Tuesday’s analyst upgrades and downgrades

Inside the Market’s roundup of some of today’s key analyst actions
RBC Capital Markets analyst Tom Narayan warns sentiment toward North American auto parts suppliers is “negative” heading into third-quarter earnings season “and for good reason.”
“OEM commentary this earnings season suggests more light vehicle production (LVP) cuts and concerns over share loss to Chinese domestics where suppliers in our coverage have minority market share positions,” he said. “While we do expect some suppliers to cut ‘24 guides at their Q3 prints, others appear to have managed expectations. Even so, uncertainty on 2025 may keep investors on the sidelines.”
In a research report released Tuesday, Mr. Narayan reduced his LVP delivery forecast, estimating a year-over-year decline of 2.7 per cent in 2024 and a gain of 0.3 per cent in 2025. Both are now below the projections of IHS Automotive.
“IHSM has been cutting in recent months, and we expect these cuts to continue based on OEM commentary,” he said.
“We expect ‘24 guidance to come down for APTV, DAN, and MGA. Meanwhile, for AXL and MBLY guidance appears reasonable. Commentary on 2025 could have impacts, however. For example, we expect MBLY to rationalize ‘25 which could result in consensus coming down. For Dana, upside to Commercial numbers in ‘25 owing to the pre-buy in North America could be viewed positively.”
With his reduced estimates, Mr. Narayan lowered his target for shares of Aurora, Ont.-based Magna International Inc. (MGA-N, MG-T) to US$42 from US$47 with a “sector perform” rating. The average target on the Street is US$48.96.
“Our Q3 EBIT [for Magna] is well below consensus and assumes a 5.1-per-cent margin after the company posted 5.3 per cent in Q2 and our Q3 LVP forecast is down 6 per cent year-over-year,” he said. “‘24 guide implies H2 EBIT up 32 per cent while H2 Rev down 2.5 per cent. H2 margins to be 6.5 per cent vs 4.8 per cent in H1. We think it likely that Magna cuts guidance. Consensus already below the bottom end of the range.”
The analyst added: “Magna consensus is assuming significant growth at $2.50-billion, up from $2.28-billion, and on top of LVP that could be declining in 2025. We lower our ‘25 EBIT to $2.131-billion from $2.470-billion until we see evidence of an H2/24 recovery as guided by mgmt. We worry about further production cuts coming in 2025 as OEMs seek to counter elevated dealer inventory levels.”
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In a report released Tuesday titled Stuck in Neutral, Scotia Capital analyst Jonathan Goldman said guidance for auto parts suppliers has been “largely derisked,” thus he expects any third-quarter downward revisions to be “minor.”
“Sentiment and valuations are likely at bottom, but we see little reason to believe industry conditions and share prices improve in the near-term (at least until 2H25),” he said. “Vehicle affordability is still keeping many households on the sidelines. Barring an acceleration in incentives, announced rate cuts are unlikely to catalyze a snap-back in demand. Inventories are on an upward slope hitting 55 days in September (66 pre-COVID) while ‘large’ vehicles (full-size sedans, CUV/SUV, pickups) were at 68. We expect mix to be an outsized headwind to our coverage.”
Seeing a lack of near-term catalysts, Mr. Goldman downgraded Linamar Corp. (LNR-T) to “sector perform” from “sector outperform” with a $77 target, down from $86. The average is currently $82.
“It’s hard to deny there’s value in the shares trading at 0.7 times P/B (historicals 1.1 times), but the story is looking increasingly catalyst-lite,” he said. “Beyond auto headwinds, our confidence in the Ag outlook has waned with tractor/combine declines accelerating in 3Q. Access peer Terex also warned intra-quarter about rental destocking. Where we could be wrong is capital allocation. Strong FCF generation this year and next could support M&A or buybacks. But, given the company did not renew its NCIB, the latter is more likely a 2025 event.”
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While he deemed the third-quarter release from Canfor Corp. (CFP-T) as “slightly negative,” TD Cowen analyst Sean Steuart continues to see an “attractive long-term valuation as earnings reach [a] (deep) cyclical trough.”
“Like the preceding quarter, there was plenty of noise included in reported results,” he said. “Using a consistent approach across our lumber coverage, we calculate adjusted EBITDA of a loss of $140.7-million, which is below our estimate of a loss of $93.9-million and the consensus forecast of a loss of $56.6-million. This includes a favourable inventory revaluation, more than offset by incremental duty expenses on fair value remeasurement and prior period finalized rates. Normalizing for unexpected variance for those factors, core operating EBITDA was close to our estimate, but was below the consensus forecast.”
After excluding non-operating items, Mr. Steuart said North American lumber EBITDA of a loss of $66.3-million was close to his forecast with shipments declined 10 per cent from the same period, however, he emphasized its European lumber operations “remain a relative bright spot with positive single-digit EBITDA margins.”
“We would welcome a more balanced approach to capital allocation, but CFP retains a strong balance sheet, and we expect unit cost improvement following asset recent/pending restructuring initiatives,” he said.
Lowering his mid-term estimates to “reflect reconciliation of Q3 results and adjustments to volume forecasts,” Mr. Steuart lowered his target for Canfor shares to $21 from $22 with a “buy” rating. The average is $21.83.
“We believe that CFP is undervalued on relative and absolute bases,” he said. “We attribute some of the company’s relative valuation discount to a lesser focus on returning capital to shareholders versus peers. We see a compelling valuation ahead of a cyclical earnings recovery, particularly given CFP’s flexible capital structure at the bottom of the earnings cycle. Management’s asset rationalization initiatives over the past two years have repositioned CFP’s asset base away from the B.C. Interior (high-cost region with long-term fibre constraints), while preserving capital-structure flexibility. Expansion into European lumber markets has proven to be value-accretive, and we believe that management has further growth ambitions in that region. We believe that structural housing demand factors support mid-to-long-term demand growth for lumber.”
Elsewhere, CIBC’s Hamir Patel raised his target by $1 to $21 with an “outperformer” rating.
“Although we expect profitability will likely remain depressed through Q4 given current lumber prices and continued cost pressure in British Columbia, we believe Canfor is well positioned to benefit from favourable long-term trends for R&R,” said Mr. Patel.
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National Bank Financial analyst Vishal Shreedhar expects “tepid” quarter results from Alimentation Couche-Tard Inc. (ATD-T), suggesting the operational performance gap versus its own expectations has “motivated” it to pursue the acquisition of Japanese conglomerate Seven & i Holdings.
“If ATD achieves its ambitious F2028 targets, stock price upside remains,” he said in a research note previewing the late November release of its second-quarter 2025..
“That said, our estimates continue to fall short of ATD’s goals, in part due to the challenging c-store backdrop. While ATD has executed well against prior growth ambitions, the strategic plan calls for growth largely outside traditional vectors (fuel margin and M&A).”
Mr. Shreedhar is currently projecting quarterly earnings per share of 73 cents, down 9 cents from the same period a year ago and 5 cents below the consensus expectation on the Street. He attributes that 11.1-per-cent year-over-year drop to lower fuel margins across all all regions, negative merchandise same-store sales growth in both the U.S. and Canada, higher expenses, higher depreciation and amortization (D&A) and rising interest payments.
“We expect modestly lower fuel margins year-over-year in Canada and the U.S., reflecting pressured macroeconomic conditions and tepid consumer trends,” he said. “OPIS data suggests U.S. fuel margin averaged 42.7 cents per gallon during Q2/F25 (NBF projects 45.1 c/g for ATD, lower by 4.5 c/g year-over-year). We model a U.S. fuel margin delta of 2.3 c/g vs. OPIS based on our proprietary calculations. Kalibrate data suggests fuel margin averaged Cdn 10.2 cents per litre during Q2/F25 (NBF projects Cdn 13.2 cpl). We model a Canada fuel margin delta of Cdn 3.0 cpl vs. Kalibrate based on our proprietary calculations.”
“We expect fuel consumption to be higher year-over-year in Q2/F25, primarily reflecting an easier comparable base, partly offset by pressured consumer demand (particularly at the lower end). On a comparable basis, NBF models U.S. same store volume increase of 0.5 per cent and Canada same store volume increase of 0.5 per cent. This reflects a Q2/F25 2-year stack of negative 1.0 per cent in the U.S. and 3.5 per cent in Canada.”
Andrew Willis: Couche-Tard founder Alain Bouchard is betting the company on a legacy deal
Mr. Shreedhar also revisited his accretion analysis of Seven & i, saying: “Media reports have indicated that ATD could seek to primarily use debt to fund a possible acquisition of Seven & i. Specifically, reports suggested the possibility of a leverage ratio above 4.0 times to minimize the need for equity. That said, we note that ATD intends to maintain its investment grade credit rating (ATD has previously indicated it can go up to 3.75 times net-debt to EBITDA without impacting its credit rating). We explore the possibility of a takeover that contemplates a post-equity issuance leverage of 4.5 times but note that our analysis is subject to revision upon release of more specific information. We calculate EPS accretion of 20-44 per cent, based on a takeout multiple of 8.5-10.0 times LTM [last 12-month] EBITDA. We employ various assumptions, including synergies of 30 per cent. Interestingly, media reports suggest ATD’s four founders have indicated that they are not willing to accept a substantial equity dilution.”
While he trimmed his 2025 and 2026 estimates to reflect “weaker merchandising trends and F/X,” Mr. Sheedhar maintained his investment thesis on Couche-Tard as well as his “sector perform” rating and $85 target. The average is $90.65.
“Before revisiting our neutral view we await:(i) more clarity on ATD’s organic growth trajectory, and/or (ii) more favourable valuation,” he said.
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In a report titled TPZ Makes It Look EZ-PZ, Raymond James analyst Luke Davis initiated coverage of Topaz Energy Corp. (TPZ-T) with an “outperform” recommendation, believing its hybrid royalty-infrastructure model “enhances optionality and provides stable, recurring cash flow.”
“We believe the company is aligned with some of the top operators in the WCSB, which we expect will drive peer-leading payor funded growth over the next several years with the infrastructure business providing cash flow stability to backstop the dividend,” he said. “Further, we expect M&A will remain a key value driver – management has proven the ability to consistently execute accretive transactions.”
Mr. Davis also said the Calgary-base company’s “peer-leading” growth is funded and driven by “quality” payors.
“Based on our current estimates, we expect Topaz will exhibit the highest organic growth rate among royalty peers in our coverage universe over the next several years (4-5 per cebt) largely driven (and entirely funded) by some of the highest quality operators in the WCSB,” he said. “While we do expect natural gas will outpace liquids (5-6-per-cent natural gas growth, 2-3-per-cent liquids growth), we note that the majority is operated by Tourmaline that has favourable marketing agreements in place and limited direct exposure to AECO.”
He emphasized its balance sheet is in “good shape” and now expect “rapid deleveraging” following its $278.2-million deal with Tourmaline Oil Corp. (TOU-T) for a gross overriding royalty interest in recently acquired lands in Alberta and B.C..
“Following the latest acquisition from Tourmaline, we see the company exiting 2024E/25E with $470/$330 million in net debt, mapping to 1.6 times/1.4 times D/CF. In our view this is very manageable in the context of natural deleveraging to the tune of roughly $125+ million per year, combined with a $700 million credit facility that we expect will be 50-per-cent undrawn at year-end 2025,” he said. “Management remains highly focused on consolidating high quality assets within Canada, and we expect the team will continue to look for opportunities to bulk up the infrastructure portfolio trending to a longer-term revenue balance (currently 75-per-cent weighted to royalties).”
Mr. Davis set a $34 target for Topaz shares, exceeding the $30.96 average on the Street.
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RBC Dominion Securities analyst Walter Spracklin sees a “wide dichotomy” in how North American railway companies handled the third quarter and emphasizes a “big discrepancy” in forward guidance between them “with and without idiosyncratic growth opportunities.”
“Important in our view from Q3 reporting was the wide dichotomy in how the rails performed during the quarter,” he said. “On one hand, both NSC and CP had solid quarters. Somewhere in the middle was CN, which saw its results affected by a number of oneoff items although its network recovered meaningfully in September with that momentum continuing throughout October. On the other hand, both CSX and UNP disappointed in the quarter. Key is that we believe strong Q3 exit trends at CP, CN, and NSC, are going to favourably affect earnings in Q4 and into next year and therefore positively affect sentiment looking ahead. However, we see a lack of near-term catalysts at CSX and UNP, although believe UNP is well positioned for when macro inflects.”
“In addition to the large variance in how the rails handled Q3 results, we also saw a big divergence between rails with and without idiosyncratic growth opportunities. CP was the clear standout in this regard and was the only rail to increase its volume guide in the quarter to up MSD (from up LSD) despite all the other rails flagging uncertainty surrounding the industrial economy. As an example, CP’s Auto RTMs [revenue ton miles] were up 35 per cent in Q3 versus Auto carloads down 3 per cent across the group highlighting the meaningful idiosyncratic opportunity in CP’s auto franchise. Overall, we see these CP specific opportunities as offsetting current macro weakness, in addition to driving continued expected outperformance when the freight cycle inflects. Whereas we see each other rails’ volume growth as very much dependent on the freight cycle more generally.”
Mr. Spracklin sees the sentiment surrounding Canadian Pacific Kansas City Ltd. (CP-T) as “positive” exiting earnings season, leading him to place it atop his pecking order.
“CP had a solid Q3 result that came in line with expectations coming into the quarter,” he said. “Key for us though was guidance for a 500 basis points quarter-over-quarter improvement in O/R [operating ratio], which if achieved, provides strong operating momentum into next year; in addition, the increased volume guide, which we see as insulating CP’s earnings growth from macro headwinds and which we expect to facilitate significant operating leverage given the aforementioned commentary on O/R.”
He has an “outperform” rating and $134 target for CPKC shares. The average on the Street is $126.61.
Seeing its sentiment direction as “neutral,” Mr. Spracklin has an “outperform” rating for Canadian National Railway Co. (CNR-T) with a $178 target, exceeding the $174.25 average.
It sits No. 4 on his pecking order, behind CPKC, Union Pacific Corp. (UNP-N) and Norfolk Southern Corp. (NSC-N) but ahead of CSX Corp. (CSX-Q).
“Inbounds we received on CN’s Q3 results were mixed with some concern surrounding the pause in the buyback and confusion surrounding how the company hits its volume guide given quarter-to-date trends; offset by optimism surrounding an inflection in operating performance which we see driving significant earnings growth in Q4 and into 2025,” he said. “With regard to volume we flag easy comps in Grain and that we believe performance will get better as the quarter progresses. Overall, we view the operating metrics flagged on the conference call, backed with management’s positive commentary on the fluidity of the network, as suggesting the company is poised to exceed the new EPS guidance it set a few weeks back. Accordingly, we remain very constructive on the CN stock at these levels.”
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In other analyst actions:
* Previewing quarterly results for Canadian thermal-weighted Independent Power Producers (IPPs), TD Cowen’s John Mould hiked his targets for Capital Power Corp. (CPX-T) to $57 from $48 and TransAlta Corp. (TA-T) to $16 from $14 with “buy” ratings for both. The averages are $47 and $15.09, respectively.
“Q3/24 Alberta power prices of $55/MWh were soft (mild weather, new supply),” said Mr. Mould. “We believe thematic tailwinds remain in place for CPX and TA (load growth, power system reliability needs, potential data centre growth in Alberta). We reaffirm our BUY ratings for both equities (higher PTs for both on increased valuation multiples). CPX remains our top pick (thermal asset quality, growth track record).
“The share prices of Canadian thermal-weighted Independent Power Producers (IPPs) have outperformed those of Canadian renewable IPPs, on average, since the end of Q2/24. Capital Power and TransAlta’s share prices are up 30 per cent and 46 per cent, respectively, since the end of June, compared with an average decline of 3 per cent for CDN renewable IPPs. Over this period, S&P/TSX Composite increased 12 per cent, with large-cap CDN utilities up 17 per cent. We see CPX/TA outperformance as driven by data centre/load growth enthusiasm. We view both companies as positioned to potentially participate but prefer CPX (thermal asset quality, growth track record).”
* In a separate report on renewable IPPs, Mr. Steuart cut his Algonquin Power & Utilities Corp. (AQN-N, AQN-T) target to US$5 from US$5.50 with a “hold” rating. The average is US$5.72.
“Our estimates are near consensus forecasts for most names, reflecting another below-LTA generation quarter for the sector (average 7 per cent Q3 shortfall for our coverage universe). In most cases, we believe that soft production is fairly factored into consensus forecasts. Our Q3 EBITDA estimates are slightly above expectations for BLX and NPI,” he said.
“BEP and BLX stand out with the most attractive balance between visible growth prospects and funding platforms.”
* Raymond James’ Michael Glen cut his ATS Corp. (ATS-T) target to $52 from $58 with an “outperform” rating. The average is $53.71.
“As we enter ATS F2Q report, we are opting to trim our forecast to reflect ongoing headwinds in the EV segment alongside slightly more muted results across other segments,” said Mr. Glen. “With such changes, we are lowering our F2Q revenue assumption to $630-million (versus $663-milion previously), which represents a backlog conversion rate of 33.5 per cent and rests at the lower end of the 33-36-per-cent guidance range provided. With these adjustments, our new Adj. EBITDA forecast is $77-million, which represents a margin of 12.2 per cent and a sequential decline of approximately 300 basis points from 1QF25 (was down 240 bps previously). Additionally, investors should recall that ATS also guided towards a restructuring charge of ~$15-20 mln over the next few quarters (we believe F2Q will see a large portion of this charge) as the company right sizes its EV business. Overall, we do expect the F2Q to be a challenging/transition quarter, but remain optimistic we will see the business start to rebound off this trough through the balance of the year.”
* TD Cowen’s Cherilyn Radbourne hiked her Brookfield Asset Management Ltd. (BAM-N, BAM-T) target to US$61 from US$50 with a “buy” rating.
“We expect solid Q3/24 results from BAM and positive outlook commentary,” said Ms. Radbourne. “We have increased our target price based on improving industry fundamentals, anecdotal evidence that investors are starting to look beyond 2026, and upcoming changes to BAM’s corporate structure, which should be supportive of multiple expansion.”
* CIBC’s Scott Fletcher initiated coverage of Kneat.com Inc. (KSI-T) with an “outperformer” rating and $6 target. The average is $5.43.
“Kneat’s cloud-based eValidation software has been adopted by a majority of the largest pharmaceutical companies, leading to a three-year annual recurring revenue (ARR) CAGR of 84 per cent,” he said. “We believe that Kneat’s strong product, established market position, land-and-expand sales approach, and ability to target new verticals will allow it to continue to grow at 30-per-cent-plus rates through 2026 while realizing operating leverage as the business scales. Validation is an under-digitized, mission‑critical activity and Kneat stands to benefit from digital transformation within the validation space. Our $6.00 target is based on 6x 2026E sales, a slight premium to life sciences software peers but a discount to a broader best-in-class SaaS peer group. In an upside scenario where Kneat outperforms our growth forecast, we see potential for multiple expansion that approaches premium SaaS peers.”
* RBC’s Irene Nattel trimmed her Street-high Canadian Tire Corp. (CTC.A-T) target to $188 from $190 with an “outperform” rating. The average is $159.
“We are fine-tuning underlying Q3 assumptions to reflect evidence of deteriorating consumer spending across categories as the quarter evolved,” she said. “Having said that, the defensive bent to the CTR offering, its solid owned brands penetration, compelling good/better/best architecture, augmented by population growth and related demand for home basics, should provide some ballas.”
* Ms. Nattel also lowered her Saputo Inc. (SAP-T) target by $1 to $38 with an “outperform” rating. The average is $34.44.
“Moderating forecasts ahead of FQ2 results as commodity, operating, and geographic backdrops remain mixed,” she said. “Nonetheless, we remind investors that F25 is a key inflection year with several critical elements to help stabilize the business, and we remain constructive on the longer-term outlook with normalizing commodity backdrop an important caveat. As we move through F25/26 and full commissioning/run rate benefits of the $2-billion-plus capital program, focus on controlling the controllables should drive improving results, with U.S. segment optionality in F26 related to ongoing discussion among stakeholders to amend the milk pricing formula.”
* TD Cowen’s Aaron Bilkoski bumped his PrairieSky Royalty Ltd. (PSK-T) target to $26 from $25 with a “hold” rating, while BMO’s Jeremy McCrea increased his target to $34 from $33 with an “outperform” recommendation. The average is $30.94.
“Q3 results were as we had expected. Although valuation is higher than peers, we find it difficult to fault asset quality, strategy or performance. We have increased our target price to account for expected W.G. Duvernay drilling in our NAV. The renewed focus on the Duvernay highlights the value of PSK’s diversified portfolio and demonstrates the rekindled opportunities on perpetually held lands,” said Mr. Bilkoski.
* Ahead of its Nov. 7 earnings release, Ventum Capital Markets’ Rob Goff lowered his Well Health Technologies Corp. (WELL-T) target to $7 from $8 with a “buy” rating. The average is $7.61.
“We view WELL as a top performer in healthcare technology in Canada. Over the next 3 to 12 months, we expect the Company to extend its track record of delivering double-digit organic growth in alignment with WELL’s rule of 30 (combined organic revenue plus the EBITDA margin exceeding 30 per cent) and to build shareholder value,” he said. “We look for positive catalysts around portfolio monetizations, ongoing tuck-in acquisitions along with absorptions layered onto double-digit organic growth.”
* Raymond James’ Frederic Bastien initiated coverage of security and surveillance services provider Zedcor Inc. (ZDC-X) with an “outperform” rating and $3.25 target. The average is $2.61.
“Our analysis has established this Alberta-based company is ideally positioned to win enterprise-level customers who value fast response times and premium service above all,” he said. “We are particularly optimistic about management’s decision to build manufacturing and monitoring capabilities in Texas, from where several avenues for profitable organic growth exist.”