel costs stay elevated whereas the Ontario min wage elevated in Jan-22.”

“For Hospitality, we forecast year-over-year income good points of 130 pr cent (down 30 per cent vs. 2019) to $19.2-million. We anticipate leisure journey to be the principle contributor to year-over-year enhancements particularly within the U.Okay. whereas Canada’s This fall lodge occupancy was, on common, down 19 per cent under 2019. Occupancy fell in Jan-22 to down 36 per cent (vs. 2019) in Canada and has additionally been weak within the U.Okay. (per peer). Nonetheless, removing of 1) U.Okay. testing journey necessities; and a pair of) restrictions in Scotland (from March twenty first) bode properly for a continued however partial restoration. Labour and vitality doubtless stay issues for each U.Okay. (per peer) and Canada.”

Whereas Mr. Leno launched his 2023 monetary projections that estimate roughly 5-per-cent year-over-year as its hospitality enterprise continues to recuperate from COVID-related weak point, he warned that rebound will now be swift.

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“Each the healthcare and hospitality sectors of the laundry & linen providers trade are likely to generate, pandemic apart, recurring enterprise with the added long-term stability and visibility for the previous sector,” he mentioned. “KBro’s contracts usually vary from seven to 10 years in healthcare and two to 5 years in hospitality with low turnover charges – buyer retention has been 90-per-cent-plus in the previous couple of years. Though Okay-Bro has important market share in Canada (29 per cent market share) and Scotland (28 per cent market share; 4 per cent market share within the U.Okay.), each markets are typically fragmented presenting acquisition alternatives for bigger trade contributors, significantly within the hospitality trade.

“Whereas Okay-Bro has been negatively impacted by the pandemic within the hospitality section, healthcare volumes have been resilient with tailwinds together with extra frequent use of reusable private protecting clothes and elevated hospital occupancies alongside the outsourcing of laundry volumes by provincial governments and long-term care amenities. Though we anticipate alternatives for KBL, significantly in Canadian healthcare (reminiscent of clearing of surgical backlogs), hospitality M&A exercise will doubtless rely on the sector’s postpandemic restoration that a number of organizations don’t anticipate happens in full till 2024.”

Retaining a “sector carry out” ranking for the Edmonton-based firm’s shares, Mr. Leno reduce his goal to $42 from $45, under the $50.44 common.

“Though KBL has a conservative steadiness sheet and is well-run by a powerful administration staff, we keep a impartial stance given the anticipated lengthy highway to hospitality restoration and potential margin danger given the inflationary backdrop,” he mentioned.


Citing the impression of near-term margin headwinds, Raymond James analyst Andrew Bradford lowered CES Vitality Options Corp. (CEU-T) to “outperform” from “robust purchase” on Monday.

“CES ended 2021 with a bang, reporting $48-million headline EBITDA towards a $42-million consensus,” he mentioned. “Revenues have been encouraging on each side of the border and throughout each main service strains. Nonetheless, the tempo of 1Q23 price inflation has been so unprecedentedly excessive that CES has been challenged to maintain up with the mechanical logistics of passing prices via by way of worth will increase to its prospects. Such has been the acceleration of prices that CES is guiding 1Q EBITDA to be 20 per cent decrease sequentially or roughly $38-million.

“We’ve got no purpose to anticipate CES’ pricing gained’t have the ability to catch again up. Pricing throughout a number of main inputs has been rising for a minimum of 12 months, however CES’ margins have been trending modestly upward regardless, indicating success at passing via increased prices when these price will increase come at a manageable tempo. However within the interim, will increase are coming in sooner than they are often communicated and re-written into service agreements. We anticipate it’s going to take a number of weeks earlier than CES is kind of ‘caught-up’ and margins roughly normalize.”

Mr. Bradford raised his goal by 10 cents to $3.25. The common is $3.48.

“As an apart, buyers ought to admire that full price restoration doesn’t equate to full % margin restoration. Pricing will increase that simply offset unit price will increase imply the unit greenback margin will absolutely recuperate, however % margins will likely be decrease than earlier than,” he added.

Elsewhere, Nationwide Financial institution’s Michael Robertson elevated his goal to $3.35 from $2.85, sustaining a “sector carry out” ranking, whereas Stifel’s Cole Pereira bumped his goal to $3.25 from $3 with a “purchase” ranking.


In different analyst actions:

* In response to the Clearlake Capital Group LP’s US$2.6-billion acquisition supply, RBC Dominion Securities’ Walter Spracklin lowered Intertape Polymer Group Inc. (ITP-T) to “sector carry out” from “outperform” with a $40.50 goal, up from $37.

“We view counter gives as much less more likely to materialize given the excessive premium (82 per cent), administration’s full help of the transaction and dear termination charges on each side if the deal falls via,” he mentioned.

* CIBC World Markets’ Krista Friesen initiated protection of Badger Infrastructure Options Ltd. (BDGI-T) with a “impartial” advice and $29 goal. The common goal on the Avenue is $36.53.

“We maintain a constructive long-term view of Badger Infrastructure Options (Badger) given its natural progress alternatives and the initiatives taken to enhance margins. That being mentioned, within the close to time period we consider the corporate’s valuation is capped till there may be concrete proof of margin enchancment and higher free money stream (FCF) conversion,” he mentioned.

* CIBC’s Allison Carson initiated protection of Ascot Assets Ltd. (AOT-T) with an “outperformer” ranking and $1.65 goal, Artemis Gold Inc. (ARTG-X) with an “outperformer” ranking and $12.50 goal and Skeena Assets Ltd. (SKE-T) with an “outperformer” ranking and $20 goal. The common targets are $1.74, $12.73 and $22.44, respectively.

* CIBC’s Nik Priebe elevated his Alaris Fairness Companions Earnings Belief (AD.UN-T) goal to $23.50 from $22, maintaining an “outperformer” ranking. The common is $24.11.

“The follow-on funding in BCC displays a sizeable cheque that pushes the payout ratio down in direction of the low 60-per-cent vary (nearer to the place we consider the corporate would take into account a rise to the unitholder distribution). It additionally lowers the reinvestment danger related to a possible redemption occasion from Kimco. We’ve got elevated our earnings estimates accordingly,” he mentioned.

* Canaccord Genuity’s Carey MacRury raised his goal for Altius Minerals Corp. (ALS-T) to $27 from $21, exceeding the $25.86 common, with a “purchase” ranking.

* BMO Nesbitt Burns’ Jonathan Lamers raised his Ballard Energy Programs Inc. (BLDP-Q, BLDP-T) goal to US$11.50 from US$10 with a “market carry out” ranking. The common is US$18.70.

“The This fall launch had combined implications. Income exceeded estimates and Weichai-Ballard JV gross sales stepped as much as new ranges. Nonetheless, the order backlog declined to a four-year low,” he mentioned.

“We take into account this in keeping with our view Ballard’s income progress will stay decrease than gasoline cell sector leaders over 2022.”

* Whereas he expects to see progress throughout all its segments when it reviews quarterly outcomes on March 23, Nationwide Financial institution’s Endri Leno reduce his goal for Dialogue Well being Applied sciences Inc. (CARE-T) to $11.50, above the $10.72 common, from $14 with an “outperform” ranking based mostly on sector compression.

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“We keep a constructive view on CARE because of its 1) topline visibility via recurring and reoccurring revenues; 2) important market place in Canadian digital main well being and psychological care; 3) its potential to disrupt the in-person main/psychological healthcare and EAP supply; 4) expectations of continued progress; and 5) the built-in and well-liked strategy/platform/consumer expertise,” he mentioned.

* BMO’s Stephen MacLeod reduce his goal for Dorel Industries Inc. (DII.B-T) to $17 from $32, maintaining a “market carry out” ranking. The common is $21.

“This fall/21 outcomes have been properly under our estimates, as provide chain constraints and inflation weighed on earnings much more than steerage had contemplated. These headwinds are anticipated to proceed to weigh, resulting in elevated earnings volatility and decreased visibility. Whereas monetization of Residence & Juvenile stays a possible future consequence, Dorel faces extra acute headwinds (provide chain, inflation). Whereas valuation is undemanding (inventory is again to pre-Sports activities sale ranges), within the absence of incremental sale readability low earnings visibility will restrict the inventory’s upside,” mentioned Mr. MacLeod.

* CIBC’s Scott Fromson raised his Dream Workplace Actual Property Funding Belief (D.UN-T) goal to $31.50 from $27.25 with an “outperformer” ranking. The common is $27.78.

* Berenberg’s Jonathan Man reduce his Endeavour Mining Corp. (EDV-T) goal to $44 from $46 with a “purchase” ranking. The common is $43.62.

* TD Securities’ Craig Hutchison raised his Endeavour Silver Corp. (EDR-T) goal to $7 from $6, sustaining a “maintain” ranking. The common is $7.48.

* Desjardins Securities’ Frederic Tremblay reduce his Goodfood Market Corp. (FOOD-T) goal to $5 from $7 with a “purchase” ranking. The common is $4.06.

“We’re off restriction following FOOD’s $30-million purchased deal of convertible unsecured debentures,” he mentioned. “With proceeds from the providing supporting an acceleration of the rollout of micro achievement centres, we consider that FOOD must be higher positioned for achievement within the more and more aggressive on-demand supply market. Pace and scale matter if FOOD desires a good piece of the pie, as an alternative of simply the crumbs. We view FOOD’s depressed valuation as another excuse to revisit the story.”

* BMO’s Jonathan Lamers elevated his Granite Actual Property Funding Belief (GRT.UN-T) goal to $115 from $112 with an “outperform” ranking. The common is $110.09.

* Desjardins Securities’ Benoit Poirier raised his IBI Group Inc. (IBG-T) goal by $1 to $17 with a “purchase” ranking. The common is $17.38.

“Whereas we have been shocked by the softness in margins in 4Q, we’re assured that the adversarial impression was solely non permanent. We’re inspired by IBI’s report backlog and powerful steadiness sheet, which ought to allow the corporate to ship stronger progress than we’re concentrating on in 2022. We’re additionally trying ahead to the launch of IBI’s subsequent strategic plan with 1Q22 outcomes (Might 6),” he mentioned.

“We stay bullish on IBI as we see robust potential for natural (close to report backlog) and inorganic (very robust steadiness sheet with a sturdy pipeline of alternatives) progress forward.”

* CIBC’s Dennis Fong raised his Imperial Oil Ltd. (IMO-T) goal to $60 from $58 with a “impartial” ranking. Others making adjustments embody: Desjardins Securities’ Justin Bouchard to $65 from $60 with a “purchase” ranking and BMO’s Randy Ollenberger to $65 from $60 with a “market carry out” ranking. The common is $60.11.

“IMO’s investor day offered a plethora of particulars on many initiatives associated to optimizing property and bettering ESG efficiency,” mentioned Mr. Bouchard. “IMO is producing huge quantities of FCF and is working via the main points on how finest to allocate it to buyers. That mentioned, the market was anticipating the announcement of a SIB, which didn’t occur. However elevated shareholder returns are coming — it’s only a matter of timing, in our view. The problem now could be that the share worth is up greater than 40 per cent because the begin of talks on an SIB.”

* Credit score Suisse’s Fahad Tariq elevated his Lundin Mining Corp. (LUN-T) goal to $13 from $11.50 with a “impartial” ranking. The common is $13.08.

* Scotia’s Phil Hardie trimmed his Energy Company of Canada (POW-T) goal to $48 from $48.50 with a “sector carry out” ranking. The common is $47.38.

“We proceed to consider that holding POW shares supply buyers higher worth and embedded optionality than proudly owning its underlying publicly-traded holdings,” he mentioned. “POW’s announcement at first of the 12 months that it was promoting its 13.9-per-cent curiosity in ChinaAMC to IGM additional advances administration’s strategic purpose of simplifying POW’s company construction and gives one other instance of the worth creation alternatives embedded inside its non-public stub.”

* Scotia Capital’s Mark Neville reduce his WSP International Inc. (WSP-T) goal to $185 from $190 with a “sector carry out” ranking. The common is $195.43.

“WSP’s 2022 – 2024 Strategic Plan units formidable progress targets, but additionally makes additional commitments to ESG imperatives, greening of the portfolio, and diversification of the enterprise combine and geographic publicity — all whereas additional strengthening its core,” he mentioned. “Whereas we view the plan in a constructive gentle, it was additionally largely as anticipated given the corporate’s historical past of setting (after which exceeding) strong targets and targets. The corporate’s aspirational goal (i.e., to double in dimension and obtain an adjusted EBITDA margin greater than 20 per cent) additionally frames the L/T imaginative and prescient, in addition to potential upside within the fairness. We’ve got made modest upward revisions to our forecasts — reflecting increased assumed natural progress charges as margin targets have been in keeping with our prior forecasts.”

* TD Securities’ Arun Lamba raised his Wesdome Gold Mines Ltd. (WDO-T) goal to $17.50 from $15.50 with a “purchase” ranking, whereas Nationwide Financial institution’s Don DeMarco elevated his goal to $18.75 from $15.25 with an “outperform” ranking. The common is $15.83.