Inside the Market\u2019s roundup of some of today\u2019s key analyst actions<\/p>\n
Jefferies analyst John Aiken does not think second-quarter earnings season will threaten the \u201chistorically high\u201d valuations for Canadian banks despite \u201csome serious potential headwinds,\u201d believing \u201cwith almost all the upside priced in, any questions surrounding promised robustness of the second half of 2026 could potentially upset the apple cart.\u201d <\/p>\n
\u201cWhile the results should be solid, much will hinge on the conviction of management\u2019s commentary to support current levels,\u201d he added.<\/p>\n
In a client report released before the bell titled The Calm Before the Storm, Mr. Aiken says he expects largely \u201csolid\u201d results across the sector ahead of an \u201cuncertain\u201d second half of the year.<\/p>\n
\u201cDespite a myriad of potential pressures, we anticipate that the second quarter results will represent solid earnings, in context of a challenging operating environment,\u201d he said. \u201cIn fact, our expectations are that Q2 should reflect a similar profile to the first quarter: slowing (but still positive) loan growth with elevated but not critical credit losses. We expect competing pressures on net interest margins, with operating leverage likely to once again separate the wheat from the chaff. Although we expect ongoing positive contributions from capital markets and wealth management, the impact is not likely to be as significant as it was last quarter. <\/p>\n
\u201cIn context, the awaited positive inflection point for the second quarter has not become any clearer, with the Canadian banks still trading at or near historic highs on a price-to-earnings metrics. Technical issues, including fund flows, still support valuations, however, we maintain that the banks remain fully valued, with downside risk greater than upside risk additional upside may require the banks\u2019 earnings growing into their valuations. With this outlook, we maintain our stance of no Buy ratings along our banking coverage.\u201d<\/p>\n
Predicting loan growth will \u201cremain constrained,\u201d Mr. Aiken thinks relative performance between the banks will \u201clikely be critical in differentiating performances and outlook.\u201d<\/p>\n
\u201cWith the Canadian economy far from out of the woods and global macro headwinds yielding ongoing uncertainty, we do not expect much relief on the credit front,\u201d he said. \u201cThat said, we are not expecting any material degradation, either, with our forecasts largely in line with the occurrence of the first quater. We believe that the market will be listening closely to management\u2019s commentary on the calls and any shift towards a more conservative commentary, after previously arguing for a better second half, will likely be viewed negatively. <\/p>\n
\u201cProfitability remains the key: As investors, and the management teams, become almost solely focused on profitability, we continue to anticipate that relative performance will be dictated by ground gained or lost on core ROE. While earnings remain paramount, top line growth, efficiency and capital management will determine relative performance coming out of reporting. Consequently, this is why we believe that the banks that have announced more aggressive buybacks (TD, BMO and NA) could see better relative performance.\u201d<\/p>\n
After modest adjustments to his full-year forecasts, Mr. Aiken made these target price changes to stocks in the sector while keeping his \u201chold\u201d recommendations for each:<\/p>\n
* Bank of Montreal (BMO-T<\/a>) to $196 from $195. The average on the Street is $211.82, according to LSEG data.<\/p>\n Analyst: \u201cBMO\u2019s acquisition of Bank of the West adds heft to its U.S. P&C banking footprint and expands beyond its U.S. Midwest market, but investors continue to look towards opportunities for synergies.\u201d<\/p>\n * Bank of Nova Scotia (BNS-T<\/a>) to $105 from $104. Average: $109.<\/p>\n Analyst: \u201cNear term, Scotia\u2019s earnings are expected to be modest. That said, buoyed by Scotia\u2019s restructuring charges in 2023, along with capital reallocation to stronger risk-adjusted return businesses, earnings are expected to grow by 7 per cent plus starting in 2026 over its five-year plan. And, while a dividend yield north of 5 per cent may be a compelling yield to wait for, its payout ratio remains elevated and well above its 40-50-per-cent range, suggesting dividend growth could remain fairly restrained over the immediate horizon.\u201d<\/p>\n * Canadian Imperial Bank of Commerce (CM-T<\/a>) to $143 from $136. Average: $152.95.<\/p>\n Analyst: \u201cWhile CIBC\u2019s strategic priorities, including emphasizing growth in key client segments with strong returns, maintaining discipline in resource allocation with a focus on returns over balance sheet growth, and leveraging its capabilities to drive simplification and efficiency, could lead to earnings outperformance and relative multiple expansion, execution of the strategy remains key.\u201d<\/p>\n * EQB Inc. (EQB-T<\/a>) to $112 from $110. Average: $123.14.<\/p>\n Analyst: \u201cWe view the current pressure on growth and profitability (mid-2025) as largely transitory, as EQB\u2019s business model and platform remain a compelling proposition. That said, the dual headwinds of a challenging macro environment as well as a significant transition in its management team imply that rectifying the several issues affecting EQB may take some time.\u201d<\/p>\n * National Bank of Canada (NA-T<\/a>) to $188 from $172. Average: $194.66.<\/p>\n Analyst: \u201cWith the acquisition of CWB now closed, National\u2019s relative growth profile remains focused on the domestic front. While we believe the deal will be transformational for National, the opportunities for synergies will be key.\u201d<\/p>\n * Royal Bank of Canada (RY-T<\/a>) to $232 from $226. Average: $255.04.<\/p>\n Analyst: \u201cWith the acquisition of HSBC Canada, RY\u2019s dominance in Canadian retail and commercial banking has been extended. Furthermore, with expense run-rate savings from its recent restructuring charges expected to hit the bottom line, we see a scenario in which Royal will generate strong earnings growth and, on a relative basis, outperform the group.\u201d<\/p>\n * Toronto-Dominion Bank (TD-T<\/a>) to $142 from $134. Average: $147.65.<\/p>\n Analyst: \u201cWhile TD continues to recover from the resolution of its anti-money laundering issues, the bank retains a solid growth profile, based on the strength of its retail banking platforms on both sides of the U.S.-Canada border. Furthermore, ample excess capital offers optionality and downside protection against a potential recession.\u201d<\/p>\n Elsewhere, in a report released before the bell titled A rising tide lifts all boats, but not equally, Canaccord Genuity analyst Matthew Lee said he views the overall environment for Canadian banks as \u201cconstructive, albeit uneven, with capital markets and Wealth likely to be the primary drivers of earnings strength in the quarter, offsetting still-muted loan growth.\u201d <\/p>\n \u201cWith Canadian P&C remaining subdued and the macro backdrop becoming more uncertain, we believe investors will increasingly focus on segment differentiation\u2014particularly the performance of the investment bank and the quality of international operations,\u201c he said. \u201dWe continue to favour U.S. exposure over all other international businesses given the stronger growth and credit backdrop relative to other international markets. On the credit front, we believe the current Middle Eastern conflict will flatten the PCL trajectory, with our model now reflecting a slight uptick in Q2 and elevated levels for the remainder of the year. <\/p>\n \u201cOverall, our current forecast contemplates industry-level organic EPS growth of 18.7 per cent for the quarter, driven by 11.4-per-cent revenue growth in capital markets and Wealth, offsetting sluggish loan growth. Given elevated valuations, we continue to prefer the stories with the clearest path to above-industry earnings growth over the coming two to three years. We maintain our BUY ratings on TD, BMO, and RY, with HOLD ratings on CM, BNS, and NA.\u201d<\/p>\n Mr. Lee made these target revisions:<\/p>\n * Bank of Montreal (BMO-T<\/a>, \u201cbuy\u201d) to $230 from $224. The average on the Street is $211.82.<\/p>\n * Bank of Nova Scotia (BNS-T<\/a>, \u201chold\u201d) to $108 from $110. Average: $109.<\/p>\n * Canadian Imperial Bank of Commerce (CM-T<\/a>, \u201chold\u201d) to $153 from $145. Average: $152.95.<\/p>\n * National Bank of Canada (NA-T<\/a>, \u201chold\u201d) to $200 from $190. Average: $194.66.<\/p>\n * Royal Bank of Canada (RY-T<\/a>, \u201cbuy\u201d) to $270 from $260. Average: $255.04.<\/p>\n * Toronto-Dominion Bank (TD-T<\/a>, \u201cbuy\u201d) to $158 from $149. Average: $147.65.<\/p>\n TD Cowen analyst Derick Ma raised his rating for Franco-Nevada Corp. (FNV-N<\/a>, FNV-T<\/a>) to a \u201cbuy\u201d rating from \u201chold\u201d to reflect \u201ca compelling combination of balance sheet strength, robust deal flow, and a potential Cobre Panama catalyst within the next 6 months. <\/p>\n \u201cDespite these positive attributes, FNV is trading at near 5-year valuation trough multiples, presenting an attractive entry point,\u201d he added.<\/p>\n In a client note titled Primed for Growth, Mr. Ma said he\u2019s \u201cconfident\u201d in the management of the Toronto-based miner\u2019s \u201cability to grow the business in a strong deal environment.\u201d<\/p>\n \u201cFNV\u2019s balance sheet is the best positioned in the sector with $4.1-billion of financial capacity (including equity investment, available credit on the revolvers and accordion features),\u201d he explained. \u201cFNV\u2019s financial capacity allows it to pursue large-scale deal opportunities without capital restrictions or limitations, in our view. <\/p>\n \u201cFNV has demonstrated strong deal execution, deploying over $3.3-billion over the past 24 months. FNV\u2019s recent transactions have also skewed towards producing mines resulting an addition of 7k GEOs to 2026E production on our estimates (representing 12 per cent of total 2026E GEOs).\u201d<\/p>\n Mr. Ma said a decision on a full restart of the Cobre Panama mine, which Franco-Nevada holds a metal purchase agreement with partner First Quantum, is \u201cgetting closer,\u201d but he thinks is \u201cunlikely to occur until H2\/26 at the earliest.\u201d<\/p>\n \u2018We believe that a positive resolution on a Cobre Panama could be achieved later this year,\u201c he said. \u201dGoP\u2019s target to make a decision on Cobre Panama by June 2026 is unlikely to occur, in our view, given the environmental audit has not yet been completed and socialized with the public. Furthermore, formal negotiations between FM and the GoP have also not yet commenced. <\/p>\n \u201cWe expect any amendments to the streams will be relatively minor and will have a minimal economic impact. There is a risk that FNV will be compelled to make minor stream amendments to accommodate a new deal between First Quantum (FM) and Government of Panama (GoP). Even in a downside scenario where the CP stream is reduced by 20 per cent, we calculate FNV\u2019s overall EBITDA and FCFPS will decline by only 4 per cent.\u201d<\/p>\n The analyst lowered his target for Franco-Nevada shares by $1 to $291. The average is $302.68.<\/p>\n In response to its all-stock, $7-billion deal to be acquired by Equinox Gold Corp. (EQX-T<\/a>), TD Cowen analyst Wayne Lam moved Orla Mining Ltd. (OLA-T<\/a>) to \u201cbuy\u201d from \u201chold\u201d previously, recommending shareholders \u201dtender to the offer given exposure to a larger scale, Canadian producer with accelerated growth.”<\/p>\n \u201cWe view the EQX\/OLA combination constructively in creating a company with greater scale while preserving operational focus in U.S.\/Canada,\u201d he said. \u201cIn our view, investors have shown an increasing willingness to pay a premium for companies with assets in Tier I jurisdictions, which we anticipate could support a higher valuation multiple for the pro forma entity over time. For OLA shareholders, we view the combination providing exposure to accelerated growth via two additional Canadian flagship assets at Greenstone\/Valentine, along with a robust growth pipeline with impending permits at the Castle Mountain project in California by yearend complementing the anticipated Record of Decision and start of construction at South Railroad in Q3\/26.\u201d<\/p>\n \u201cIn our view, the combination with EQX provides improved asset diversification via a larger portfolio with exposure to two additional flagship, long-life Canadian assets. As well, we view the EQX portfolio helping accelerate the path forward to 1 Moz+ while providing funding for upcoming growth initiatives planned by OLA. This includes (1) planned start of construction at South Railroad in Q3\/26, (2) further investment in optimization initiatives at Musselwhite along with potential for additional future infrastructure, and (3) ongoing advancement of the Camino Rojo underground opportunity. As such, we view the combination constructively in helping to accelerate growth ahead via a larger, diversified asset portfolio.\u201d<\/p>\n Mr. Lam updated his target to $24 from $26. The average is $31.14.<\/p>\n \u201cWe anticipate a successfully completed acquisition given shareholder support for the deal and our view of a limited likelihood of a superior competing bid for OLA,\u201d he concluded.<\/p>\n Citing \u201cstrong operational performance, rapid deleveraging, and potential funds flow directed its way following a peer acquisition,\u201d Citi analyst Scott Gruber upgraded Ovintiv Inc. (OVV-N<\/a>, OVV-T<\/a>) to \u201cbuy\u201d from \u201cneutral\u201d previously.<\/p>\n \u201cThe acquisition of Montney peer Arc Resources should bring additional attention to OVV\u2019s position in the play, while also potentially spurring funds flow toward OVV, which should offset the AECO pricing headwind,\u201d he said. \u201cFurther, OVV\u2019s well productivity in the Midland impressively continues to show improvement, which should derisk the volume outlook going forward and could set the stage for a type-curve uplift into 2027. In addition, the company aims to balance share repurchases with balance sheet improvement and is forecast to end 2027 with $2-billion of net debt (0.4 times levered).\u201d<\/p>\n Mr. Gruber\u2019s target for Ovintiv shares rose to US$70 from US$62. The average on the Street is US$66.63.<\/p>\n \u201cWe rate OVV a Buy. The portfolio is underappreciated (particularly the Montney) and we believe it is advantaged due to its gas weighting (50 per cent of production). Further, the portfolio has been largely realigned and management has exhbitied strong operational execution,\u201d he concluded.<\/p>\n RBC Dominion Securities analyst Irene Nattel says the tone of recent meetings with Canadian Tire Corp. Ltd. (CTC.A-T<\/a>) was \u201cconstructive\u201d with its management team reiterating its \u201cpath to value creation under the True North framework: 3-5-per-cent revenue growth with earnings growing faster, stable gross margins at 35-per-cent-plus, and FCF directed toward share buybacks.\u201d<\/p>\n \u201cKey enablers include AI-powered tools driving margin optimization and data-led decision-making, a cultural shift toward performance management as CTC transitions from holdco to opco, and proactive risk management at CTFS amid an uncertain but stable consumer backdrop,\u201d she added.<\/p>\n In a client note released before the bell, Ms. Nattel said Canadian consumers continue to be \u201cvalue-oriented but resilient\u201d and noted its first-quarter release<\/a>, which disappointed investors, was \u201cimpacted by weather and calendar dynamics.\u201d <\/p>\n \u201c53rd week in Q4 cost SSS [same-store sales] approximately 200 basis points; adjusting for it, all banners would have comped positively,\u201d she said. \u201cBC posted a positive comp, and sales picked up materially as weather turned. Credit card spend and payment patterns healthy. Loyalty sales up 2.3 per cent against a 6% prior- year comp; all five customer segments positive, with the thrifty cohort showing the highest growth. Insolvencies ticking higher, but industry-wide phenomenon and unpredictable, with no clear geographic or tariff-related trends; write-off rates at high-end of normal but stable. <\/p>\n \u201cCurrent emphasis on increasing the top line, with focus on efficiency and performance management to drive operating leverage. True North should deliver 3-5-per-cent revenue growth (delta reflects immigration, GDP, employment) with earnings growing faster and gross margins 35 per cent plus. True SG&A operating leverage more difficult to achieve given wholesale structure and techflation, but opex growth is being actively managed down through business-case discipline, and balancing tech debt retirement against new investment. FCF directed toward share buybacks. Limited M&A appetite beyond opportunistic, brand focused tuck-ins (i.e. Stripes).\u201d<\/p>\n Emphasizing Canadian Tire \u201ccontinues to trade at compelling discount to peers,\u201d Ms. Nattel reiterated her \u201coutperform\u201d rating and $216 target for Canadian Tire shares. The average on the Street is $198.37. <\/p>\n \u201cCTC continues to trade well below other discretionary retailers in North America,\u201d she said. \u201cNear term we expect valuation to be range-bound due to perceived risks around product cost\/ supply chain inflation and consumer expending. Based on our analysis, however, there appears to be potential for multiple re-rating, particularly if CTC navigates the current slowdown well, and as CTC resumes activity on its NCIB and executes on annual dividend increases, both are typically correlated with valuation\/share price performance in our coverage universe. While ROIC will be negatively impacted by the current step- up in investments, prior focus on improving ROIC and cash flow conversion should help sustain return metrics\/valuation, as these two measures are highly correlated with valuation in our coverage universe.\u201d<\/p>\n While Vital Infrastructure Property Trust\u2019s (VITL.UN-T<\/a>) first-quarter results fell below his expectations, RBC Dominion Securities analyst Pammi Bir says his outlook for the Toronto-based REIT is largely unchanged, emphasizing its \u201cdefensive healthcare focused portfolio continues to deliver decent organic growth, supported by near full occupancy and rent steps.\u201d<\/p>\n \u201cInitiatives to simplify the business are also progressing well, with potential monetization of its stake in VHP providing another source of liquidity for debt reduction and reinvestment in North America,\u201d he added. \u201cStill, HSO related downside risks persist, as work toward a resolution continues. All said, valuation seems reasonable.\u201d<\/p>\n On May 13, Vital Infrastructure, formerly known as Northwest Healthcare Properties Real Estate Investment Trust which possesses a portfolio of healthcare real estate infrastructure in major markets in North America, Brazil, Europe and Australia, reported same-property net operating income increased a \u201chealthy\u201d 3 per cent year-over-year, driven by inflationary rent adjustments, improved recoveries, and rents on capital spent alongside occupancy that \u201cremains high and steady\u201d at 96.4 per cent.<\/p>\n \u201cHowever, uncertainty persists with respect to VITL\u2019s exposure to [Australian private hospital operator] Healthscope (HSO, 6.7 per cent of revenue),\u201d he said. \u201cAs it stands, VITL\u2019s conditional lease with Calvary Health Care at 12 properties has not been approved by HSO\u2019s receiver. However, management believes progress toward a resolution is being made with the receiver currently evaluating a proposal from several operators to acquire the remaining HSO hospitals. Timing on resolution remains unclear. Nonetheless, as a reminder, we estimate every $2-million rent reduction equates to $0.01\/unit.\u201d<\/p>\n While he trimmed his forecast for 2026 and 2027, seeing \u201cmoderate\u201d growth, Mr. Bir kept a \u201csector perform\u201d rating and $6 target for the REIT\u2019s units. The average is $6.22.<\/p>\n \u201ce believe VITL\u2019s geographical breadth and strong institutional relationships provide unique capital allocation flexibility\/opportunity with which to drive returns. There appear to be growing pools of institutional capital seeking healthcare real estate investment. Currently, the majority of VITL\u2019s proportionately consolidated assets are located outside of Canada,\u201d he said.<\/p>\n In other analyst actions: <\/p>\n * In response to its $1.21-billion deal to be acquired<\/a> by Caisse de d\u00e9p\u00f4t et placement du Qu\u00e9bec-owned infrastructure fund manager Plenary Americas, Raymond James\u2019 Stephen Boland moved Information Services Corp. (ISC-T<\/a>) to \u201cmarket perform\u201d from \u201coutperform\u201d with a $51 target, matching the offer price, from $53. The average is $49.40.<\/p>\n \u201cWe had viewed any potential transaction as contingent on preserving the Government of Saskatchewan\u2019s economic and operational interests, given Crown Investments Corporation\u2019s ownership of the Class B Golden Share ,\u201d said Mr. Boland. \u201cRecent amendments to The Information Services Corporation Act appear to have helped address these considerations by enhancing provincial protections. These include added veto rights over any transfer of ISC\u2019s intellectual property, assets or functions related to the Saskatchewan registries, as well as the right to appoint two directors to ISC\u2019s board.<\/p>\n \u201cPlenary has committed to maintaining ISC\u2019s headquarters in Regina and preserving ISC\u2019s economic and brand relationship with Saskatchewan, including job preservation and continued economic activity in the province. ISC will continue to operate the Saskatchewan registries under the Amended and Restated Master Service Agreement with the Province of Saskatchewan, which runs to 2053. Registry data will remain the property of the Government of Saskatchewan.\u201d<\/p>\n Elsewhere, ATB Cormark\u2019s Nicholas Boychuk moved the stock to \u201ctender\u201d from \u201coutperform\u201d with a $51 target, down from $55.<\/p>\n * Stifel\u2019s Ian Gillies trimmed his target for AtkinsR\u00e9alis Group Inc. (ATRL-T<\/a>) to $99 from $101 with a \u201cbuy\u201d rating. The average is $114.34.<\/p>\n \u201cATRL announced a solid 1Q26, but has left 2026 and 2027 guidance unchanged,\u201d said Mr. Gillies. \u201cContribution is expected to be 2H26 weighted as the war in Iran negatively impacts AMEA while USLA\u2019s growth is expected to pick up throughout the year. The company has been active in its capital allocation yeae-to-date through a series of three acquisitions ($310-million) and repurchasing 0.9 million shares in 1Q26. We believe the company can continue to be very active with both programs given the capital flexibility.\u201d<\/p>\n * Stifel\u2019s Greg MacDonald resumed coverage of Calian Group Inc. (CGY-T<\/a>) with a \u201cbuy\u201d rating and $100 target. The average is $95.<\/p>\n \u201cOur recent report The \u201cChampions\u201d Portfolio defines Canada\u2019s Defence Industrial Strategy (DIS) as no less than the blueprint for the country\u2019s long-term economic policy,\u201c said Mr. MacDonald. \u201dThe DIS specifies ten key sovereignty goals (capabilities) and will leverage certain industry leaders (Champions) to execute on the defence mandate. Our investment thesis is that Calian is a key DIS Champion overlapping five \u2018capabilities\u2019 with the following implications: 1) procurement and promotion benefits increase growth in current defence verticals (space, training, healthcare), 2) new VENTURES platform provides first look exposure to vital C5ISRT technology with IP and M&A cross-benefits to existing defence verticals, 3) a DIS inspired structural reorganization leads to a focus on profitable growth with margin expansion. … We see previous growth\/margin challenges being significantly de-risked and sustainable growth growing due to DIS benefits with multiple expansion as a possibility.” <\/p>\n * In response to the announcement of a definitive agreement with Mr. Lube Canada for the acquisition of the Mr. Lube + Tires franchisor business for $237-million, Raymond James Michael Glen raised his Diversified Royalty Corp. (DIV-T<\/a>) target to $4.70, which is the average, from $4.25 with an \u201coutperform\u201d rating, while Canaccord Genuity\u2019s Matthew Lee raised his target to $5.50 from $4.75 with a \u201cbuy\u201d rating<\/p>\n \u201cWe view this transaction as very positive for DIV, but acknowledge that there are aspects of the deal investors are still seeking some clarity, \u201d said Mr. \u201cMr. Lube + Tires generated $46-million in Adj. EBITDA in 2025 and management estimates the business will generate $58.7-million of Adj. EBITDA in the 12 months post deal close (expected 2Q26). We estimate that the level of system sales forecast to support this level of Adj. EBITDA is $610-640-million vs. $516 mln in 2025. This level of system sales growth does represent an acceleration versus more recent historical trends, and is reflective of strong new store openings (16 in 2025, 18 in 2026 + 16 planned for 2027).\u201d <\/p>\n