Contained in the Market’s roundup of a few of at present’s key analyst actions
Nationwide Financial institution Monetary analyst Shane Nagle sees Wheaton Treasured Metals Corp. (WPM-T, WPM-N) “properly positioned to fund progress targets,” emphasizing its “secure monetary place and high-quality, low-cost long-life asset portfolio.”
“Whereas disproportionately uncovered to any proposed will increase in World Minimal tax charges (roughly 8-per-cent impression to NAV at an adopted tax price of 15 per cent), we now have but to formally incorporate any modifications till extra readability on the anticipated timeline/tax therapy of streaming is healthier understood – one thing prone to stay on the again burner amidst rising rates of interest, ongoing battle in Ukraine, inflationary pressures and international provide chain points,” he mentioned in a word launched Monday. “Wheaton is ready to realize sturdy natural progress within the coming years with completion of Salobo and expanded manufacturing at Stillwater, Constancia and Voisey’s Bay.”
Shares of the Vancouver-based miner rose 3.6 per cent on Friday in response to the discharge of its fourth-quarter monetary outcomes and reiteration of its 2023 steering.
With gross sales and manufacturing prereleased in February, adjusted earnings per share of 23 US cents got here in broadly in step with Mr. Nagle’s 24-US-cent estimate and the consensus forecast of 25 cents, whereas money stream per share of 36 US cents was narrowly decrease than anticipated (38 US cents and 39 US cents, respectively).
“NBF Estimates proceed to undertake conservative ramp-up assumptions for WPM’s pursuits in single-asset growth firms,” mentioned the analyst. “Because of this, our 5/10-year estimates for common annual manufacturing of 746,000/753,000 GEOs (utilizing WPM value deck), stay beneath reiterated 5 and 10-year steering of 810,000/850,000 GEOs owing to extra conservative growth assumptions throughout the portfolio.”
Believing Wheaton’s stability sheet “stays sturdy,” he added: “WPM ended This fall with US$699-million in money and a totally undrawn US$2.0-billion credit score facility. At spot costs, WPM generates US$330-million in common annual money stream from 2023-2025, to service ongoing dividends and fund the Salobo III growth cost and extra progress inside the portfolio.”
In response to the outcomes and steering, Mr. Nagle trimmed his goal for Wheaton shares to $65 from $68, which is the present consensus on the Avenue.
“We preserve our Outperform score which is predicated on WPM’s secure monetary place, complemented by a portfolio of high-quality, low-cost, and long-life belongings,” he mentioned.
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In a analysis report titled (Making an attempt to do) Every thing In all places All at As soon as, Desjardins Securities analyst Chris MacCulloch expressed shock over buyers’ muted response final week to the fourth-quarter outcomes from Vermilion Vitality Inc. (VET-T), persevering with to see it as “some of the closely discounted equities” within the agency’s vitality sector protection universe.
“After decimating Avenue expectations and saying an attractively priced disposition of non-core belongings in southeast Saskatchewan for $225-million —a price ticket that can conveniently fund remaining closing prices on the Corrib consolidation ($200-million )— VET barely moved a muscle within the March 9 buying and selling session. What provides?,” he mentioned.
“For starters, there could have been some hesitancy to reward the big money stream beat, seeing as roughly half of it was attributable to a lower-than-expected windfall tax hit of $223-million (vs earlier steering of $250-million), and the truth that it was paired with a quarterly manufacturing miss. There was additionally the announcement of two dry holes in Croatia coming off a string of disappointing leads to Hungary, though we warning that Central and Japanese Europe (CEE) may be very a lot a ‘Massive E’ exploration play for the corporate with minimal capital prices related on the wells. In our view, the important thing disappointment was the dearth of visibility surrounding the Wandoo outage, an asset producing 10 per cent of company money stream that has been offline since December with nary a disclosure from VET, together with inside its January 6 press launch detailing 2023 steering.”
Whereas it “crushed expectations” with its outcomes, Mr. MacCulloch mentioned Vermilion “continues to languish because the worst-performing identify (down 21.5 per cent) within the Desjardins E&P universe thus far this 12 months, which has expanded the valuation disconnect vs friends.”
“For context, based mostly on present strip costs and our estimates, which conservatively assume the continuation of EU windfall taxes into 2024, we now see VET buying and selling at 2.6 instances DACF [debt-adjusted cash flow] (2024 estimates) whereas providing a 22-per-cent FCF yield. In different phrases, we needs to be nearing some extent of capitulation for the inventory, assuming no extra surprises.”
Reiterating his “purchase” advice, Mr. MacCulloch trimmed his goal for Vermilion shares by $1 to $30 after modest reductions to his 2023 and 2024 estimates. The common is $31.50.
In a separate word titled High Fuel Maverick going into Cruise management, Mr. MacCulloch additionally lowered his Peyto Exploration & Growth Corp. (PEY-T) goal by $1 to $16, protecting a “purchase” advice. The common is $17.25.
“We’re trimming our goal on Peyto … reflecting estimate revisions following its 4Q22 monetary outcomes,” he mentioned. “Particularly, we now have walked down our capex assumptions whereas introducing extra conservatism inside our manufacturing forecast, reflecting higher-than-expected company declines. We nonetheless imagine the dividend is sustainable at strip costs, and we spotlight that the inventory is now probably the most attractively valued identify within the Desjardins E&P protection universe.”
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Regardless of its “sturdy” share value efficiency, Scotia Capital analyst Michael Doumet thinks there’s “significant potential upside” in ATS Corp. (ATS-T), main him to provoke protection with a “sector outperform” advice.
“From the surface wanting in, it’s typically onerous to completely admire how a change in an organization’s technique and working framework will impression its efficiency – that’s, till it demonstrates sustainable monetary enhancements,” he mentioned. “A couple of years after Andrew Hider joined as CEO, ATS’s capacity to realize sustainable progress has turn into obvious. At first, administration’s focus was on strengthening the corporate’s working spine and refocusing ATS on the appropriate market alternatives – i.e., decentralizing operations, implementing the ABM, rising the concentrate on regulated end-markets, and increasing its standardized product and repair choices. Having achieved a baseline of working success a couple of years in the past, ATS accelerated its tempo of M&A, including capabilities and scale to its product (roughly 30 per cent of revenues) and companies (30 per cent) choices – areas of the enterprise which are extra repeatable, predictable, and higher-margin (and less-reliant on buyer capex budgets). At this time, ATS is quicker rising, higher-margin, and extra sturdy (i.e., much less cyclical) – all elements which have constructive implications for valuation.”
Mr. Doumet mentioned ATS has turn into a “high quality compounder” via that earlier determination to ” focus the corporate on end-markets with favorable long-term progress prospects, execution that continues to enhance, and a wholesome recycling of FCF into accretive M&A.”
“4 years after setting the aim, ATS achieved its 15-per-cent EBIT margin goal in F2022 (ex. acquisitions),” he added. “Since then, margins compressed resulting from provide chain challenges. Success is usually simpler the second time round – and there’s rising proof that provide chains are easing. As we anticipate Transportation revenues to speed up and margins to broaden/get better, we imagine ATS’s EBITDA will monitor above Avenue estimates beginning within the 2HF24 (and probably above ours). For 4QF22, we’re beneath consensus resulting from larger inventory comp (given the latest share value appreciation).”
Touting its “sturdy” natural progress, Mr. Doumet set a goal of $67 per share. The common on the Avenue is $62.57.
“Regardless of the sturdy share value efficiency, we see a number of causes to stay bullish, together with continued momentum in backlog (i.e., book-to-bill greater than 1 instances in subsequent a number of quarters), income (in F2024/F25) and margin (F2025) upside versus our/consensus estimates, and outsized product and repair progress, all of which ought to result in a number of growth,” he mentioned.
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Desjardins Securities’ Benoit Poirier expects ongoing capability growth will profit The Lion Electrical Co. (LEV-N, LEV-T) over the long run.
Nonetheless, he thinks many buyers will “need to see extra proof of order consumption earlier than totally committing,” given its order e book is a “important driver of the inventory’s efficiency.”
“That mentioned, we view Lion as ideally positioned to succeed given its product providing and governments’ push to decarbonize,” mentioned Mr. Poirier.
He was certainly one of a number of fairness analysts on the Avenue to decrease their 2023 and 2024 monetary forecasts and goal costs for shares of the Montreal-based producer of all-electric medium and heavy-duty city autos following Friday’s launch of its fourth-quarter 2022 outcomes, which he referred to as “impartial.”
Lion Electrical reported income of US$46.8-million, in step with Mr. Poirier’s US$46.1-million and the consensus on thr Avenue of $47.3-million. It delivered 174 autos (139 buses and 35 vehicles) throughout the quarter, lacking the analyst’s expectation of 176 deliveries (together with 45 vehicles) as international provide chain disruptions persevered.
“We view the uptick in truck deliveries as a constructive growth for the story,” he mentioned. “Administration acknowledged that whereas it’s seeing enchancment in each important and non-critical a part of the availability chain, it expects some challenges to stay in 2023. Regardless of this, administration signaled that the development of the final 5 quarters is anticipated to proceed into 2023. We anticipate a considerable step up in deliveries in 2023 following these feedback and the capability obtainable to LEV in Montreal and Joliet, mixed with the already procured stock of BMW batteries on location and able to be deployed. Consequently, we forecast 1,125 deliveries in 2023 (705 college buses, 420 vehicles).”
“We view the flexibleness to ramp up future capex on a need-be foundation as constructive given the present tightness in capital markets. All in all, we’re happy with the capex technique for the 12 months and forecast US$75-million in 2023 adopted by US$40-million in 2024 and US$44-million in 2025.”
Citing a “larger danger premium in fairness markets and macroeconomic uncertainty,” Mr. Poirier lowered his goal for Lion Electrical’s U.S.-listed shares to US$5.50 from US$7 with a “purchase” score. The common is US$3.83.
“The manufacturing efficiencies created by the capability growth tasks and the early success of the college bus enterprise help our longterm bullish stance,” he concluded.
Others making modifications embody:
* Nationwide Financial institution Monetary’s Rupert Merer to US$3 from US$3.50 with an “outperform” score.
“LEV nonetheless trades at a reduction relative to friends, at 1.0 instances EV/gross sales on our 2024 estimates (FY2) versus friends at 3.1 instances,” mentioned Mr. Merer. “Within the close to time period, our forecasts stay weighted to gross sales of buses (versus friends which have extra publicity to truck markets). With the comparatively bigger addressable marketplace for vehicles, we imagine that LEV might proceed to commerce at a reduction till its truck orders decide up some momentum. The battery plant in Quebec ought to assist enhance margins sooner or later, though we’re forecasting a drop in margins from excessive mounted prices within the short-term as they ramp up capability at a number of amenities. With decrease income and gross margins, we’re decreasing our goal.”
* Canaccord Genuity’s George Gianarikas to US$2.50 from US$3 with a “maintain” score.
“Whereas administration has labored admirably to safe extra funding, we await extra money cushion earlier than recommending the inventory. We additionally await extra readability on the corporate’s market share dynamics as awards associated to the EPA’s college bus program turn into clear,” mentioned Mr. Gianarikas.
* CIBC’s Kevin Chiang to US$3.75 from US$4.50 with a “impartial” score
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Canaccord Genuity analyst Yuri Lynk mentioned he likes Doman Constructing Supplies Group Ltd.’s (DBM-T) place within the North American constructing merchandise distribution house, pointing to “the secular demand drivers we see within the longterm.”
Nonetheless, he thinks earnings reached a cyclical peak in 2021, “and are prone to contract via 2024 on decrease building materials costs, decrease volumes, and the decremental impression on EBIT margin.”
After the bell on Thursday, the Vancouver-based firm reported fourth-quarter 2022 outcomes that largely fell in step with the analyst’s expectations. Income was down 10.7 per cent year-over-year to $572.9-million, narrowly decrease than Mr. Lynk’s $579.9-million estimate as gross sales have been damage by a drop in common building supplies costs. Adjusted EBITDA was down 11.3 per cent to $32.9-million, topping the analyst’s $32.1-million projection.
“Lumber costs proceed to exhibit volatility however are presently at ranges that ought to permit for DBM to generate wholesome, albeit decrease, EBITDA,” mentioned Mr. Lynk. “The benchmark Western SPF 2×4 CAD lumber value continues to development down with the quarter-to-date (QTD) common reducing 4 per cent quarter-over-quarter and 63 per cent year-over-year. Nonetheless, up to now in 2023, lumber costs elevated 40 per cent via early February earlier than falling 30 per cent solely to get better barely to face at US$413/mbf. Recall, DBM’s high line and margins profit from durations of accelerating costs, however declining value environments have the alternative impact. In the meantime, gross sales volumes are being negatively impacted by the slowdown within the housing markets. As such, we imagine margins in Q1/2023 will probably be about common and in step with our full 12 months assumption of 14.5 per cent.
“The close to time period outlook for housing stays tender and restore and transform spending is anticipated to reasonable. The CMHC expects a broad and substantial slowdown in residential building that would result in an financial recession. Within the U.S., housing begins decreased 3 per cent in 2022 and are anticipated to say no 27 per cent year-over-year in 2023. Additional, after three years of double-digit will increase in R&R spending, progress is anticipated to reasonable to three per cent in 2023, based on the Main Indicator of Reworking Exercise.”
With will increase to his 2023 and 2024 EPS projections, Mr. Lynk raised his goal for Doman shares to $6 from $5 with a “maintain” score. The common is $6.46.
“Our forecasts assume lumber costs stabilize round present ranges (down 65 per cent year-over-year) and that quantity stays weak all through our forecast horizon,” he mentioned.
Different analysts making modifications embody:
* RBC’s Paul Quinn to $9 from $8 with an “outperform” score.
“We proceed to suppose Doman is properly positioned to guage M&A alternatives on this slowing market, and whereas constructing supplies demand is prone to be muted, Doman is a agency that performs greatest in low pricing volatility setting,” mentioned Mr. Quinn.
* CIBC’s Hamir Patel to $7.25 from $6.25 with a “impartial” score.
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In different analyst actions:
* RBC’s Drew McReynolds lowered his goal for AcuityAds Inc. (AT-T) to $3, beneath the $3.32 common, from $3.50 with a “sector carry out” score.
“In an unlucky flip of occasions, the corporate introduced that 90 per cent of its money stability is deposited with SVB and is uninsured,” he mentioned. “The final word quantity to be recovered stays unsure and the state of affairs fluid. Pending FDIC dedication of the advance dividend anticipated inside the subsequent week and a situational replace from regulators, our $3 value goal (from $3.50) elements in a 50-per-cent restoration price with every 25-per-cent change in price equating to $0.30/share.”
* Nationwide Financial institution’s Zachary Evershed minimize his Dexterra Group Inc. (DXT-T) goal to $8.50 from $10 with an “outperform” score. The common is $8.
* CIBC’s John Zamparo minimize his Diversified Royalty Corp. (DIV-T) goal to $3.30 from $3.50 with an “outperformer” score. The common is $3.98.
* CIBC’s Scott Fletcher moved his DRI Healthcare Belief (DHT.UN-T) goal to $15.50 from $11.50 with an “outperformer” score. The common is $13.65.
* RBC’s Paul Treiber diminished his Enghouse Techniques Ltd. (ENGH-T) goal by $1 to $48, remaining above the $41.13 common, with an “outperform” score.
“Q1 missed RBC/consensus resulting from decrease than anticipated natural progress. The belief of year-over-year stabilization in Vidyo income was one quarter too early, per administration’s feedback,” mentioned Mr. Treiber. “Though it has been troublesome to name the underside in Enghouse’s natural progress, cashflow was wholesome (up 19 per cent year-over-year) and internet money is at an all-time excessive. Preserve Outperform, as we anticipate M&A to ramp over the approaching quarters.”
* Desjardins Securities’ Kyle Stanley raised his Granite Actual Property Funding Belief (GRT.UN-T) goal to $97 from $94 with a “purchase” score, whereas Raymond James’ Brad Sturges bumped his goal to $95 from $93 with an “outperform” score. The common is $95.60.
“GRT’s operational momentum solely seems to be accelerating, with sturdy industrial demand and leasing spreads contributing to mid- to high-single-digit SP NOI and sector-leading 12-per-cent FFOPU [funds from operations per unit] progress steering,” Mr. Stanley mentioned.
* Mr. Stanley diminished his Minto Residence Actual Property Funding Belief (MI.UN-T) goal to $19.50 from $21.50 with a “purchase” score, whereas BMO’s Michael Markidis raised his goal to $17.50 from $17 with an “outperform” score.
“We’re trimming our goal … reflecting a modest 4Q22 outcomes miss, a slight revision to our NOI outlook, the stream via of higher-than-expected curiosity expense and 10 foundation factors of cap-rate growth (NAVPU declines 8 per cent),” he mentioned. “With that mentioned, MI presents buyers 8-per-cent annualized NAV progress and potential earnings upside by decreasing variable-rate debt publicity, at a beautiful 16.7 instances 2024 FFO a number of and 27-per-cent low cost to NAV (vs the friends at 17.6 instances and a 14-per-cent low cost).”
* Canaccord Genuity’s Yuri Lynk lowered his Greenlane Renewables Inc. (GRN-T) goal to $1.15 from $1.30 with a “purchase” score. The common is $1.17.
* Canaccord Genuity’s Joseph Vafi trimmed his Hut 8 Mining Corp. (HUT-Q, HUT-T) to $5 from $6 with a “purchase” score. The common is $2.67.
* RBC’s Alexander Jackson minimize his goal for Largo Inc. (LGO-T) to $10, beneath the $11.83 common, from $13 with an “outperform” score.
“We proceed to imagine Largo has important potential worth which may be unlocked if the corporate can execute on plan and we see a number of potential catalysts over the subsequent 12-months — improved manufacturing and extra high-purity gross sales; completion of the primary LCE set up; potential JV settlement with Ansaldo; commissioning of ilmenite plant, potential strategic determination on additional pigments growth,” mentioned Mr. Jackson.
* TD Securities’ Tim James lowered his Magellan Aerospace Corp. (MAL-T) goal to $8 from $9.50 with a “maintain” score. The common is $10
* JP Morgan’s John Royall raised his Meg Vitality Corp. (MEG-T) goal to $24 from $22 with an “chubby” score. The common is $24.83.
* Canaccord Genuity’s John Bereznicki lowered his targets for Tidewater Midstream and Infrastructure Ltd. (TWM-T) to $1.50 from $1.65 with a “purchase” score and Tidewater Renewables Ltd. (LCFS-T) to $15.50 from $18 with a “speculative purchase” score. The averages are $1.52 and $17.39, respectively.
* TD Securities’ Daryl Younger raised his Westshore Terminals Funding Corp. (WTE-T) to $27 from $25 with a “maintain” score, whereas Scotia’s Konark Gupta elevated his goal to $25.50 from $23.50 with a “sector carry out” score. The common is $26.90.
