Inside the Market\u2019s roundup of some of today\u2019s key analyst actions<\/p>\n
Heading into third-quarter earnings season for Canada\u2019s energy sector, National Bank Financial analysts Dan Payne and Travis Wood acknowledge bearish commentary has emerged around oil supply and demand, however they reaffirmed their more neutral stance, citing \u201cthe market\u2019s proven ability to adapt to price shocks, leaving the market generally more balanced than forecasts have implied (time will tell).\u201d<\/p>\n
\u201cDespite negative news flow on the state of the global economy (lots of bubble + trade war talks) and stagnating commodity prices, equities and valuations for the sector remain resilient, with most names currently trading between mid-range and their 52-week highs,\u201d they said. \u201cThanks to rock solid balance sheets and operating models focused on return of capital above all else, our coverage universe now maintain break-evens in the low\u00a0US$50s\u00a0a barrel range.<\/p>\n
\u201cWhile we may see some downward pressure on our oil-weighted names, in particular over the short-term, we believe multiples and balance sheet strength still offer insulation to the downside. Despite improved capital discipline, which has supported attractive corporate-level returns, multiples are trading below their historical range (approximately 17-per-cent discount on average).\u201d<\/p>\n
In a client report released before the bell titled Can\u2019t See The Forest Through The Trees (But We Can See The Bears), the analysts reduced their quarterly cash flow per share and production projections by 12 per cent and 1 per cent, respectively, due largely to softer-than-expected gas realizations.<\/p>\n
“In terms of our gas-weighted peers, the sting of historically low AECO prices has not been quite as severe, which is a direct function of diversification efforts,\u201c they added. \u201dWhile the ramp up of LNG Canada (LNGC) has not yet led to significant price appreciation domestically, partially due to producers front running production, we still believe that an additional 2 Bcf\/d of egress to the West Coast can only help improve the domestic gas picture with a normalization of exports and seasonality also helping buoy demand. This could come as continental demand lifts from data centre growth. Overall, we view any potential weakness as an opportunity for investors to build or enter positions.”<\/p>\n
In conjunction with their report, Mr. Payne downgraded a pair of stocks: <\/p>\n
* Advantage Energy Ltd.<\/b> (AAV-T<\/a>) to \u201csector perform\u201d from \u201coutperform\u201d with a $14 target, down from $14.50. The average target on the Street is $14.36, according to LSEG data.<\/p>\n \u201cThe basis for our revised rating comes as a function of risk to performance on the basis of a decelerating earnings profile (a drop of 21 per cent CFPS Q3\/Q2 vs. peers down 14 per cent), set against near-term drag from its leverage profile (2.5 times Q3\/25 D\/CF; in opposition to the near-term cadence of buyback), in addition to a lack of clarity as it relates to the ongoing strategic review (more to come we would assume), which have us pivoting to neutral,\u201d said Mr. Payne. \u201cTo that end, and as we reflect on recent transaction metrics that have drifted higher (towards 5x), we are comfortable with the orientation of our $14 target price and return to target as a logical risk-adjusted outcome.<\/p>\n \u201cThat said, AAV remains one of the highest quality gas producers in the industry, and upside to gas pricing (either wholesale or through a contraction in basis) should have a meaningful impact on cash flow as the outlook improves (10-15-per-cent CFPS sensitivity to a $0.50\/mcf change in gas prices), while meaningful ancillary value components (infrastructure, non-core assets) plus upside of Entropy (at least $1 per share in prospective value) could each all drive material upside to our value estimate, and we will continue to view this name in the light of that dynamic environment & opportunity.\u201d <\/p>\n * NuVista Energy Ltd. <\/b>(NVA-T<\/a>) to \u201csector perform\u201d from \u201coutperform\u201d with a $20 target, up from $18.50. The average is $18.42.<\/p>\n \u201cThe basis for our revised rating comes as a function of recent performance, with the stock 10-15 per cent since our upgrade with second quarter results (vs. peers 4 per cent over the same period). Strictly speaking, based on our unchanged valuation paradigm, which was recently validated by the acquisition metric highlighted by the recent sale of its shares by POU (5 times), our bias to the upside is now more muted.<\/p>\n \u201cHand up \u2013 there is not a name in the entire sector we\u2019ve ever been as wrong about as this one (as reflected by our highly unconventional reduced rating on an increased target)\u2026 perhaps our stringent valuation paradigm doesn\u2019t fully capture the value profile (or street sentiment) – so to that end, we have increased our target price multiple to 5.5 times to reflect the inherent upside of the opportunity.”<\/p>\n With their new forecasts, the analysts also made these other target price adjustments:<\/p>\n “Our highest conviction ideas into the quarter are: ATH, CVE, SDE, TVE and WCP,” they added.<\/p>\n =====<\/p>\n Seeing it set up for \u201csolid\u201d third-quarter financial results, Desjardins Securities analyst Brent Stadler reaffirmed Capital Power Corp. <\/b>(CPX-T<\/a>) as a \u201cpreferred name\u201d and expects it to \u201ccontinue creating significant value for shareholders through (1) recurring U.S. recontracting\/contracting, with MCV [Midland Cogeneration Venture] providing investors with a glimpse at the material value creation on these initiatives, and (2) highly accretive M&A (potential to self-fund).\u201d<\/p>\n Ahead of its quarterly release on Oct. 29, Mr. Stadler maintained his estimates, forecasting adjusted earnings before interest, taxes, depreciation and amortization of $489-million, which tops the consensus by almost 3 per cent ($475-million) and a rise from $401-million a year ago. He attributes that increase to the \u201cacquisition of Hummel and Rolling Hills, partially offset by lower contributions from the renewables segments.\u201d<\/p>\n \u201cWe model FCF\/sh of $2.02, down from $2.42 in 3Q24, as we expect higher sustaining capex in the quarter (timing-related),\u201d he added. <\/p>\n \u201cWhat to watch for with 3Q25 results. (1) Colour on the recent recontracting of MCV and potential colour on additional recontracting\/contracting opportunities across CPX\u2019s seven other US gas assets (totalling 5.4GW net)\u2014although with the quarter, we could get just a small teaser with more details expected at CPX\u2019s investor day on December 10; (2) an update on M&A opportunities and ability to self-fund; (3) CPX\u2019s strategy regarding its 375MW allocation in AESO\u2019s Phase 1 and how transferring its MWs is a win-win for the company; and (4) some colour on the outlook for the Alberta power market.”<\/p>\n After raising his 2026, 2027 and 2028+ run-rate power price assumptions to be more in line with the current forward curves, Mr. Stadler raised his target for Capital Power shares to $83 from $80, keeping a \u201cbuy\u201d rating. The average is $72.04.<\/p>\n In separate reports, Mr. Stadler made these other target revisions:<\/p>\n * Emera Inc. <\/b>(EMA-T<\/a>) to $68 from $64 with a \u201chold\u201d rating. Average: $67.54.<\/p>\n \u201cWe are expecting a relatively in-line quarter from EMA and have trimmed our 3Q25E EPS, primarily after reflecting expectations for higher corporate expenses,\u201d he said. \u201cWith the quarter, we expect that EMA will update and roll forward its capital program out to 2030 and expect that a 7\u20138-per-cent rate base CAGR [compound annual growth rate] will remain the sweet spot for the company. Additionally, with the quarter, we expect a regulatory update, which could include colour on NSPI, the NMGC sale and the PGS rate case. ,\u201d he said.<\/p>\n * Fortis Inc.<\/b> (FTS-T<\/a>) to $79 from $76 with a \u201cbuy\u201d rating. Average: $71.54.<\/p>\n \u201cWe have maintained our 3Q25E EPS, which is roughly in line with consensus. Year over year, we expect rate-base growth at ITC to be partially offset by higher financing costs and lower CDDs (down 9 per cent year-over-year), which could modestly affect consumption in Arizona,\u201d he said. \u201cWith the results, we will be looking for FTS\u2019s updated capital outlook and commentary on the Project Blue datacentre agreement. FTS is in several exciting and attractive markets that should lead to significant growth as we move further into the energy expansion era.\u201d<\/p>\n * TransAlta Corp.<\/b> (TA-T<\/a>) to $21 from $16.50 with a \u201chold\u201d rating. Average: $20.73.<\/p>\n \u201cWe are expecting a weaker quarter and have lowered our 3Q25 EBITDA estimate (in line with the Street),\u201d he said. \u201cHowever, we have increased our run-rate power price assumption and reduced our discount rates which increased our target to $21.00 (from $16.50). Following the recent strong share price momentum, in our view, expectations around TA\u2019s datacentre opportunity are high\u2014and we view current levels as a higher risk entry point. We maintain our Hold rating as we look for clarity on datacentres in Alberta.”<\/p>\n ===== <\/p>\n RBC Dominion Securities analyst Paul Treiber raised his forecast for Celestica Inc.<\/b> (CLS-N<\/a>, CLS-T<\/a>) ahead of its Investor Day event next week, pointing to \u201cstrong\u201d artificial intelligence demand momentum<\/p>\n \u201cWith continued strong AI capex growth and Celestica\u2019s new program win momentum, we see strong revenue growth and margin expansion through FY26 and FY27,\u201d he said in a client note. \u201cIn light of robust growth, we anticipate Celestica\u2019s valuation to remain above peers and towards the high-end of its historical range.\u201d<\/p>\n Mr. Treiber predicts the Toronto-based company is likely to report third-quarter results on Oct. 27 that top the Street\u2019s expectations while increasing its full-year guidance.<\/p>\n \u201cWhile we expect FY26 guidance to be conservative (where aspects may only match consensus), Celestica has averaged actual revenue 13 per cent and adj. EPS 36 per cent above initial annual guidance for the last 2 years,\u201d he explained. \u201cWe see room for actuals to exceed consensus; our revised estimates call for $14.2-bilion revenue and $7.15 adj. EPS, above consensus at $14.0-billion and $6.89, respectively.<\/p>\n \u201cRising AI capex underpins Celestica\u2019s growth momentum. In the last 3 months, consensus estimates for capex at the top 5 U.S. hyperscalers increased 11 per cent for CY26 and 17 per cent for CY27. Some of Celestica\u2019s largest customers (e.g., Google, Meta, Amazon, OpenAI) have announced significant capex expansion plans, which bodes well for Celestica\u2019s revenue from existing programs. Our revised outlook calls for Celestica\u2019s hyperscaler revenue to increase 30 per cent year-over-year in FY26 and 25 per cent year-over-year in FY27.\u201d<\/p>\n Mr. Treiber thinks new custom application-specific integrated circuit (ASIC) programs are likely to drive \u201cstrong\u201d revenue growth moving forward, predicting its OpenAi program could commence earlier than anticipated in the second half of 2026 (versus 2027 previously).<\/p>\n \u201cCelestica is well positioned to benefit from the 1.6T Ethernet product cycle,\u201d he added. \u201cCelestica is one of the top 3 vendors for Ethernet switches for data centres. Celestica is seeing rapid share gains due to hyperscalers prioritizing high performance (800G) switches from ODMs. With Celestica announcing its DS6000 1.6T Ethernet switch in October, investor visibility has improved to the 1.6T switch product cycle commencing in CY26. Our outlook calls for Celestica\u2019s HPS\/ODM revenue.\u201d<\/p>\n Believing its premium valuation is likely to be sustained, Mr. Treiber hiked his target to US$315 from US$225 with an \u201coutperform\u201d rating. The average target is US$246.53.<\/p>\n \u201cCelestica is trading at 42 times NTM [next 12-month] P\/E, towards the high-end of its 10-year historical range (5-45 times) and well above EMS peers (19 times),\u201d he said. \u201cOur updated $315.00 price target reflects our revised financial estimates and is based on 35 times calendar 2027 estimated P\/E, up from 29 times prior, given higher visibility to adj. EPS growth through CY27 and Celestica\u2019s increasing mix of higher quality, higher margin revenue (i.e. hyperscalers, HPS\/ODM).\u201d<\/p>\n =====<\/p>\n Scotia Capital analyst Phil Hardie sees investors in the property and casualty insurance industry \u201cgrappling with a complex landscape, with strong industry profitability contrasting with emerging concerns related to pricing sustainability and market cycle transitions.\u201d\u00a0<\/p>\n Ahead of earnings season, he thinks these conditions are leading investors to” discount near term profitability with an increased focus on how the pricing environment is evolving.”<\/p>\n \u201cConcerns over a transition in the pricing cycle appear to be putting near term pressure on valuation multiples, as investors ponder whether pricing softness in certain corners of the commercial market leak into broader commercial and personal line products,\u201d he said. \u201cThat said, we think the critical element to focus on is what the evolving pricing environment could mean for the \u201cgap\u201d between premium rate and loss cost trends, and ultimately the ROE outlook. We think this will look very different between business lines and in several cases see U.S. trends contrast with those in Canada.<\/p>\n \u201cCanadian listed P&C insurance companies have generated out-sized returns for investors over the last several years, however this trend has reversed through the back half of 2025. We attribute recent weakness to several confounding factors that include: 1) investor rotation towards cyclical-value over quality defensive, 2) profit taking at elevated valuation levels, and 3) concerns related to transitioning pricing environment. Fairfax has outperformed and likely sustained its share price gains through the back half of the year given it\u2019s relatively lower valuation levels and likely differing investor base than the group. Given recent sell off across the space, we think valuations are not looking onerous and see solid upside potential across the group.\u201d<\/p>\n Mr. Hardie raised his Fairfax Financial Holdings Ltd. <\/b>(FFH-T<\/a>) target to $3,050, topping the $2,921.82 average, from $2,900 with a \u201csector outperform\u201d rating, while he cut his Intact Financial Corp.<\/b> (IFC-T<\/a>) target to $318, which is below the $322.08 average, from $339 with a \u201csector outperform\u201d rating.<\/p>\n \u201cWe expect Fairfax and Trisura [\u201csector outperform\u201d and $51 target] to provide the most upside over the next twelve months, with Intact continuing to provide the most appeal to investors looking for the best defensive positioning,\u201c he said.\u00a0\u201cFairfax\u2019s shares have outperformed, and while we view the stock as less defensive than Intact and Definity given the size of its investment book and equity exposures, we think it offers an attractive combination of value and low-risk growth. Assuming we get some degree of improvement in risk appetite, we think Trisura offers the biggest upside opportunity of the group. The P&C insurance stocks have relatively low sensitivity to macro factors and can generate solid investor returns in an environment where broad market multiple expansion is limited. Even if multiples remain constrained at current levels, we believe these stocks could deliver returns in the mid-to-upper teens.<\/p>\n \u201cPricing cycle, valuation and M&A are likely to remain dominant near term themes.\u00a0We continue to believe the outlook for the Canadian listed P&C insurers is positive with recent share price weakness alleviating concerns of \u201cstretched valuations\u201d. Sentiment is likely moderating given concerns related to a potential transition in the pricing cycle, however we think the valuations are beginning to price in these risks. Severe weather has been top of mind for investors for some time, but we believe Q3 saw unseasonably low levels of catastrophe losses, with the potential to drive an upside surprise. Definity\u2019s announced acquisition of Travelers Canada, and Intact\u2019s strong level of excess capital and appetite for deals is excepted to keep M&A on the forefront of investor\u2019s minds.”<\/p>\n Elsewhere, CIBC\u2019s Paul Holden cut his target for Intact to $288 from $315 with a \u201cneutral\u201d rating.<\/p>\n =====<\/p>\n When Loblaw Companies Ltd. <\/b>(L-T<\/a>) reports its third-quarter financial results on Nov. 12, National Bank Financial\u2019s Vishal Shreedhar is expecting to see \u201csolid\u201d earnings per share growth despite a narrow decline in food same-store sales gains.<\/p>\n The analyst is now projecting EPS of 69 cents, a penny above the Street\u2019s forecast and up 7 cents from the same period a year ago. He attributes that 11-per-cent gain to “positive Food Retail (FR) same store sales growth (sssg), solid Drug Retail (SDM) sssg, benefits from ongoing growth\/efficiency programs and share repurchases, partly offset by higher D&A, interest and tax rate.”<\/p>\n \u201cWe forecast FR sssg of 2.5 per cent, moderating sequentially from 3.5 per cent last quarter (easier comparables last quarter),\u201d explained Mr. Shreedhar. \u201cStatsCan data suggests Q3\/25 inflation was 3.5 per cnet (vs. 3.4 per cent in Q2\/25). We expect continued strength in discount; we expect higher traffic and tonnage. We expect [Shoppers Drug Mart] sssg to moderate sequentially, reflecting difficult comparables in Rx sssg, partly offset by resilient trends in front store (L noted gradual momentum in front store continued into Q3\/25).<\/p>\n \u201cRecall that Loblaw stated an update to guidance will be provided alongside Q3\/25 results. NBCM models 2025 EPS growth of 11.5 per cent year-over-year versus consensus at 12.2 per cent; Loblaw\u2019s current guidance calls for EPS growth in the high single-digits (excluding the extra week, which is expected to add 2 per cent to EPS growth). Recall that Loblaw\u2019s long-term framework calls for annualized EPS growth of 8-10 per cent.\u201d<\/p>\n Mr. Shreedhar said recent commentary across the retail sector \u201cpoints to ongoing consumer resilience,\u201d adding: \u201cOur review of peer commentary suggests: (i) Resilience in consumer spending, and (ii) Moderating momentum in \u2018Buy Canadian\u2019, although we understand that sales of Canadian products continues to be higher than non-Canadian products.\u201d<\/p>\n Reiterating his investment thesis and \u201coutperform\u201d rating for Loblaw shares, Mr. Shreedhar raised his target by $1 to $61 to reflect \u201cmodest\u201d adjustments to his forecast. The average on the Street is currently $61.63.<\/p>\n \u201cWe maintain a favourable view on L and recommend it as our preferred grocer supported by: (i) Benefits from improvement initiatives; (ii) Ongoing stable EPS growth; and (iii) Favourable medium-term trends in discount and drug store (where L over-indexes),\u201d he said.<\/p>\n =====<\/p>\n In other analyst actions: <\/p>\n * Raymond James\u2019 Frederic Bastien downgraded Badger Infrastructure Solutions Ltd. <\/b>(BDGI-T<\/a>) to \u201cmarket perform\u201d from \u201coutperform\u201d with a Street-high $72 target, rising from $60 and exceeding the $60.78 average.<\/p>\n “We roll our valuation on Badger Infrastructure forward to 2026 and raise our target EV\/EBITDA multiple to 9 times, a full standard deviation above the stock\u2019s 10-year average,” he sai. \u201cIn doing so, we reward management for the sustainable improvements it brought to the operations and the disciplined approach it is showing to growth. While both parameter changes push our target price to $72, it leaves insufficient upside from current levels to justify an Outperform rating on BDGI. Following an impressive 97 per cent run year-to-date, versus a 23-per-cent gain for the TSX composite, we are taking chips off the table and lowering our recommendation to Market Perform. We recognize that our downgrade could prove premature should results for Badger\u2019s seasonally strongest quarter blow the doors on expectations, but we feel some of that upside potential may already be priced into the stock. Our adjusted EBITDA forecast of US$67-million for 3Q25 compares favourably to the consensus estimate of US$65-million and reflects a year-over-year improvement of 15 per cent. Our numbers contemplate an 11-per-cent top-line gain on strong appetite from brownfield construction and ongoing pricing enhancements in key markets. A growing truck fleet and disciplined cost management should allow operating leverage to handle the rest.\u201d<\/p>\n * TD Cowen\u2019s Menno Hulshof downgraded MEG Energy Corp. <\/b>(MEG-T<\/a>) by two levels to \u201csell\u201d from \u201cbuy\u201d with a $28 target, down from $30. The average on the Street is $28.63.<\/p>\n \u201cCVE\u2019s bid for MEG likely gets approved, but a second delay to the Special Meeting and ASC investor complaints require higher deal risking, in our view,\u201d he said. \u201cRisking our estimated implied break-price of $25.42\/sh and current CVE offer of $29.52\/sh at 25 per cent\/75 per cent drives our new $28\/sh TP and SELL rating. While investors can await \u2018full-value\u2019 of $29.52\/sh (1-per-cent upside), selling avoids deal risk altogether.\u201d<\/p>\n * CIBC\u2019s Hamir Patel downgraded Stella-Jones Inc. <\/b>(SJ-T<\/a>) to \u201cneutral\u201d from \u201coutperformer\u201d with a $89 target, which exceeds the $88.13 average. He also reduced his targets for Interfor Corp.<\/b> (IFP-T<\/a>) to $10 from $12 with a \u201cneutral\u201d rating and West Fraser Timber Co. Ltd<\/b> (WFG-T<\/a>) to $113 from $119 with an \u201coutperformer\u201d rating. The averages are $14.33 and $135.27, respectively. <\/p>\n * Raymond James\u2019 Luke Davis raised his target PrairieSky Royalty Ltd.<\/b> (PSK-T<\/a>) to $30 from $29 with a \u201cmarket perform\u201d rating. The average is $30.27.<\/p>\n \u201cPrairieSky\u2019s 3Q25 results came in ahead of our expectations with oil volumes the key driver, a trend we expect to continue and have reflected in our longer-term estimates with oil moving higher despite ongoing headwinds. In our minds, the company screens well admidst a volatile backdrop and will be a beneficiary of continued weakness with key payors positioned in some of the lowest supply cost (e.g. Clearwater) and highest growth (e.g. Duvernay) oil plays. We continue to like PrairieSky\u2019s high-quality asset base and defensive positioning, and are becoming incrementally more bullish on underlying growth trends; we reiterate our Market Perform rating and have bumped our target price to $30\/share,\u201d said Mr. Davis.<\/p>\n * In a report titled Right Place, Right Time, Right Technology, Raymond James\u2019 Daniel Magder became the first analyst to initiate coverage of Halifax-based Ucore Rare Metals Inc.<\/b> (UCU-X<\/a>), giving it an \u201coutperform\u201d rating, citing its \u201cdifferentiated positioning, advanced development timeline, and strategic relevance to U.S. supply chain objectives,\u201d and $14.50 target.<\/p>\n \u201cUcore is developing a vertically integrated rare earth supply chain in North America, anchored by its proprietary RapidSX separation technology and its planned strategic metals complex in Louisiana,” he said. \u201cWith a differentiated midstream processing model, strategic feedstock partnerships, and a scalable technology platform, we believe Ucore is well-positioned to benefit from growing demand for domestic rare earth element production.\u201d<\/p>\n\n