Thursday’s analyst upgrades and downgrades

Inside the Market’s roundup of some of today’s key analyst actions
In response to Wednesday’s announcement from Lithium Americas Corp. (LAC-T) that General Motors Co. (GM-N) will contribute $625-million to their new joint venture for developing the Thacker Pass project in Nevada, National Bank Financial analyst Mohamed Sidibé upgraded the Vancouver-based miner to an “outperform” recommendation from “sector perform” previously, seeing a financing overhang “largely removed now” and the investment “solidifying the importance of the asset in the North American EV supply chain.”
“We view the Thacker Pass project as an attractive project strategically located to benefit from the North American Supply Chain and our Outperform rating is driven by the removal of the financing overhang for the stock and the strategic nature of the asset for the North American EV supply chain, which are likely to overweigh any future development and capex risk associated with the start of major construction,” he said in a research note.
Calling the joint venture, which sent Lithium Americas shares soaring 22.2 per cent on Wedesday, “an accretive alternative financing option,” Mr. Sidibé emphasized the agreement “solidifies a strong partnership” with the U.S. automaker.
“Through this agreement, GM’s overall investment into LAC will amount to $945-million, including its initial February 2023 Tranche 1 investment of $320-million in exchange for 15 million common shares of LAC,” he said. “Additionally, with the agreement, GM has now also extended its existing offtake agreement for up to 100 per cent of production volumes from Phase 1 of Thacker Pass to 20 years to support the expected maturity of the DOE loan. On the call held by management, the company noted that no changes in pricing terms were made to the initial Phase 1 offtake agreement. Upon closing, LAC will also enter into an additional 20-year offtake agreement for up to 38 per cent of Phase 2 production volumes purchased at market prices and will retain its right of first offer on the remaining Phase 2 production volumes. Additionally, the JV agreement lightens the capital burden on LAC on future development plans such as Thacker Pass Phase 2 with GM expected to contribute its fair share. No major decisions have been done on the advancement of the Thacker Pass Phase 2 project with a focus on first advancing and completing construction of Phase 1.”
After increasing his net asset value projection, Mr. Sidibé raised target for Lithium Americas shares to $7.25 from $5.75. The average target on the Street is $7.88, according to LSEG data.
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With Rogers Communications Inc. (RCI.B-T) shares having underperformed the S&P/TSX composite index by 8 per cent since the Sept. 18 announcement of its $4.7-billion acquisition of rival BCE Inc.’s (BCE-T) stake in Maple Leaf Sports & Entertainment, Desjardins Securities analyst Jerome Dubreuil feels its valuation “continues to overlook the value of its sports assets.”
“While we are reducing our RCI NAV [net asset value] to reflect typical sports asset discounts in publicly traded entities, we believe there is an opportunity for a higher valuation of RCI’s sports assets in its share price,” he said.
Andrew Willis: Rogers wins MLSE with no outside financing
In a report released Thursday, Mr. Dubreuil called MLSE “one of the most complete and desirable multi-franchise sports assets globally, given its ownership of multiple teams within one of North America’s largest and fastest-growing cities, and in four of the six largest sports leagues on the continent.” He analyzed the valuation of publicly traded sports assets, precedent transactions and sports trading dynamics.
He said: “Key findings in our report. (1) Publicly traded premium sports assets exist; (2) typical financial analysis is not a great way to assess the value of sports assets; (3) sports teams’ PMVs (private market value) have performed relatively in line with the S&P 500 since 2010; (4) transactions have closed at values significantly above PMVs; (5) most publicly traded sports teams trade at a significant discount to PMV; (6) MLSE will probably trade at a discount to PMV, whether it trades publicly or remains within RCI; (7) the implied discount to PMV for MLSE in RCI should not be 100 per cent (as is the case currently), especially if there is an IPO; and (8) we do not expect a leverage impact on RCI.”
The analyst concluded MLSE’s potential valuation could be “north of $15-billion” when including the Blue Jays, which called “a whole new ball game.”
“We believe RCI’s management could explore the option of adding the Toronto Blue Jays to the MLSE structure as a way to maximize the team’s value, generate efficiency gains and effectively monetize a portion of the baseball team to reduce leverage,” he said.
“If we include the Blue Jays in the mix, RCI’s four main sports teams would be worth $13.3-billon based on Forbes’ latest valuation at current exchange rates, or $15.4-billion using Forbes’ valuation for the Blue Jays and the value implied by the BCE transaction. However, given our view that RCI wants to remain a long-term owner of the Toronto sports franchises, we believe MLSE (including the Blue Jays) would likely trade at a significant discount to its PMV. A 30-per-cent discount to PMV would return a $9.3-billlion EV for a publicly traded MLSE if the Blue Jays were added to the structure.”
Mr. Dubreuil also suggested an initial public offering for MLSE could help RCI “surface the value of its sports assets.”
“We believe RCI’s management could explore the option of adding the Toronto Blue Jays to the MLSE structure as a way to maximize the team’s value, generate efficiency gains and effectively monetize a portion of the baseball team to reduce leverage,” he said. “If we include the Blue Jays in the mix, RCI’s four main sports teams would be worth $13.3-billion based on Forbes’ latest valuation at current exchange rates, or $15.4-billion using Forbes’ valuation for the Blue Jays and the value implied by the BCE transaction. However, given our view that RCI wants to remain a long-term owner of the Toronto sports franchises, we believe MLSE (including the Blue Jays) would likely trade at a significant discount to its PMV. A 30-per-cent discount to PMV would return a $9.3-billion EV for a publicly traded MLSE if the Blue Jays were added to the structure.”
Keeping a “buy” recommendation for Rogers, he trimmed his target to $63 from $68, which he said “reflects the discounts that the market typically attributes to sports assets.” The average is $67.54.
“Although we have reduced our target price, we still view increased reflection of sports assets in RCI’s share price as a potential catalyst,” said Mr. Dubreuil.
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When Loblaw Companies Ltd. (L-T) reports its third-quarter financial results on Nov. 13, National Bank Financial analyst Vishal Shreedhar expects “good” earnings per share growth “amid mild sales performance.”
He’s currently projecting total sales to nudge up to $18.589-billion from $18.265-billion a year ago, narrowly below the consensus forecast of $18.772-billion. However, he’s forecasting earnings per share of $2.44, a penny below the Street but a notable jump from $2.26 in fiscal 2023. He attributes that 8.1-per-cent year-over-year gain to “positive Food Retail (FR) same store sales growth (sssg), continued overall momentum in Shoppers Drug Mart (SDM), benefits from ongoing growth/efficiency programs and share repurchases.”
“We forecast sequentially better FR sssg primarily reflecting sequentially easier comparisons,” said Mr. Shreehar. Recall, L expects the 2-year stack to be 6 per cent (NBF models 5.7 per cent).
“Our review of peer commentary suggests: (i) Gradual improvements in customer shopping behaviour, albeit still pressured, (ii) Pricing investments by several retailers as the consumer remains stretched (we understand competition remains rational), and (iii) Higher sales in fresh. (3) Our analysis of thousands of customer reviews suggests that customer sentiment continues to favour discount over conventional; that said, the gap is narrowing.”
The analyst also sees customer sentiment toward Shoppers Drug Mart “improving.”
“We expect F/E [front end] sssg to be slightly negative, largely reflecting a normalization of sales growth rate,” he said. “In Rx, we expect solid growth in services (expanded scope of care) and continued strength in specialty drugs. (2) Our analysis suggests customer sentiment for SDM has been improving over the last several months, which we believe could be supportive of improving sales performance over the medium term (we expect low-single digit sssg at SDM in 2025 and 2026).”
Also seeing margin expansion reflecting “continued improvement in shrink (albeit to a lesser extent sequentially) and favourable mix in Drug Retail,” Mr. Shreedhar raised his target for Loblaw shares to $188 from $175, keeping an “outperform” recommendation. The current average is $183.88.
“We continue to maintain a favourable view on Loblaw and recommend it as our preferred grocer supported by several key themes: (1) Benefits from management’s improvement initiatives; (2) Ongoing consistent EPS growth, and (3) Favourable trends in discount and drug store (where Loblaw over-indexes),” he said.
“Major projects for Loblaw include: accelerating square footage growth (primarily in discount and Shoppers Drug Mart), ongoing cost reduction efforts (supply chain, supplier collaboration, etc.) and other initiatives (freight as a service, retail media, reinvigoration of the right-hand side, etc.).”
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While warning CCL Industries Inc.’s (CCL.B-T) adjusted earnings per share year-over-year growth rate will decelerate from the previous quarter, TD Cowen analyst Sean Steuart continues to expect a third-quarter earnings beat as “easy comps continue.”
“Even with prospects for slower earnings growth starting Q4/24, we expect that Q3/24 results will build on positive sentiment,” he said. “On the Q2 conference call in mid-August, management referenced ongoing strong top-line momentum for the CCL and Checkpoint segments in July (the latter, boosted by RFID applications). We suspect those trends continued into August and September at a moderating pace. On a regional basis, Latin America remains a relative strong point, mitigated by slowing demand growth from Asia, especially China. To a limited extent, we also expect that Q3 results will benefit from a full quarter including consolidation of the Pacman JV and incremental benefits from Innovia restructuring initiatives.”
Previewing the Nov. 13 release, Mr. Steuart now expects quarter adjusted fully diluted EPS of $1.14, which is 5 cents above the consensus on the Street and represents 21-per-cent year-over-year growth. He notes that gain would represent a “slight deceleration” from 25 per cent in the second quarter, which was the highest quarterly improvement since fiscal 2017 (excluding volatility during the pandemic). His consolidated EBITDA estimate of $399.6-million is also above the consensus of $385.5-million.
“Despite strong share price gains (up 56 per cent the past 11 months), CCL is active on share buybacks,” he noted. “Q3/24 share repurchases were $100.2-million versus Q2/24 buybacks of $40.6-million. Cumulative shares repurchased over the past two quarters are 1.86 million (1.0 per cent of the total outstanding). With tempered M&A ambitions, a strong balance sheet (1.2 times net debt/LTM [last 12-month] EBITDA at the end of Q2) and expected deleveraging over our forecast horizon, we believe that NCIB activity will continue (10 per cent of Class B shares allowed under the program).
“We are making modest changes to our earnings outlook and are introducing 2026 estimates. We expect a slowing EPS growth trajectory for CCL (2024 estimate = 18.6 per cent; 2025 = 7.0 per cent; 2026 = 5.7 per cent), but the company’s FCF profile is robust and overall growth rates continue to outpace broader label/specialty packaging industry trends.”
Maintaining a “buy” rating, Mr. Steuart raised his target for CCL shares to a Street high of $98 from $92. The average is $88.70.
“We believe that CCL represents attractive value given favourable mid-term organic earnings growth prospects and a flexible capital structure,” he said.
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In a report previewing earnings season for Canadian industrials titled Some near-term pain, but long-term gain, Stifel analyst Ian Gillies warned “the next few months are going to be spooky for the short-cycle names.”
“We expect the focus for 3Q24 to be on whether there are initial positive demand signals emerging from recent interest rate cuts in Canada and the U.S,” he said. “Many investors are already looking past what is likely to be tepid 3Q24 and 4Q24 results, into a recovery for volumes and pricing in 2025.
“If this messaging does not materialize, we could be looking at a step back in the near-term for short-cycle stocks (ex-Stelco) given that those stocks in our coverage are up 7.0 per cent in the last 3 months (driven by multiple expansion) compared to SPX at 3.3 per cent. Our best idea for the remainder of 24 and into 25 remains Aecon, given the combination of earnings recovery, backlog growth, inexpensive valuation and index inclusion. We continue to favour the long-cycle infrastructure-focused names such as WSP, STN, and BDT as outlined in our 2026 estimate rollout.”
Mr. Gillies predicted long-cycle stocks should “continue to articulate a robust growth outlook.”
“We anticipate WSP, Stantec, Bird and Aecon to all post strong backlogs, and continue to suggest margin expansion is likely,” he said. “With that said, catalysts are likely to be limited given that Bird just hosted an investor day, WSP will release its updated business plan in February 2025, and Stantec’s updated business plan was released in December 2023. Of this group of companies, Aecon remains our best idea into year-end.
“2Q24 going to be a mixed bag for short-cycle stocks: We have revised 2024E EBITDA lower for 3 of 8 short-cycle stocks in our coverage, while only raised one. The reductions are primarily due to lower-than-anticipated demand in 3Q24. We also anticipate 4Q24 will be a weaker-than-expected quarter. As such, it will be important for the short-cycle stocks that we cover to demonstrate a compelling case that 2025 should see demand improvements.”
Mr. Gillies made four target changes ahead of earnings season:
For top pick Aecon Group Inc. (ARE-T), he kept a “buy” rating and Street-high $31 target. The average is $22.81.
“We believe the level of uncertainty has reduced significantly following the resolution of CGL and the company quantifying an impact of $125-million for the remaining three legacy projects. In our view, Aecon can deliver revenue growth of MSD to HSD [mid to high single digits] given spending trends put forth by governments out to 2026-2027, on a normalized basis. Moreover, we believe the company can deliver adj. EBITDA of at least $433-million (accounting EBITDA: $356-million) on a normalized basis. As a result, the significantly de-risked earnings profile leads to our BUY rating.”
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National Bank Financial analyst Cameron Doerksen sees Cargojet Inc. (CJT-T) set to benefit from a “positive” air cargo market when it reports third-quarter results on Nov. 4 with further growth to come from e-commerce through its contract with China-based Great Vision HK Express.
“Cargojet’s domestic network has been outperforming some P&C peers with Q2 domestic revenue up nearly 11 per cent year-over-year,” he said. “We believe domestic network volumes for Cargojet have remained healthy through Q3. August data from IATA shows that global air freight traffic in the month was up 11.4 per cent year-over-year, the ninth consecutive double-digit year-over-year increase driven largely by higher international traffic due to strong e-commerce demand.”
“Cargojet has benefited from the increased demand for e-commerce with its new scheduled charter contract supporting Chinese e-commerce volumes announced in Q2 (3-year deal worth $160-million based on a minimum of three flights/week). Q3 will show the first full quarter of the new contract, and we expect the company’s All-in Charter revenues to be up 43 per cent year-over-year.”
In a research note released Thursday, Mr. Doerksen raised his 2025 revenue and earnings forecast, leading him to increase his target for the Mississauga-based company to $158 from $154 with an “outperform” recommendation (unchanged). The average on the Street is $162.09.
“With a positive outlook for CJT’s domestic network volumes and growth from the new contract signed in Q2 supporting e-commerce volumes between China and Canada, we see an acceleration of growth for the company that will continue in the coming quarters,” he said. “In that context, the current valuation of 8.1 times EV/EBITDA based on our updated 2025 forecast looks compelling, especially when compared to the historical forward average for the stock of 11.0 times.”
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In other analyst actions:
* In response to its Investor Day on Wednesday in New York, CIBC’s Todd Coupland raised his BlackBerry Ltd. (BB-N, BB-T) target to US$3.60 from US$3.50 with an “outperformer” rating. The average is US$3.22.
“At this event, for the first time, Blackberry provided segmented P&Ls for both its IoT and Cybersecurity divisions as well as a new outlook for fiscal years 2026 and 2027,” he sai. “Excluding Cyber’s Cylance, the Investor Day confirmed the company’s growth potential, and that it is already generating double-digit EBITDA margins with room to grow. In our view, it was clear Blackberry shares are currently undervalued.
“The company’s IoT market opportunity and product path to 15-per-cent revenue growth and 25-per-cent profitably (EBITDA) by F2027 was credible and conservative. Note we had previously expected growth of 20 per cent and EBITDA margins of 20 per cent. For Cyber, the company’s secure communications segment was new, encouraging, and inclusive of UEM, AtHoc, and SecuSUITE. The final Cyber product, Cylance, remains an issue for growth and EBITDA losses and requires further remediation, which the company expects will occur in the coming 12 months. Despite this, the Investor Day supports our positive investment thesis.”
* Desjardins Securities’ Gary Ho raised his Chemtrade Logistics Income Fund (CHE.UN-T) target to $14 from $13.25 with a “buy” rating. The average is $12.86.
“In 3Q, chemicals continued to perform well, with strength in HCl, regen acid and water treatment,” he said. “We increased our 3Q estimates and expect 2024 EBITDA of $448-milllion vs guidance of $430–460-million. We also increased our 2025 estimates and are introducing our 2026 numbers. Continued strong chemicals performance, active buybacks, potential index inclusion and valuation marks from recent acquisitions in the industry should support the shares.”
* Jefferies’ Matt Murphy cut his targets for Ero Copper Corp. (ERO-T, “buy”) to $34 from $35 and Franco-Nevada Corp. (FNV-N/FNV-T, “hold”) to US$136 from US$137, while he raised his targets for Lundin Gold Inc. (LUG-T, “buy”) to $37 from $35 and Ngex Minerals Ltd. (NGEX-T, “buy”) to $14 from $13. The averages are $36.21, US$140.42, $31.29 and $13.85, respectively.
* Roth MKM’s Matt Koranda increased his Kits Eyecare Ltd. (KITS-T) target to $14.50, above the $14.43 average, from $14 with a “buy” rating.
* In response to the release of an update to its Integrated development Plan (IDP) for the Stage 3 and Stage 4 expansions of its Kainantu mine, Scotia’s Ovais Habib bumped his target for K92 Mining Inc. (KNT-T) to $9.50 from $9, below the $11.79 average, with a “sector outperform” rating.
“We view the update as positive for KNT shares as the latest technical report update reiterated that development capex remains under control, with the remaining Stage 3 expansion capex coming in better than our estimate and the ramp up to nameplate in line with our estimate,” he said. “With respect to Stage 4, the update outlined significantly more total production from higher peak mill throughput, supporting an improved cost profile. We look forward to future updates on commissioning of the Stage 3 mill and paste plant which are expected to progress through mid-2025.”
* Previewing its Oct. 30 earnings release, Canaccord Genuity’s Luke Hannan cut his Parkland Corp. (PKI-T) target by $1 to $47 with a “buy” rating. The average is $50.92.
“For the quarter, we forecast adjusted EBITDA of $445-million, well below consensus’ $527-million and Q3/23′s $585-million,” he said.
“The primary driver of our below-consensus adjusted EBITDA estimate for the quarter is the softer backdrop for Parkland’s Burnaby refinery, where our forecast of $71-million of adjusted EBITDA for the quarter is far below consensus’ $123-million. Our indicative crack spread tracker implies an average spread of C$51.7/bbl for the quarter, well below Q3/23′s C$82.5/bbl and the trailing two-year average of C$68.7/bbl. Given the sharp decline in crude oil prices during the quarter, and the time required to move and process feedstock, crack spreads could be squeezed even further than what our tracker implies. Further weighing on Refining segment EBITDA are imports of heavily subsidized renewable diesel from the oversupplied US market weighing on BC Low Carbon Fuel Standard (LCFS) credit sales.”