Inside the Market’s roundup of some of today’s key analyst actions

National Bank Financial analyst Richard Tse moved his rating for Telus International (Cda) Inc. (TIXT-N, TIXT-T) to “tender” from “sector perform” following Monday’s announcement Telus Inc. (T-T) has signed a definitive agreement to take back control of its affiliate.

The Vancouver-based telecom will acquire all outstanding multiple and subordinate shares of the company, which operates under the name Telus Digital, which offers technology outsourcing, for US$539-million or US$4.50 a share.

“The potential transaction represents an enterprise value of approximately US$2.9-billion ($1.3-billion equity value) and represents a valuation of 6.6 times EV/EBITDA (6.3 times EV/EBITDA including SBC) on our FY25 estimates,” said Mr. Tse. “We believe the 6.3 times EV/EBITDA valuation appears reasonable against CX peers. We see little to no risk that this transaction does not close; timing of the potential closing is expected in Q4′25. As such, we’re revising our rating to Tender.”

He moved his target for Telus International’s NYSE-listed shares to US$4.50 from US$4 to reflect the offer and the assumption it will close without adjustments. The average target on the Street is US$4.26, according to LSEG data.

Elsewhere, others making changes include:

* Stifel’s Suthan Sukumar to “hold” from “buy” with a US$4.50 target, up from US$4.

“The higher bid implies 5.8 times C26 EBITDA (vs. 5.1 times for the initial bid), at the upper-end of the 4-6x range for customer experience outsourcing peers, which we believe is appropriate given the better-than-expected stabilization in Telus Digital’s business as seen in recent quarters. The transaction has the unanimous recommendation of Telus Digital’s special committee, with the 2nd largest shareholder EQT and Telus Digital directors/officers in favor of the transaction. As such, we believe this is a done deal,” said Mr. Sukumar.

* CIBC’s Stephanie Price to “tender” from “neutral” with a US$4.50 target, up from US$3.40.

=====

National Bank Financial analyst Cameron Doerksen expects the third-quarter results from Transat AT Inc. (TRZ-T) to be boosted by lower-than-anticipated fuel costs and the benefits of the strike by flight attendants at rival Air Canada (AC-T).

After adjustments to his financial projections to reflect that optimism and the belief its stock will be “supported as the possibility of a takeout offer from one of the company’s large shareholders will persist,” he raised his recommendation for Transat shares to “sector perform” from “underperform” previously.

In a client note released Wednesday, Mr. Doerksen suggested a bidding war for the Montreal-based tour operator could be emerging.

“Could Transat be acquired? The question arises because of the public interest in acquiring the company from Pierre Karl Peladeau, one of Transat’s largest shareholders (9 per cent plus),” he explained.“ Recall that his family office, Financière Outremont, unsuccessfully legally challenged the debt restructuring deal between Transat and the Federal Government and, according to legal filings, had made an alternative bid to acquire Transat for $2.64/share. Mr. Peladeau’s interest in acquiring Transat goes back to the pre-pandemic period when Transat agreed to be acquired by Air Canada and based on public comments, it would appear that there still may be interest from him in acquiring the company.

“Given that Transat’s balance sheet is improved (albeit with leverage still high) and the company has taken solid steps to improve margins, it is possible that the company could attract additional potential suitors as well (noting that as an airline, any acquiror would have to be Canadian, which limits the number of potential suitors). In either case, the potential prospect of an acquisition of the company seems likely to provide support for the stock and is a key reason for our upgrade to Sector Perform from Underperform.”

In the near term, he raised his financial expectations after the average price of jet fuel in its fiscal third quarter was 87 cents per litre, ending 3 cents below his expectation. He also noted the current spot price is 89 cents, which is a penny under his fourth-quarter forecast.

“As such, we see fuel being a year-over-year tailwind in Q3 (fuel price last year was 98 cents per litre) and relatively neutral year-over-year in Q4,” he added.

“Transat should also benefit in fiscal Q4 from the Air Canada flight attendant strike as disrupted passengers sought alternative flight arrangements, which we expect boosted trans-Atlantic loads and yields (given the last-minute nature of the bookings). Book-away from Air Canada in the lead-up to and during the strike may provide a boost beyond just the strike period. While the impact on Transat’s financial results in the quarter is difficult to forecast, we have upped our revenue assumption for Q4.”

Mr. Doerksen raised his target for Transat shares to $3 from $2.25. The average target on the Street is $3.20.

“Transat continues to take steps towards improving margins through its Elevation Program, but net debt remains high relative to earnings. We forecast leverage at year-end F2025 at approximately 4.4 times (which assumes a meaningful improvement in EBITDA). We note that based on our updated forecast, Transat shares are trading at 6.1 times F2025 EV/EBITDA, which is a sizable premium to Air Canada at 3.4 times CY EV/EBITDA even though Air Canada’s leverage is much lower and its margins considerably higher.”

=====

Scotia Capital analyst Konark Gupta has reduced his third-quarter forecast for Air Canada (AC-T) significantly due to the “unexpected” multi-day operational disruption.

“The good news, however, is that AC was able to accelerate the normalization of its large-scale network in short order, while reaching a deal with the union for no strike/lockout if the tentative agreement fails (vote ends September 6) – a scenario some media reports are painting,” he said in a client note.

“Reflecting the aforementioned along with AC’s other disclosures since the disruption, including traffic impact and compensation policies, we are reducing our 2025 revenue and EBITDA/FCF estimates by more than $400-million and more than $350-million, respectively, with almost the entire delta occurring in Q3. Our post-2025 estimates are largely intact. Any deviation in pending guidance (currently suspended) due to further wage negotiations (to be mediated or arbitrated if the tentative agreement is voted down) should be relatively minor, in our view.”

Despite the changes, Mr. Gupta emphasized Air Canada stock “remains attractively valued” at 3.5 times estimated 2026 EV/EBITDA, which is “well below U.S. peers at 5.5 times although some discount is warranted for FCF weakness.”

“We view Air Canada as a value play in the airline sector with its industry-leading balance sheet and potential for margins to rebound toward high-teens along with mid- to high-single digit top-line growth over the next several years,” he added. “While cost inflation is higher this year due to labour contracts and uncertainties continue around U.S. tariffs, CAD/USD and fuel price, the demand and yield environment is holding up well as AC is keeping capacity and costs in check. FCF is tracking ahead of the company’s plan so far even with the upswing in capex to support fleet recovery and renewal.”

He reiterated his “sector outperform” rating for Air Canada shares but trimmed his target by $1 to $26. The average on the Street is $26.08.

=====

Emphasizing Alimentation Couche-Tard Inc. (ATD-T) is one of few recent large-cap “laggards” following recent share price depreciation, RBC Dominion Securities analyst Irene Nattel thinks the retailer’s valuation now “looks compelling” and remains “constructive on this Global Top 30 name based on track record of capital allocation discipline, ability to manage through challenging times.”

“The fade in ATD share price performance since the initial bump after the Company walked way from 7&i reinforces our view that THE key to ATD generating higher investor conviction/multiple re-rating remain improvements in underlying performance. Q1/F26 results a step (albeit small) in the right direction, with KPI’s showing sequential improvements, notably US inside store sales,” she said in a research note titled Road to recovery: ATD Q1/F26 results show green shoots of improvement.

After the bell on Tuesday, Couche-Tard reported quarterly revenue of $17.347-billion, down 5.1 per cent year-over-year and under Ms. Nattel’s $17.819-bilion estimate. Adjusted diluted earnings per share of 78 cents was a decline of 5.9 per cent and a penny under the analyst’s expectation.

“Although not the kind of robust growth quarter everyone would like from ATD, in our view investors should be somewhat encouraged by the modest growth in both inside store and gas gross profit despite the challenging macro backdrop that continues to weigh on demand, notably for low income consumers that typically make up 50 per cent of c-store business,” she said. “Adjusted EBITDA $1.615-billion, up 4.7 per cent year-over-year and a slushie straw above forecast $1.59-billion/consensus $1.55-billion despite higher than expected non-recurring expenses, normalized opex growth well controlled at 2.4 per cent.

“Q1 results reflect deepening traction on initiatives to drive inside sales, offset by pressure on consumer spending: U.S. SSS [same-store sales] finally moved (slightly) into positive territory and nicely outperformed closest peer 7-Eleven, better than expected in Canada/Europe&Other. Release notes benefit of favourable legislative changes in the Netherlands and Canada, latter offset by unfavourable changes in legislation around nicotine pouches. In the U.S., strong food execution key call-out, and on gross margins, higher support from vendors and favourable mix shift. SSG negative in U.S. and Europe, Canada positive although slightly less than expected.”

Trimming her forecasts to “reflect more stable gas margin environment,” Ms. Nattel lowered her target for Couche-Tard shares to $91 from $94, keeping an “outperform” rating. The average target is $83.22.

“ATD typically performs well across the cycle; in our view, extended SSS pressures reflect protracted, unexpected headwinds for low-end consumer,” she noted.

=====

Ahead of the release of its third-quarter financial results after the bell on Thursday, RBC Dominion Securities analyst Drew McReynolds sees Transcontinental Inc. (TCL.A-T) possessing “a compelling financial, risk and capital return profile.“

“Transcontinental is successfully transitioning from legacy commercial printing to packaging and retail services with a return to underlying EBITDA growth in F2024 bolstered by cost efficiencies,” he said. “With the stock trading at 5.3 times FTM [forward 12-month] EV/EBITDA versus an average of 7.6 times for packaging peers (each 0.5 times increase in multiple equates to $2.50/share), we continue to see value in the shares, particularly given significant FCF generation ($2.50/ share), management’s track record of solid execution, the strong balance sheet (net debt/EBITDA of 1.5 times in F2025E) and healthy capital returns (dividends, share repurchases.”

Expecting “an evolving operating environment to remain in focus” with its quarterly report, Mr. McReynolds is projecting the Montreal-based packaging and printing company to report year-over-year declines in revenue of 2.7 per cent (to $681-million) and EBITDA of 1.6 per cent ($119-million). However, he’s projecting adjusted earnings per share of 66 cents, which is 3 cents below the Street’s estimate but a gain of 10.4 per cent from the same period in fiscal 2024 (at 59 cents).

“With lingering tariff-induced economic uncertainty, we expect the operating environment to continue to evolve through the remainder of 2025,” he said. “While Transcontinental is not immune to any incremental macro headwinds or unforeseen direct tariff impacts, we do expect H2/25 results to benefit from: (i) the likelihood of year-over-year volume growth and EBITDA margin expansion within Packaging (we forecast Q3/25 organic revenue growth of 1.0 per cent year-over-year and EBITDA margin expansion of 70 basis points) driven by a recovery in medical, LATAM seasonality and a stronger sales pipeline; and (ii) renewed strength in book printing and ISM organic revenue growth within Retail Services and Printing, albeit with EBITDA margins facing a tougher year-over-year comparable (we forecast a Q3/25 organic revenue decline of 1.5 per cent year-over-year and EBITDA margin contraction of 82 basis points).”

“Other issues in focus. (i) the potential for further tuck-in M&A following the recent acquisitions of Middleton Group and Canva Group within ISM (an estimated $60-$65-million in incremental annualized revenue); (ii) any changes to a relatively subdued packaging M&A environment; and (iii) an update on the timing of non-core asset sales.”

While he raised his full-year EPS projections through fiscal 2027, Mr. McReynolds maintained an “outperform” rating and $25 target for Transcontinental shares. The average on the Street is $24.46.

=====

In other analyst actions:

* To reflect its share consolidation, Scotia’s Robert Hope moved his Tidewater Midstream and Infrastructure Ltd. (TWM-T) target to $6 from 30 cents with a “sector perform” rating. The average is $6.20.