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

RBC Capital Markets analyst Darko Mihelic has done a significant reassessment of Canadian banks and lifecos that now includes fresh assumptions on future stock buybacks and ability to meet return on equity targets.

The review resulted in him upgrading Toronto-Dominion Bank (TD-T) to “outperform” from “sector perform” while downgrading Bank of Montreal (BMO-T) to “sector perform” from “outperform”. His price target for TD was raised to $120 from $93, while his price target for BMO was modestly lowered to $163 from $168.

“We believe capital would reach excessive levels by 2027, thus we have added more buyback activity for all large banks and lifecos we cover (our EPS and ROE estimates rise modestly as a result),” Mr. Mihelic said in a note to clients

“As modelled, we expect BNS, NA, and IAG to be the only large companies we cover to achieve their medium-term core ROE targets by 2027 (and for BMO to be furthest from its 15% goal). In our view, for most banks and lifecos to achieve their ROE targets they may need to implement restructuring programs, complete ROE accretive acquisitions or simply have business growth beyond our current assumptions. For banks with significant buybacks, there is an argument for higher valuations as the economy improves and risk fades. We argue that valuations are somewhat cyclical unless the improvement in ROE comes not only from higher leverage but also from sustainably higher ROAs through scale (and/or lower risk).”

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In other analyst actions:

Altus Group Ltd (AAIF-T): TD Cowen resumes coverage with target price C$70 and a “buy rating.

CGI Inc (GIB-A-T): TD Cowen resumes coverage with target price C$145 and a “buy” rating

Dye & Durham Ltd (DND-T): CIBC cuts target price to C$8.5 from C$16 and downgrades rating to “neutral” from “outperformer”

Enghouse Systems Ltd (ENGH-T): TD Cowen resumes coverage with target price C$22 and resumes coverage with a “hold” rating

Kinaxis Inc (KSX-T): TD Cowen resumes coverage with target price C$225 and a “buy” rating

Real Matters Inc (REAL-T): Canaccord Genuity raises target price to C$10 from C$7; TD Cowen resumes coverage with target price C$9 and “buy” rating

More to come