Inside the Market’s roundup of some of today’s key analyst actions
Signs of a “rapid backdrop detetrioration” in the fourth-quarter 2023 financial results from Saputo Inc. (SAP-T) overshadowed “business improvement,” according to National Bank Financial analyst Vishal Shreedhar.
Shares of the Montreal-based dairy company plummeted 11.2 per cent on Friday following the release of an earnings report that actually exceeded the Street’s expectations. Revenue grew to $4.4468-billion from $3.957-billion a year ago, topping both Mr. Shreedhar’s $4.385-billion estimate and the consensus projection of $4.400-billion. Earnings per share jumped to 47 cents from 26 cents, also ahead of forecasts (43 cents and 42 cents).
However, president and chief executive Lino Saputo cautioned consumer sentiment has “turned somewhat negative” in a call with analysts and dairy markets are now “somewhat uncertain.”
“SAP reiterated its F2025 EBITDA target of $2.125-billion (NBF estimate is $1.877-billion), though it updated the components noting a changing dairy backdrop,” said Mr. Shreedhar. “Furthermore, during the call, it speculated on extending the target timeline citing demand/commodity weakness.
“In F2024, SAP anticipates a year of organic growth with a focus on EBITDA margin expansion, maximizing cash flow and driving operating leverage. Q1 is expected to deliver modest growth. In our view, execution against the plan becomes more nuanced as it increasingly relies on implementing operational improvement initiatives.”
In response, Mr. Shreedhar cut his full-year 2024 revenue and EPS projections to $17.507-billion and $1.88, respectively, from $17.987-billion and $2.03. His 2025 revenue estimate grew to $18.2-billion from $17.964-billion, but his EPS expectation slid to $2.18 from $2.29.
“Fundamentally, we see significant operational improvement over the next 2+ years associated with numerous network optimization (automation/digital), and manufacturing footprint rationalization initiatives (approximately $200-million in F2024, and more than $200-million in F2025, albeit partially offset by market conditions),” he said. “This could suggest that the selloff was overdone, particularly if based on concerns regarding commodity prices (which are inherently volatile). On the other hand, questions on SAP’s ability to achieve targets and deliver relatively consistent growth have intensified.
“Considering tepid dairy market outlook commentary, we have reduced our estimates.”
Reiterating his “outperform” recommendation for Saputo shares, Mr. Shreedhar cut his target to $37 from $43 to reflect his lower estimates and “increasing uncertainty in the backdrop.” The average target on the Street is $39.25, according to Refinitiv data.
Elsewhere, other analysts making target adjustments include:
* Desjardins Securities’ Chris Li to $38 from $43 with a “buy” rating.
“Increasing competition and softening demand (inflation, rising rates, economic uncertainty, slower-than-expected China reopening, etc) have driven a sharp decline in dairy prices, resulting in unfavourable market factors,” said Mr. Li. “We have reduced our FY24 EBITDA by 9 per cent, and our FY25 EBITDA of $1.861-billion is below management’s aspirational target of $2.1-billion. While we believe risk/reward skews to the positive, we expect the stock to be range-bound until earnings visibility improves, likely in 2H.”
* RBC’s Irene Nattel to $40 from $46 with an “outperform” rating.
* CIBC’s Mark Petrie to $38 from $43 with an “outperformer” rating.
* TD Securities’ Michael Van Aelst to $42 from $46 with a “buy” rating.
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Despite calling Neighbourly Pharmacy Inc.’s (NBLY-T) in-line fourth-quarter results “solid,” Desjardins Securities analyst Chris Li wants to “wait for better margin visibility” before raising his rating for its shares.
“While same-store sales are trending in line with the long-term range, elevated costs related to the pharmacist shortage will weigh on margins for two more quarters,” he said.
“4Q FY23 revenue and adjusted EBITDA were right in line with our forecast and consensus. Lower-than-expected same-store sales (1.6 per cent vs 3.0-per-cent estimate) was due to transitory factors, with the trend normalizing in 1Q FY24 (2.6–2.8 per cent, in line with the long-term range). Since the recently announced acquisitions (10 sites) will close after 1Q FY24, we expect 1Q FY24 revenue to be largely in line with the $191-million in 4Q FY23 (vs current consensus of $198-million). Pharmacist temporary relief staffing headwinds are expected to persist in 1H FY24 and weigh on margins before improving in 2H FY24. We forecast 40–50 basis points year-over-year improvement in 2H.”
Mr. Li thinks the M&A pipeline “remains robust” for the Toronto-based company, seeing it on track to acquire 35-40 pharmacies this year at a “favourable valuation.”
“NBLY is leveraging its solid financial position and strong reputation as the acquirer of choice to seek high-quality assets with above-average EBITDA per site while at the same time being able to pay at the lower end of the historical 6–7 times EBITDA range,” he said. “Despite recent noise around increasing competition for M&A, NBLY is on track to acquire 35–40 pharmacies a year. Management remains comfortable with pro forma leverage of 3.5 times net debt/EBITDA, with some flexibility to take this up to 4 times for high-quality acquisitions. We estimate leverage will remain in the mid- to high-3 times range based on 35–40 acquisitions per year at 6–7 times EBITDA.”
Maintaining a “hold” rating for its shares, Mr. Li reduced his target to $21 from $25 after lowering his 2024 EBITDA expectation based on margin pressure in the first half of the fiscal year. The average on the Street is $27.44.
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Desjardins Securities analyst Gary Ho is predicting AGF Management Ltd. (AGF.B-T) will “rebound” from a first-quarter miss when it reports its results before the bell on June 21.
He’s projecting earnings per share of 31 cents, a 5-cent improvement sequentially and up 17 cents from the same period a year ago. He’s expecting EBITDA from its Wealth Management business to rise to $23.5-million from $20-million in the previous quarter but down from $27.8-million in fiscal 2022.
“Our forecast continues to point to elevated SG&A, offset by strong contribution from its private alt platform in 2Q,” Mr. Ho said.
“Despite weak industry net flows (IFIC reported industry long-term fund net redemptions of $10.8-billion for March and April combined), we expect continued net inflows for AGF of $92-million in 2Q. We believe three-year fund performance continues to track well against AGF’s target, albeit likely below 1Q FY23. AGF reported May AUM of $41.2-billion (down 1.7 per cent vs 1Q).”
Maintaining a “buy” rating, he lowered his target to $9.75 from $10.25 based on lower assets under management. The average on the Street is $9.21.
“We favour AGF given its fund performance, positive retail net flows, solid balance sheet and healthy FCF profile,” said Mr. Ho.
“We foresee a few near- or medium-term positive catalysts: (1) retail net flows trending at or above industry; (2) redeployment of capital for organic growth, to seed new private alt strategies and for share buybacks; (3) growth in fees/earnings from its private alt platform; and (4) 2022′s DSC ban benefiting FCF and EPS.”
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National Bank Financial analyst Lola Aganga reaffirmed her “outperform” recommendation for Bravo Mining Corp. (BRVO-X) after resuming coverage following its equity raise of $20-million, citing the “attractive critical metals mix” at its 100-per-cent-owned Luanga project in Brail as well as the “project economics and regional exploration potential, notably considering the currently undefined high-grade nickel mineralization which is a focus of the Phase 2 drill program.”
The Vancouver-based company plans to use proceeds from the public offering of 5.65 million common shares (at a price of $3.50 each) to fund exploration at Luanga, located in the Carajas mineral province, as it continues Phase 2 drilling and geophysical work as well as general corporate purposes.
“The next significant catalyst/de-risking event will be the maiden resource expected in the latter half of the year,” said Ms. Aganga in a note. “Concurrently, BRVO is rapidly advancing Phase 2 drilling to follow up on the newly identified higher-grade nickel magmatic sulphide mineralization and commence extensive geophysics at site.”
“Results to date have been positive with more than 80 per cent of re-assay intercepts received returning better grades compared to historic results. Our assumptions capture 90 per cent of the Historical Resource at grades of 1.7 PGE + Au, and expect to see further upside to our estimates following the inclusion of rhodium in the upcoming maiden resource.”
Despite the share dilution, the analyst increased her target to $4.80 from $4.10 based on revised financing assumptions, as she now expects a $20-million raise in 2025 to help fund pre-feasibility activities at $3.50 per share from $1.65 per share based on recent price appreciation. The average target is now $4.18.
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H.C. Wainwright analyst Heiko Ihle sees a “foundation from meaningful growth” from U.S. GoldMining Inc.’s (USGO-Q) “already impressive resource base.”
That led him to initiate coverage of the Vancouver-based company, which began trading on the Nasdaq following the completion of initial public offering on April 20, with a “buy” recommendation.
“U.S. GoldMining’s (USGO) Whistler project maintains a significant gold and copper resource located within a world-class mining jurisdiction,” Mr. Ihle said. “The project, which is located just 150 kilometers (km) northwest of Anchorage, Alaska, hosts multiple deposits offering a variety of mineralization styles and mining opportunities. On a consolidated basis, the site presently hosts 3.0 million Indicated gold equivalent ounces (GEOs).
“We believe that 6.4 million GEOs in the Inferred category offers significant opportunity. We expect USGO’s management team to further de-risk these ounces going forward. We also believe the conversion of Inferred ounces into the Indicated category should prove to be a catalyst in driving the project’s value. In the longer term, we expect these resources to form the basis for an economic study.”
While acknowledging the lack of a published economic study for Whistler, Mr. Ihle set a target of US$20 per share. The average is US$16.25.
“Looking ahead, the primary near-term value driver for USGO is likely to be its success with the drill bit ... Whistler has seen incremental exploration work from a variety of different operators throughout its past,” he said. “We nonetheless believe that a significant amount of value has been left on the table. In addition, we expect this value to be unlocked under USGO’s ownership as the project is now poised to benefit from a dedicated technical team and a fully funded systematic drill program that we expect to be utilized as the basis of a maiden economic study. In turn, the firm remains fully permitted to conduct a broad-scale exploration program in 2023. Subsequently, mine design and financial modeling is expected to be completed in 2024 following the completion of a scoping study.”
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In other analyst actions:
* TD Securities’ Cherilyn Radbourne trimmed her ATS Corp. (ATS-T) target to $71 from $72. The average is $69.67.
* CIBC’s John Zamparo reduced his target for Canopy Growth Corp. (WEED-T) to 50 cents from $1.75 with an “underperformer” rating. The average is $2.88.
* RBC’s Alexander Jackson cut his Frontier Lithium Inc. (FL-X) target to $3.25 from $3.75 with an “outperform” recommendation. The average is $3.95.
* RBC’s Irene Nattel lowered her North West Company Inc. (NWC-T) target to $36 from $38 with a “sector perform” rating. The average is $38.25.
* Jefferies’ Samad Samana raised his target for Shopify Inc. (SHOP-N, SHOP-T) to US$65, exceeding the US$61.67 average, from US$44 with a “hold” rating.

This data comes from MediaIntel.Asia's Media Intelligence and Media Monitoring Platform.