Inside the Market’s roundup of some of today’s key analyst actions
Desjardins Securities analyst Jerome Dubreuil does not “expect sufficiently good news this earnings season to decisively reverse the trend in Canadian telecoms.”
“We expect volume declines in both wireless and wireline services, driven by expectations for lower immigration, to more than offset the recent stabilization in pricing when the Big 3 release their annual guidance in the coming weeks,” he added.
In a research note released Tuesday, Mr. Dubreuil said it is “too early to tell” on signs of price stabilization, and he expects to see lower EBITDA growth in 2025.
“Despite observing wireless price increases for premium and flanker brands’ plans, we highlight that prices had also increased at this time last year before decreasing again in February and March,” he said. “From a shareholder perspective, we will be more confident in this pricing stabilization if it holds until at least mid-March.”
“We believe there is a risk that the guidance provided could validate concerns about the lower level of growth in the industry, especially BCE’s EBITDA. FCF generation remains robust across the sector, but we believe a more prudent approach to shareholder distributions or to incremental investments would ultimately be welcomed by the market.”
He also emphasized the sector recently reach a “notable valuation ‘milestone’ relative to U.S. peers.”
“For the first time since 2011, BCE is trading below AT&T on an EV/NTM EBITDA basis (excluding assets not generating EBITDA),” he said. On the same metric, RCI also trades roughly in line with Verizon for the first time since 2021. The long-time advantages of
population growth and pricing discipline that Canadian telecoms had vs the U.S. have eroded recently, but we believe the converging valuations between the countries should provide support to Canadian telecom valuations.”
The analyst made a “significant” target drop for Rogers Communications Inc. (RCI.B-T) “as a result of the large ongoing investments in sports and capex despite its tight balance sheet and the 50-per-cent discount (was 35 per cent) to PMV (private market valuation) we now use on sports assets to better align with publicly traded peers, partly offset by our increased PMVs.”
“RCI’s infrastructure deal with Blackstone was initially expected to close before the end of 2024, but we are uncertain whether the deal will close before the company reports 4Q24 results on January 30,” the analyst said. “We have now pushed the financial impact of the potential transaction in our model to 1Q25 from 4Q24. We believe the company will not complete this transaction if credit agencies do not grant RCI the equity treatment for the instrument. It is our understanding that it would be ideal for the infrastructure deal to close several months before the closing of the MLSE deal (expected in mid-2025). Indeed, should the infrastructure deal collapse, the company would need to set up another type of financing, which could include the issuance of hybrid securities or an accelerated sale of minority stakes in MLSE.
”Earlier in January, RCI reduced its 2024 service revenue growth guidance to ‘just over 7 per cent’ from 8–10 per cent, citing media weakness. We lowered our 4Q top-line growth expectation for media to 0 per cent from 6 per cent, which translates into a 0.2-per-cent impact on annual consolidated revenue. We highlight that 2024 revenue consensus was already below RCI’s service revenue growth guidance. For 2025, we have lowered the pace of improvement in cable pricing, reflecting sustained competition in wireline services. We have also shifted more wireless net adds to prepaid from postpaid to better align with recent trends in loadings. We expect the market will closely monitor cable revenue in 4Q24 as the company has long guided to a return to growth in this quarter—we forecast 0.9-per-cent year-over-year growth in cable. Finally, we have removed the MLSE financials from our forecast given the uncertainty about the closing date for the MLSE deal—we still carry MLSE in our NAV.”
His Rogers target is now $49, down from $60 and below the $58.07 average on the Street. He kept a “buy” recommendation.
Mr. Dubreuil also lowered his targets for BCE Inc. (BCE-T, “hold”) to $38 from $40 and Quebecor Inc. (QBR.B-T, “buy”) to $38 from $40. The averages are $36.46 and $37.50, respectively.
He maintained his targets for Cogeco Communications Inc. (CCA-T, “hold”) at $72 and Telus Corp. (T-T, “buy”) at $26.50. The averages are $79.15 and $23.58, respectively.
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Monday’s sell-off in Celestica Inc. (CLS-N, CLS-T) was “overdone,” according to TD Cowen analyst Daniel Chan.
TSX-listed shares of the Toronto-based supply-chain solutions company plummeted 28 per cent as the emergence of China’s DeepSeek low-cost artificial intelligence model sparked a sector-wide selloff.
“The market’s reaction [Monday] was likely driven by fear of hyperscalers slowing AI infrastructure investments,” said Mr. Chan “As a major supplier of datacentre networking and compute equipment, we do not believe Celestica is immune from this risk; however, we believe there are many opportunities that may come from being able to deliver GenAI at significantly lower costs:
“We share our semis team’s view that lower cost can drive significantly higher GenAI adoption. DeepSeek’s API costs $0.55 per million input tokens and $2.19 per million output tokens, compared to OpenAI’s $15 and $60, respectively. More efficient models and training methods can still benefit from more computing resources. Higher compute resources can result in superior performance, particularly for reasoning models, like the DeepSeek model released last week. Moreover, in addition to the fierce competition between American companies, a Chinese company just raised the stakes on the GenAI race. We argue that stakeholders remain incentivized to differentiate with their compute resources.”
The analyst noted his 2026 forecast implies hyperscaler capex investments “maintain momentum.”
“Until we get more clarity on the potential impact of DeepSeek’s developments, our base case assumption is that capex plans remain unchanged,” he said..” As a result, we continue to expect HPS momentum into 2026, while the Enterprise segment sees a sharp recovery as CLS’s largest customer ramps up volumes again. Similar to the 2025 narrative, a growing mix of AI and HPS products should provide EBIAT margin expansion and justify a higher multiple.
“But what if we are wrong? We estimate that the current share price builds in a sufficiently conservative 2026 scenario where HPS revenue declines by 10 per cent and Enterprise revenue from its largest customer remains flat off the 16-per-cent decline we expect in 2025 due to the well-telegraphed product transition. We note that Communications revenue declined by 6 per cent in 2023 when there was significant cloud rationalization following rapid expansion throughout the pandemic.”
Reiterating his “buy” rating for Celestica shares, Mr. Chan hiked his target to US$107 from US$70. The average is currently US$102.90.
“We believe the share price reflects a sufficiently conservative scenario for the potential impact of DeepSeek’s models on AI infrastructure spend,” he said. “While many unknowns remain, our view is that there is potential for material upside if the cost of AI is lowered and drives higher adoption. We believe the current share price presents an attractive risk/reward profile.”
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National Bank Financial analyst Cameron Doerksen is “still positive on growth ahead” for Exchange Income Corp. (EIF-T) and thinks its valuation compared to peers supports a higher multiple.
“We continue to see solid growth ahead for EIC in 2025 and 2026 driven by contract wins including (1) ongoing ramp and year-over-year growth from medevac contracts in B.C., Manitoba, and starting in 2025, Newfoundland; (2) contract expansion on the U.K. aerial surveillance contract; (3) leasing growth at Regional One, and (4) growth in the Windows segment supported by recently won new business (growth more skewed to later in 2025 and 2026),” he said. “Management has guided to 2025 EBITDA of $690-$730 million versus our current 2024 forecast of $624 million.”
“On our updated 2025 forecast, EIC shares are trading at just 7.0 times EV/EBITDA but .... the majority of publicly traded comparable companies to the various EIC segments trade at higher multiples. Weighting these peer group multiples based on our estimate for EIC’s revenue split in 2025 results in a weighted average EV/EBITDA multiple of 8.8 times.”
In a research report released late Monday, Mr. Doerksen adjusted his fourth-quarter 2024 and 2025 forecast for the Winnipeg-based diversified, acquisition-oriented dividend company ahead of its Feb. 26 financial report to reflect the recent and future convertible debenture redemptions as well as other minor adjustments.
“At the end of Q3/24, EIC had $926-million in total liquidity, so the company is well positioned for acquisitions,” he said. “EIC completed the acquisition of Spartan Mat in Q4/24 (US$120 million purchase price), which we estimate adds $110-million in revenue with growth ahead. Management has indicated that its M&A pipeline is still strong in both of its segments so additional deals in 2025 are likely (although we do not assume any additional M&A in our forecast).”
“Unlike many other companies in our Transportation coverage universe, Exchange Income has limited risk from potential new tariffs. The majority of EIC’s operations are located in Canada and its U.S.-based businesses are mostly domestic U.S.-focused operations. The one business within EIC that does have some cross-border exposure is its Multi-story Windows business that makes windows for residential high-rises, but it has large manufacturing plants in both Canada and the U.S. so if U.S. import tariffs were imposed, we believe EIC could readily adjust its production to avoid any significant impact. EIC could have some cost inflation if Canada were to impose import tariffs on aerospace products from the U.S. which would increase aircraft acquisition prices and the cost of parts and materials, but the nature of most of EIC’s flying operations should allow the company to pass on higher costs to its customers.”
The analyst also introduced his 2026 forecast which assumes “modest” 4.0-per-cent revenue growth and similar margins for its Aviation segment, which he said is “largely driven by full-year contributions from new contracts plus some modest organic revenue growth.” He sees 5.9-per-cent revenue growth and “some” margin expansion for the company’s Manufacturing segment, which is driven by growth in the Windows segment.
Keeping an “outperform” rating for Exchange Income shares, Mr. Doerksen raised his target to $73 from $68. The current average is $69.80.
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Desjardins Securities analyst Gary Ho predicts Goeasy Ltd. (GSY-T) will “remain prudent and maintain a credit-tightening stance, leading to more conservative loan book growth” given the uncertain macroeconomic backdrop, particularly the volatility linked to the potential U.S. tariffs.
Ahead of the Feb. 11 release of its quarterly results, Mr. Ho does not expect any surprises from the Mississauga-based lender’s outlook for 2025 and 2026 as well as new 2027 financial expectations.
“We trimmed our [fourth-quarter] adjusted EPS to $4.38 [from $4.54] (vs consensus of $4.55),” he said. “Management continues to tighten credit (maintaining the softlanding outlook) — we expect loan book growth at the low end of guidance of $205– 230-million, revenue yield of 33.3 per cent (vs guidance of 33–34 per cent) and NCO [net charge-offs] of 9.2 per cent (vs guidance of 8.75–9.75 per cent).
“With changing macro variables since 3Q, FLIs have deteriorated somewhat, impacting GSY’s more pessimistic scenarios (weightings on each scenario remain unchanged); we upped our ACL to 7.49 per cent from 7.40 per cent (the key reason for our lower adjusted EPS). However, once the macro environment improves, the ACL buildup will likely return to earnings in the outer quarters.”
After raising his 2025 and 2026 earnings projections, Mr. Ho bumped his target for Goeasy shares to $220 from $210 with a “buy” rating. The average is $236.67.
“Our investment thesis is predicated on: (1) GSY’s ability to manage in the current challenging macro environment through its robust credit underwriting platform, supported by its creditor insurance program; (2) solid loan book growth, particularly in secured products; (3) a credible management team; and (4) the business has consistently generated a 20-per-cent-plus ROE,” he said.
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Ahead of earnings season for Canada’s life insurance companies, CIBC World Markets analyst Paul Holden raised his target prices for stocks in his coverage universe.
“We expect another quarter of solid earnings, supported by equity market appreciation, growth in insurance in-force, improving insurance experience, and capital actions,” he said. “The group is not inexpensive at 10.6 times P/E (NTM [next 12-month] consensus) vs. a 10-year average of 10.1 times; accordingly, we expect sector performance to be more in line with the market. Given convergence in P/E multiples, the key question is whether we will see growing divergence, similar to the past. Our two Outperformer-rated names are SLF and IAG.”
His changes are:
- Great-West Lifeco Inc. (GWO-T, “neutral”) to $56 from $55. The average on the Street is $50.67.
- IA Financial Corp. Inc. (IAG-T, “outperformer”) to $144 from $143. Average: $138.63
- Manulife Financial Corp. (MFC-T, “neutral”) to $47 from $46. Average: $47.25.
- Sun Life Financial Inc. (SLF-T, “outperformer”) to $97 from $96. Average: $91.
“SLF remains at the top of our pecking order based on expected earnings growth, organic capital generation, potential capital deployment and highest weighting in USD,” the analyst said. “There is also potential relative valuation upside if/when MFS flows improve and from a growing proportion of earnings from SLC (high-multiple business) and progress towards the sector-leading ROE target. We expect SLF to produce strong earnings results with Q4, but still weak MFS flows.”
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A “volatile” macroeconomic backdrop is obscuring Parkland Fuel Corp.’s (PKI-T) improvement initiatives, said National Bank Financial analyst Vishal Shreedhar in a preview of its fourth-quarter 2024 earnings results, which are scheduled to be released in early March.
“The crack spread during Q4/24 was $56/bbl, recovering vs. $51/bbl in Q3/24,” he said. “Notwithstanding, crack spreads remained below the five-year average of $60/bbl.
“We project Canada fuel volumes to decline by 1.5 per cent year-over-year, largely reflecting weakness in commercial. We project USA segment volume to be flattish, largely reflecting a weak consumer backdrop and choppy business activity in PKI’s regions of operation. In the International segment we project 15.3-per-cent year-over-year volume decline, reflecting lower volumes in wholesale, partly offset by continued strength in aviation and retail. While the 2025 EBITDA guidance appears conservative relative to current crack spreads (Q1/25 YTD is $63/bbl; implies more than $100-million upside to our 2025 EBITDA), we caution that the commodity backdrop remains volatile.”
Mr. Shreedhar is currently projecting quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) of $440-million, down from $463-million during the same period a year ago and below the consensus expectation of $447-million. He attributes that 5-per-cent decline to “lower crack spreads, an unplanned shutdown at the refinery (related to maintenance activities for 7 days; we estimate $7 million impact to EBITDA), lower volumes in International & Canada, partly offset by higher fuel margin in USA and International, favourable F/X, and benefits from targeted cost-saving initiatives.”
“Despite challenging conditions, PKI’s valuation remains discounted at 6.3 times our NTM [next 12-month] EBITDA vs. the five-year average of 7.5 times,” he said “As an exploratory exercise, we impute PKI’s multiple based on a weighted average of PKI’s peers. We calculate an implied NTM EBITDA multiple of 8 times.”
Accordingly, Mr. Shreedhar reaffirmed his “outperform” recommendation and $41 target for Parkland shares. The current average is $48.42.
“PKI’s strategy, which we are supportive of, seeks to: (i) drive efficiencies, organic growth, ROIC and cash flow, (ii) divest non-core assets, and (iii) deleverage,” he said. “In addition, we believe ongoing shareholder pressure will drive better performance over time.”
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In other analyst actions:
* Jefferies’ Anthony Linton downgraded Gibson Energy Inc. (GEI-T) to “hold” from “buy” with a $26 target, below the $27.04 average on the Street.
* Mr. Linton also made these target increases: Enbridge Inc. (ENB-T, “hold”) to $65 from $59, South Bow Corp. (SOBO-T, “hold”) to $33 from $32 and TC Energy Corp. (TRP-T, “hold”) to $71 from $65. The averages are $62.27, $32.86 and $70.67, respectively.
* Scotia’s Phil Hardie increased his Brookfield Business Partners LP (BBU-N, BBU.UN-T) target to US$32, matching the average, from US$30 with a “sector outperform” rating.
“Given what we expect to remain as a relatively complex investment landscape, we recommend investors approach the non-bank financial space with a barbell approach that balances quality defensives with attractive value opportunities,” he said. “We have adopted a bias toward value, given valuation disparities are too wide to ignore, and we expect the emerging ‘catch-up’ trade to endure through 2025. ... We believe Onex [”sector outperform” and $145 target] and BBU valuation levels look increasingly at odds with fundamentals and what appear to be more favourable operating trends on the horizon. A confluence of factors created challenging operating conditions for alternative asset managers over the past few years and while several risks remain, we think pressures are receding. Further, we believe management teams at both companies are actively pursuing strategy to surface value for their fund holders and shareholders.”
* Stifel’s Suthan Sukumar raised his CGI Inc. (GIB.A-T) target to $185 from $180 with a “buy” rating. The average is $169.21.
“Strength in recent prints by IT peers ACN, INFY, and WIT point to demand greenshoots with a sustaining managed services pipeline and pockets of improving discretionary spend, in-line with our IT spending survey findings,” he said. “We believe structural improvements to CGI’s operating model and go-to-market approach have positioned the company for growth upside this year, in light of the improving backdrop and a return to more active M&A. Moreover, the valuation gap (NTM P/E basis) between CGI and global peers has expanded to nearly 4 times vs. the typical 2 times, a level not seen since 2022. Hence, we see an attractive risk-reward heading into CGI’s FQ1 print on 1/29. We raise our target price ... on the back of new C26 estimates and recent IT peer multiple expansion. CGI remains the top-pick in our IT services coverage.”
* Scotia’s Himanshu Gupta trimmed his Colliers International Group Inc. (CIGI-Q, CIGI-T) target to US$170 from US$172.50 with a “sector outperform” rating. The average is US$167.94.
“CIGI has lagged our Shadow CIGI by a meaningful 30 points in 2024. So, opportunity to catch-up,” he said. “So far in 2025, CIGI is up 6 per cent year-to-date, slightly outperforming the broader Index, but in line with Shadow CIGI. Our SotP [sum-of-the-parts] valuation of $170.00 assumes 6-per-cent organic growth and 1.5 times turn EV/EBITDA multiple expansion. Assuming normalized growth, our valuation increases to $200.00 if we roll-forward our model another year. ... CIGI has acceleration in organic & earnings growth in 2025, and lower PEG ratio of 1.3 times.”
* BMO’s Brian Quast lowered his Eldorado Gold Corp. (ELD-T) to $29 from $31 with an “outperform” rating. The average is $28.54.
“ELD released a technical report for the Lamaque Complex that was slightly negative to our valuation, as we are now modeling the Lamaque Complex as per these documents. This technical report saw the Lamaque complex having a shorter mine life, lower production, and increased costs compared with our prior estimates,” he said.
* In response to the announcement it has entered into a comprehensive financing transaction to support Discovery Silver’s proposed acquisition of the Porcupine Complex, Raymond James’ Brian MacArthur raised his Franco-Nevada Corp. (FNV-N, FNV-T) target to US$160 from US$158 with an “outperform” rating. The average is US$147.12.
* CIBC’s Hamir Patel hiked his Nutrien Ltd. (NTR-N, NTR-T) target to US$64, exceeding the US$59.90 average, from US$55 with an “outperformer” rating, while Wells Fargo’s Richard Garchitorena raised his target to US$53 from US$52 with an “equal-weight” rating.
“Heading into Q4 earnings season (our first quarter since assuming coverage of the fertilizer and chemicals space), we are making only modest estimate revisions for the four names under coverage (CHE, MEOH, MOS and NTR). Our top pick in the group remains Methanex. We also rate Nutrien Outperformer. We remain Neutral on Mosaic given more conservative phosphate pricing assumptions than the Street. We also remain on the sidelines on Chemtrade given our concerns that pricing gains since 2022 may not be sustainable,” said Mr. Patel.
* CIBC’s Mark Petrie cut his target for Saputo Inc. (SAP-T) to $32 from $35 with an “outperformer” rating. The average is $31.72.
“Commodity trends remain mixed and came in below previous expectations for FQ3, primarily in the U.S. We have also moderated our estimates for F2026, mostly for U.S. margins but also for somewhat slower top-line growth in Canada. Though clearly patience is required and trade risk has re-surfaced, we view the current valuation as punitive, and inflection on free cash flow generation, de-leveraging and returning cash to shareholders should limit further downside,” said Mr. Petrie.