Inside the Market\u2019s roundup of some of today\u2019s key analyst actions<\/p>\n
Like many of his peers on the Street, TD Cowen analyst Mario Mendonca saw the third-quarter financial report from Royal Bank of Canada (RY-T<\/a>) as \u201cvery strong.\u201d <\/p>\n \u201cComing into the quarter, we were cautious on credit, but PCLs [provisions for creit losses] were much better than expected,\u201d he said in a research report. \u201cStrong capital markets activity (trading) supported top line growth and operating leverage. RY should benefit from HSBC-synergies; deposit mix and better loan growth. Expect RY to slow the pace of buybacks. We do expect RY to raise ROE [return on equity] target in Q4\/25.\u201d<\/p>\n RBC shares jumped 5.1 per cent on Wednesday after it reported adjusted earnings per share of $3.84, rising 18 per cent from the same period a year ago and topping both Mr. Mendonca\u2019s $3.34 estimate and the Street\u2019s expectation of $3.32. While higher taxes reduced the result by 5 cents, lower PCLs & higher trading activity added 18 cents and 16 cents, respectively.<\/p>\n A breakdown of the big banks\u2019 third-quarter earnings so far<\/a><\/p>\n \u201cPTPP [pre-tax, pre-provision earnings] were up 22 per cent year-over-year, 9 per cent higher than our forecast, reflecting higher trading revenue and better operating leverage. NII [net interest income] was up 4 per cent quarter-over-quarter reflecting a 2 basis points drop in NIM [net interest margin] (est. up 2 basis points) and 1-per-cent quarter-over-quarter loan growth.\u201d<\/p>\n \u201cLower credit spreads helped FICC trading (revenue up 35 per cent year-over-year). Strong client activity supported overall cap markets PTPP – up 36 per cent year-over-year (revenue up 25 per cent year-over-year). Equities trading was also strong (up 43 per cent), and strong issuance and M&A activity supported C&IB top line growth of 11 per cent year-over-year. RY expects higher levels of transactions and deal closings to continue to support capital markets over the next 12 months.\u201d<\/p>\n Citing the outlook for both credit and credit markets, Mr. Mendonca raised his estimates by 5-6 per cent, emphasizing third-quarter earnings were 15-20 cents above run-rate.<\/p>\n That led him to hike his target for RBC shares to $208 from $191, maintaining a \u201chold\u201d recommendation. The average target on the Street is $206.85, according to LSEG data.<\/p>\n \u201cOver the past 5-10 years, Royal has traded at a 6-11-per-cent premium to the group. We expect expense actions, the HSBC deal, and business mix (large, dominant positions in several business lines) and NIM advantages to support superior PTPP growth and higher relative ROE, and ultimately support RY\u2019s premium valuation,\u201d he said. \u201cHowever, we believe that H1\/25 results, particularly the very large exposure in the utility & real estate sectors and elevated HSBC commercial PCLs, do not support a widening of the premium.\u201d<\/p>\n Other analysts making target adjustments include:<\/p>\n * National Bank\u2019s Gabriel Dechaine to $203 from $180 with a \u201csector perform\u201d rating.<\/p>\n \u201cAfter a disappointing Q2\/25 relative to peers, the Capital Markets business outperformed expectations, with 36-per-cent PTPP growth underpinned by better-than-expected trading & advisory revenue performance. With a relatively larger exposure to the U.S. Capital Markets business, RY is well positioned to benefit from improving business activity in coming quarters,\u201d he said.<\/p>\n * Desjardins Securities\u2019 Doug Young to $214 from $193 with a \u201cbuy\u201d rating.<\/p>\n \u201cCash EPS and adjusted pre-tax, pre-provision (PTPP) earnings were well above our estimates and consensus, and management\u2019s outlook \u2014while cautious \u2014 was encouraging. We increased our cash EPS estimates,\u201d said Mr. Young.<\/p>\n \u201cWe like RY\u2019s scale, higher relative ROE, and strong Canadian banking, wealth management and capital markets franchises.\u201d<\/p>\n * Scotia\u2019s Mike Rizvanovic to $210 from $186 with a \u201csector outperform\u201d rating.<\/p>\n \u201cRY\u2019s earnings power was on full display in Q3 as the bank put up the largest EPS beat so far this earnings season (13 per cent vs. our estimate),\u201d said Mr. Rizvanovic. \u201cAnd while we don\u2019t expect the top-line results to be repeatable in the near term as they were largely driven by strength in market-sensitive businesses that are likely to moderate a bit, we do believe that RY has moved the needle on its EPS trajectory. The bank\u2019s top-line strength in Q3, coupled with lower PCLs that may have peaked, along with constructive guidance, takes our EPS forecasts higher, while our target price moves up as we now value RY on our newly introduced F2027 EPS estimate. And finally on valuation, we expect RY to see some upside on its relative PE multiple premium, which had moderated close to its historical average heading into Q3 earnings season.\u201d<\/p>\n * BMO\u2019s Sohrab Movahedi to $203 from $190 with an \u201coutperform\u201d rating.<\/p>\n * Canaccord Genuity\u2019s Matthew Lee to $219 from $201 with a \u201cbuy\u201d rating.<\/p>\n =====<\/p>\n Acknowledging National Bank of Canada\u2019s (NA-T<\/a>) third-quarter came in weaker than anticipated, featuring \u201ca Financial Markets model reset and a modest NCIB,\u201d RBC Dominion Securities\u2019 Darko Mihelic now thinks the current period \u201ccould be a final \u201cnoisy\u201d quarter on PCLs which creates an interesting setup for 2026.”<\/p>\n The Montreal-based bank slid 3.8 per cent on Wednesday after it reported<\/a> adjusted earnings per share of $2.68, which was below the analyst\u2019s $2.79 estimate and the consensus of $2.71. He blamed the miss on lower-than-anticipated earnings in Financial Markets and U.S. Specialty Finance and International. <\/p>\n Improving outlook for tariff impact clouded by coming USMCA negotiations, bank CEOs say<\/a><\/p>\n It also announced a plan to buy back up to eight million shares, or about two per cent of its outstanding shares, which Mr. Mihelic said was \u201ca low level\u201d and he \u201cstrongly\u201d suspects the bank \u201cmay revisit another NCIB next year as it finishes the CWB AIRB conversion.\u201d<\/p>\n \u201c.We are surprised at the size of the NCIB as NA\u2019s CET 1 ratio was 13.9 per cent, above our estimate, and we believe there are significant benefits to be achieved from AIRB at CWB,\u201d he added. <\/p>\n \u201cWe mainly model lower Financial Markets and USSF&I earnings (we do not view the Financial Markets result as anything other than driven by weaker trading conditions so a model reset is in order).\u201d<\/p>\n Updating his forecast to reflect \u201clower impaired PCLs across the segments (except for Wealth and Corporate), reduced revenues in P&C (lower net interest margin (NIM)) and USSF&I (higher NIM more than offset by lower loan growth), and higher revenues in Corporate,\u201d Mr. Mihellic dropped his core earnings per share projections for 2025, 2026 and 2027 to $11.08, $11.63 and $12.88, respectively from $11.32, $11.95 and $13.24.<\/p>\n That prompted him to also cut his price target for National Bank shares to $148 from $152, keeping his \u201csector perform\u201d rating. The average target is $150.75.<\/p>\n \u201cNA is trading at a P\/B [price-to-book] of 1.87 times, above its long-term historical average of 1.83 times the peer average of 1.70 times. NA is trading at 12.4 times our 2026 core EPS estimate, above its long-term historical average,\u201d he concluded.<\/p>\n Elsewhere, other changes include:<\/p>\n * Desjardins Securities\u2019 Doug Young to $149 from $150 with a \u201chold\u201d rating.<\/p>\n \u201cCash EPS and adjusted pre-tax, pre-provision (PTPP) earnings fell short of our estimates. It is applying for an NCIB for up to only 2 per cent of shares outstanding, which seems light. And the implied impaired PCL rate guidance for 4Q FY25 was not encouraging. That said, the CWB integration is on track and we should get revenue synergy targets with 4Q FY25 results. We lowered our estimates,\u201d said Mr. Young.<\/p>\n * Scotia\u2019s Mike Rizvanovic to $147 from $142 with a \u201csector outperform\u201d rating.<\/p>\n \u201cWhile we would normally expect to see little share price movement following an in-line quarter, Q3 was a bit of an anomaly as the weakness in NA\u2019s share price was more reflective of its results on a relative basis as all of its peers have blown past expectations so far through earnings season,\u201d said Mr. Rizvanovic. \u201cAs for our forward view on NA\u2019s EPS trajectory, our estimates come down modestly to reflect a NIM miss in P&C Banking and lower trading revenue that fell off sequentially more than we had anticipated, partly offset by a bit more share repurchases with the announced NCIB of 2 per cent, which given the bank\u2019s strong CET 1 ratio of 13.9 per cent at quarter-end, appears to have underwhelmed the market. Our target price moves up as we now value the bank on our newly introduced F2027 EPS estimate, while our Sector Outperform rating remains unchanged.\u201d<\/p>\n * Jefferies\u2019 John Aiken to $153 from $157 with a \u201chold\u201d rating.<\/p>\n =====<\/p>\n Calling it \u201cone of the best companies in Canada,\u201d TD Cowen analyst Vince Valentini upgraded Thomson Reuters Corp. (TRI-T<\/a>) to \u201cbuy\u201d from \u201chold\u201d in response to recent share price depreciation.<\/p>\n \u201cThe stock had recently been trading at 34 times 2025 estimated EV\/EBITDA and 56 times P\/E, which were too high for us to recommend a BUY, but a recent correction (down 18 per cent since July 14) has created a rare opportunity to purchase this stock at a bit less of a premium (now 27.2 times EV\/EBITDA and 45.0 times P\/E on 2025E, but only 21 times EBITDA and 32 times P\/E if we look out to expected margin expansion in 2027E).\u201d<\/p>\n In a report released Thursday, Mr. Valentini also emphasized \u201cthe scale and breadth of technology offerings from TRI, and its GenAI capabilities, and the material improvement in its revenue growth profile in recent years.<\/p>\n \u201cWhen we compare TRI with its key comps in the business information services sector, we continue to find that it scores very well on most metrics,\u201d he explained. \u201cOne area where TRI continues to lag some of the peers with the highest multiples is on EBITDA margins. However, we believe TRI is on the verge of a multi-year expansion cycle in margins, which should start to be communicated via new multi-year guidance in early 2026 (or perhaps even some hints regarding the upside potential with Q3\/25 results in November). Our official forecasts (unchanged today) call for expansion to 42.3 per cent in 2027 versus 39.4 per cent in 2025 (note that the 42.3 per cent would not include any potential one-time restructuring costs, which we would back out of EBITDA for valuation purposes). We believe even higher than 42 per cent is possible over 3-5 years, with 45 per cent being plausible if management executes well on using GenAI capabilities (in which it has tremendous expertise) to reduce its own cost structure. TRI performs a lot of repetitive and labour-intensive data manipulation tasks, which should be well-suited for automation and a step-function improvement in margins.<\/p>\n \u201cThis should be over and above the normal operating leverage (110 basis points per year when revenue growth is at 7 per cent or above, according to management). The main risk to higher margins, in our view, would be either acquired revenue growth or accelerated organic revenue growth, which come with some near-term extra integration or R&D costs, but we do not believe investors should fear slightly lower margins if the trade-off is even higher organic revenue growth.\u201d<\/p>\n Mr. Valentini raised his target for Thomson Reuters shares by $10 to $285, which is 10 cents under the average on the Street.<\/p>\n \u201cA premium valuation is justified for TRI owing to high growth, largely recurring revenue streams; expanding margins; a very strong balance sheet (with lots of room for share buybacks on any temporary share-price weakness); and industry-leading positions in the delivery of GenAI workflow tools to legal and tax professionals,\u201d he added.<\/p>\n =====<\/p>\n Following a \u201cbig\u201d third-quarter miss, particularly on the revenue side, National Bank Financial analyst Gabriel Dechaine warned EQB Inc.\u2019s (EQB-T<\/a>) guidance suggests the end of its current fiscal year \u201cwill also be weak.\u201d<\/p>\n \u201cUpdated full-year guidance: 1) ROE of 11.5 per cent vs. year-to-date of 12.4 per cent; 2) PTPP down 10-12 per cent vs. year-to-date decline of 9 per cent; and 3) adjusted EPS decline of 12-15 per cent,\u201d he said in a client note. \u201cThe latter component implies a Q4\/25E EPS range of $2.02-$2.36, or 12-25 per cent lower than current consensus. An important question on [Thursday\u2019s] call is whether this challenging guidance will be reflected in the 2026 outlook.\u201d<\/p>\n After the bell on Wednesday, the Toronto-based digital financial services company reported<\/a> adjusted earnings per share of $2.07, down 11 per cent year-over-year and well below both Mr. Dechaine\u2019s $2.55 projection as well as the consensus forecast of $2.53. He attributed the miss to lower revenues, higher expenses and expanded provisions for credit losses, saying \u201ctop-line weakness was multi-faceted\u201d and calling it \u201canother tough credit quarter (with more mortgage provisions).\u201d<\/p>\n \u201cRevenues were 4 per cent below expectations, with NII [net interest income] falling 6 per cent short, due to NIM [net interest margins] compressing 25 basis points quarter-over-quarter,\u201d he said. \u201cMargins compressed due to: 1) lower yields on newly originated commercial loans compared to paydowns\/maturities; 2) excess liquidity levels; and 3) an influx of demand deposits offering relatively competitive yields. We note that EQB has since cut HISA rates, which should recover some margin performance.<\/p>\n \u201cTotal PCLs were 15 per cent above forecast, with the primary deviation in the Performing Category (approximately 130 per cent above forecast). Impaired PCLs were 7 per cent below forecast, with the bulk of these (40 per cent) allocated to the uninsured mortgage portfolio. This period marked the second consecutive quarter of EQB recording what we describe as \u201ccatch-up\u201d provisions on previously impaired mortgages, where either the asset value has declined substantially (i.e., more than 30 per cent) and\/or resolution times are taking much longer.”<\/p>\n Reducing his forecast to reflect lower margins, higher expense growth and higher PCLs, Mr. Dechaine dropped his target for EQB shares to $89 from $104, maintaining a \u201csector perform\u201d recommendation. The average target on the Street is $113.<\/p>\n Elsewhere, TD Cowen\u2019s Graham Ryding cut his target to $100 from $110 with a \u201chold\u201d rating.<\/p>\n \u201cThe themes behind this quarter\u2019s EPS miss (lower NIM, elevated PCLs, expense growth) could persist to some extent over the near term in our view. We have lowered our estimates as a result. … Given the weak earnings growth profile, muted on-balance sheet loan growth, and fluid outlook for credit, we are maintaining our Hold rating,\u201d said Mr. Ryding.<\/p>\n =====<\/p>\n While he summarized the second-quarter fiscal 2026 financial results from Dollarama Inc. (DOL-T<\/a>) as \u201cgood\u201d overall, National Bank Financial analyst Vishal Shreedhar emphasized the discount retailer\u2019s decision to maintain its full-year same-store sales growth guidance suggests a \u201cdeceleration\u201d through the second half of the year as it \u201chighlighted inconsistent consumer behaviour and higher than usual market competition.\u201d<\/p>\n Dollarama customers \u2018resilient\u2019 but \u2018fragile\u2019 as tariff tensions continue, CEO says<\/a><\/p>\n Shares of the Montreal-based company slid over 3.6 per cent on Wednesday based on that concern as well the expectation for delayed profitability from its recent acquisition<\/a> of Australia\u2019s The Reject Shop. That decline came despite quarterly earnings per share of $1.16, up 14 cents from the same period a year ago and exceeding Mr. Shreedhar\u2019s projection by a penny while matching the Street\u2019s forecast.<\/p>\n He attributed the narrow beat to stronger-than-anticipated results from its Latin American value retailer Dollarcity and \u201cslighty\u201d higher-than-expected gross margins.<\/p>\n Pointing to slower contributions from The Reject Shop as well as a higher burden from the global minimum tax rate, Mr. Shreedhar cut his EPS estimates for fiscal 2026 and 2027 to $4.59 and $5.22, respectively, from $4.69 and $5.42.<\/p>\n Reiterating his investment thesis, the analyst also trimmed his target for Dollarama shares to $203 from $213, keeping an \u201coutperform\u201d rating.<\/p>\n The average is $203.36.<\/p>\n \u201cWe hold a positive view on DOL\u2019s shares reflecting a stable, high return on capital international growth story supported by strong cash flows, a solid balance sheet and resilient sales performance,\u201d he said.<\/p>\n \u201cGiven strong share performance year-to-date (DOL total return of 32 per cent vs. the S&P\/TSX Composite at 17 per cent), we are removing DOL from our Top Pick list.<\/p>\n Other analysts making target adjustments include:<\/p>\n * Scotia\u2019s John Zamparo to $205 from $210 with a \u201csector outperform\u201d rating.<\/p>\n \u201cDOL\u2019s year-to-date performance created a tough hurdle for the stock to turn positive, as a lack of 2H\/F26 SSS guidance increase and cautious commentary caused investors to reset expectations slightly lower,\u201d said Mr. Zamparo. \u201cWe\u2019ve also reduced our F26 SSS estimate and F2027E EPS slightly on comps and a higher tax rate. Still, we generally take the other side of this argument. We concede SSS could slow, and flat seasonal and general merch in FQ2 isn\u2019t great, but DOL management is notoriously conservative and we believe margins probably surprise to the upside in 2H. Valuation remains the primary concern: approximately 37 times forward P\/E compares to our 12-per-cent EPS CAGR [compound annual growth rate], leading to a 3.1 times PEG, vs. a long-term average of 1.8 times.\u201d<\/p>\n * Canaccord Genuity\u2019s Luke Hannan to $195 from $200 with a \u201chold\u201d rating.<\/p>\n =====<\/p>\n Seeing the core businesses of Canadian midstream energy companies “continuing to perform well” in the second quarter of the current fiscal year, RBC Dominion Securities analyst Maurice Choy thinks investors are rewarding stocks that are \u201cpositioned to deliver sustainable, credible, and competitive growth.\u201d <\/p>\n \u201cAs a starting point, we saw: (1) generally in line quarterly results, with supportive volumes across core assets; (2) the reaffirmation or improvement of 2025 guidance ranges; and (3) major capital projects continuing to be on time and on budget,\u201d he said. <\/p>\n \u201cBeyond these, the market has been focused on upcoming stock catalysts (particularly in recognition of the sector\u2019s share price performances recently), and to this end, a number of growth projects appear set to be sanctioned in the coming months, with potentially supportive government policies and financial support offering longer-term opportunities for the midstreamers.\u201d <\/p>\n In a research note released before the bell, Mr. Choy said Pembina Pipeline Corp. (PPL-T<\/a>) \u201cremains the most topical stock among many investors.\u201d<\/p>\n \u201cWe see the share price progressively improving as it does what it does best (i.e., deliver solid results with strong volumes and\/or margins, while furthering its project execution track record), and also present a competitive and credible post-2026 fee-based EBITDA\/share growth story,\u201d he said.<\/p>\n The analyst currently has an \u201coutperform\u201d rating and $62 target for the Calgary-base company\u2019s shares. The current average is $56.89.<\/p>\n =====<\/p>\n In other analyst actions:<\/p>\n