Inside the Market\u2019s roundup of some of today\u2019s key analyst actions<\/p>\n
TD Cowen analyst Brian Morrison is expecting in-line third-quarter results from Canadian auto parts suppliers, predicting 2026 guidance will be maintained with \u201ca softer year-over-year production backdrop, margin benefits from efficiencies\/ AI\/improved contract economics, and strong FCF supporting active NCIBs.\u201d<\/p>\n
\u201cOur Q3\/26 EBITDA\/EPS estimates are in line\/nominally below consensus,\u201d he added. \u201cLower year-over-year global production volumes should pressure pre-acquisition sales, but be offset by margin benefits including operational excellence, AI-driven productivity gains and improved contract economics. Strong FCF has been supportive of active NCIBs, and we expect MGA (aside from sales on updated FX assumptions), MRE and LNR to maintain 2026 guidance metrics. <\/p>\n
\u201dIndustry Trends: U.S. LV demand resilient through Q3 despite a rising rate environment\/ affordability concerns. The U.S. SAAR\/N.A. production volumes were modestly lower year-over-year, but remained in line with expectations with inventory remaining balanced\/lean. We continue to monitor affordability trends and potential moderation in consumer demand.”<\/p>\n
In a client report released before the bell, Mr. Morrison warned he\u2019s \u201cgrowing cautious on the recent\/rapid rise in U.S. bond yields and potential impact upon the sector.\u201d <\/p>\n
\u201cIncreased borrowing costs for consumers\/dealers could pressure affordability and vehicle purchasing activity,\u201d he added. \u201cWe highlight this based upon the historical inverse relationship between U.S. 5-year bond yields and U.S. auto sales. <\/p>\n
\u201cFinancial Update: We made modest downward revisions to our financial forecasts based upon our updated 2027 production forecast; MGA FX exposure (Euro); MRE aluminum prices; LNR ongoing pressure in Agriculture segment.\u201d<\/p>\n
With those changes, Mr. Morrison made these target revisions to the three stocks in the space that he covers:<\/p>\n
Linamar Corp. (LNR-T<\/a>, \u201cbuy\u201d) to $120 from $123. The average target on the Street is $112.40.Magna International Inc. (MGA-N<\/a>\/MG-T<\/a>, \u201cbuy\u201d) to US$77 from US$80. Average: US$69.69.Martinrea International Inc. (MRE-T<\/a>, \u201cbuy\u201d) to $15 from $16. Average: $13.13.<\/p>\n \u201cWe continue to see upside opportunity to our coverage but are admittedly more cautious in recent months given the rising rate environment, and if elongated the potential for that to impact our 2027 forecasts. Our pecking order (MRE, MGA, LNR) favours Martinrea currently based on its potential to monetize non-core assets,\u201d said Mr. Morrison.<\/p>\n National Bank analyst Patrick Kenny sees Emera Inc.\u2019s (EMA-T<\/a>) $14.3-billion combination<\/a> with Canadian Utilities Ltd. (CU-T<\/a>) as a \u201cmerger of equals,\u201d creating \u201ca Top 20 North American utility with $72-billion combined enterprise value and $45-billion in rate base.\u201d <\/p>\n \u201cThe transaction results in approximately 95 per cent of pro forma earnings being generated from regulated operations with 80 per cent from Florida and Alberta (70-per-cent electric\/30-per-cent gas rate base mix),\u201d he added. \u201cThe combined capital plan of $32-billion through 2030 ($20-billion standalone) reaffirms EMA\u2019s standalone average annual rate base growth guidance of 7-8 per cent, 5-7-per-cent average annual adj. EPS growth, and 1-2-per-cent annual dividend growth target, while enhancing the company\u2019s capabilities to pursue additional growth opportunities driven by electrification, transmission, energy security, large-load customers and other energy infrastructure.\u201d<\/p>\n Analysis: The logic behind Emera\u2019s $14.3-billion acquisition of Canadian Utilities is murky so far<\/a><\/p>\n With the deal, Mr. Kenny\u2019s 2028 estimated adjusted earnings per share forecast rose by 2 per cent to $3.92 (from $3.85), while his debt-to-EBITDA projection increased to 5.9 times (from 5.5 times). <\/p>\n \u201cThat said, we note the credit rating agencies have recognized the benefits of size and scale by adjusting the downgrade thresholds to 6.4 times D\/EBITDA (was 6.0 times) and 11-per-cent FFO\/D [funds from operations to debt] (was 12 per cent). <\/p>\n \u201cOverall, the company is expecting modest accretion in the first full year for adj. EPS and a 20-per-cent dividend uplift for CU shareholders,\u201d he said.<\/p>\n Keeping a \u201csector perform\u201d recommendation for Emera shares, the analyst increased his target by $1 to $74. The average target on the Street is $76.32.<\/p>\n \u201cBased on modest accretion to our estimates offset by slightly higher pro forma leverage, our target remains largely unchanged at $74 (was $75),\u201d he said. \u201cCombined with EMA expanding its longer-term growth platform into Western Canada with improved scale and capabilities to execute growth projects while maintaining customer affordability, we reiterate our Sector Perform rating ahead of the company rolling over its standalone five-year capital plan prior to year end.\u201d<\/p>\n In concurrent reports, Mr. Kenny made these target changes: <\/p>\n * Canadian Utilities Ltd. (CU-T<\/a>) to $56 from $55 with a \u201csector perform\u201d rating. The average is $54.33.<\/p>\n \u201cCombined with viewing the transaction as strategically positive, providing immediate dividend accretion, greater geographic diversification, improved funding flexibility, and continued participation alongside Alberta\u2019s longer-term growth prospects, we maintain our Sector Perform rating,\u201d he said.<\/p>\n * Parent Atco Ltd. (ACO-X-T<\/a>) to $93 from $79 with a \u201csector perform\u201d rating.<\/p>\n \u201cWith 29,000 global space-rental and workforce-housing units, 44 branches and 13 manufacturing locations across 5 countries, \u2018New ATCO\u2019 is poised to benefit from long-term demand across modular construction, mining, public infrastructure, data centres, and defence,\u201d said Mr. Kenny. \u201c\u2018New ATCO\u2019s\u2019 defence platform is uniquely positioned to participate in federal plans earmarking approximately $180-billion towards defence procurement opportunities and $290-billion of defence-related capital investment over the next decade. Elsewhere, \u2018New ATCO\u2019 will retain its diversified investments in Neltume Ports including its 40-per-cent interest in Latin American ports with additional growth from developing its Vancouver, Washington port and planned Brazilian operations.\u201d<\/p>\n Elsewhere, RBC\u2019s Maurice Choy raised his target for Atco to $94 from $80 and Canadian Utilities to $63 from $58 with \u201csector perform\u201d ratings for both.<\/p>\n \u201cThe Emera-Canadian Utilities merger, if completed, should unlock a better public market valuation of ATCO\u2019s remaining assets, particularly the Structures & Logistics (S&L) business, which not only has delivered solid financial performance over recent years, but is also positioned to accelerate its growth given favourable infrastructure themes in the U.S. and Canada. Through this New ATCO\/ATCO SpinCo, investors gain a more direct exposure to favourable national- level trends relating to increased housing, defence and Canada North infrastructure spending, while progressively enabling a valuation that is closer to its industrial services peers over time,\u201d said Mr. Choy.<\/p>\n TD Cowen analyst Derick Ma initiated coverage of a pair of Vancouver-based \u201cemerging\u201d precious metals focused royalty and streaming companies – Versamet Royalties Corp. (VMET-T<\/a>) and Gold Royalty Corp. (GROY-A<\/a>) – with \u201cbuy\u201d ratings on Thursday, expecting both will have \u201chigh near-term organic growth that will drive a significant uplift in EBITDA and deal making capacity over the next 5 years.\u201d <\/p>\n \u201cThis should position the companies well to continue to drive aggressive growth and bridge the gap with their intermediate royalty peers,\u201d he added.<\/p>\n Mr. Ma thinks Versamet, formerly known as Sandbox Royalties Corp., is \u201crapidly establishing itself as stream financing company despite the company\u2019s short operating history, and the portfolio offers investors very strong EBITDA growth of 50 per cent through 2030. <\/p>\n \u201cThe organic growth profile is supported by a catalyst-rich 24 months, that includes first production from Toega and Eskay Creek, the ramp-up of Cui\u00fa Cui\u00fa and the Rosh Pinah 2.0 expansion,\u201d he added.” Longer term, the portfolio should benefit from expansion plans at Blackwater, first production at El Pilar, among others. Furthermore, we expect the production growth outlook will accelerate balance sheet deleveraging and position to the company to continue to aggressively pursue portfolio growth. The management team has proven its ability to originate and structure its own stream transactions, which is a differentiator amongst similar sized peers. <\/p>\n \u201cExecuting on stream transactions is important to growth and portfolio construction because streams could be structured to feature larger deal sizes and more favourable production profiles, which could result in future step changes in VMET\u2019s GEOs profile. The management team, led by former Maverix Metals CEO Dan O\u2019Flaherty, has a demonstrated track record of royalty portfolio construction, stream financing, and M&A execution.\u201d<\/p>\n Mr. Ma set a target of $21 per share, pointing to a 73-per-cent total return based on his current price. The average target is $19.12. <\/p>\n \u201cWe believe VMET should trade at a premium EV\/EBITDA multiple to the peer group due to the high expected near- and medium-term growth outlook and stream financing capabilities, albeit as a slightly lower EBITDA multiple compared to GROY despite its elevated levels of debt and exposure to some higher risk jurisdictions (Burkina Faso),\u201d he said.<\/p>\n He called Gold Royalty \u201ca high growth, junior royalty company with more than 260 assets in the portfolio\u201d and offering a \u201csuperior geopolitical risk exposure with its Americas focused portfolio.\u201d<\/p>\n \u201cThe company is approaching an EBITDA inflection point (200-per-cent increase through 2030), underpinned by a diversified pipeline of development assets including Canadian Malartic, REN, Jerritt Canyon, Vares, Borborema, and Blackwater. Unlike many of its similar sized peers,\u201d he said. <\/p>\n \u201cGROY has multiple avenues for value creation including royalty generation, in addition to the traditional royalty business activities of royalty and stream financing, third-party royalty acquisitions, and corporate M&A. This differentiated approach allows management to pursue its own opportunities without having to directly compete with its peers on each transaction. Importantly, the royalty generation activity focused on just two Tier 1 jurisdictions (Nevada and Ontario) where management has local experience and expertise and GROY does not engage in any project development activities. The leadership team has in-depth experience and industry relationships, which it has successfully leveraged into bilateral transactions for all eight of its royalty and stream acquisitions.\u201d<\/p>\n He set a target of US$4, indicating a 39-per-cent total return. The average i US$5.18.<\/p>\n \u201cWe believe GROY should trade at a premium EV\/EBITDA multiple to the peer group due to the significant expected near- and medium-term organic growth in the portfolio, which will drive improved cash flow generation and deal capacity,\u201d said Mr. Ma.<\/p>\n The third quarter is shaping up to be \u201canother challenging\u201d period for MTY Food Group Inc. (MTY-T<\/a>), according to TD Cowen analyst Cheryl Zhang, emphasizing \u201cconsumer spending pressure, cost inflation, and elevated promotions persist.\u201d<\/p>\n \u201cRecently announced corporate store closures should weigh on near-term results before delivering longer-term benefits,\u201d she said. \u201cWe expect the shares to remain range-bound pending clearer macro and industry improvement and\/or a favourable outcome from the strategic review.\u201d<\/p>\n In a note released early Thursday, Ms. Zhang warned same-store sales growth for the Montreal-based franchisor and operator of quick-service and casual dining restaurants, which has 80 different banners in Canada, the U.S. and internationally, is likely to remain negative in the quarter with network contraction likely through the second half of 2026.<\/p>\n \u201cWhile MTY begins to lap easier comps in Q3, we see little evidence that macro or competitive pressures are easing,\u201d she explained. \u201cElevated energy costs are creating fresh pressure on consumer budgets: our U.S. restaurant analyst Andrew Charles estimates that higher gas prices could reduce Q4 U.S. restaurant industry sales by 60 basis points. At the same time, major QSR [quick-service restaurant] brands remain heavily promotional in an effort to capture share of wallet (e.g., McDonald\u2019s $5 Meal Deal, Domino\u2019s 50-per-cent off all pizzas). We do not view this backdrop as conducive to sales growth and forecast Q3 SSSG of negative 1.0 per cent in Canada and negative 1.5 per cent in U.S.\/Intl.\u201d<\/p>\n \u201cDespite a healthy pipeline of restaurant openings over the coming quarters (led by Cold Stone and Wetzel\u2019s Pretzels), this should be more than offset by the announced closure of 68 underperforming corporate stores, with the impact heavily weighted to Q3 and led by Papa Murphy\u2019s. We forecast a net quarter-over-quarter reduction of 18 locations in Q3 which, together with negative SSSG, should drive a 6-per-cent year-over-year revenue decline.\u201d<\/p>\n Ms. Zhang reduced her revenue forecast for 2026-2028 revenue by 4-5 per cent and adj. EBITDA by 1-5 per cent to \u201cbetter reflect the closure of 68 corporate stores announced on the Q2\/26 call, as well as a stronger USD outlook.\u201d <\/p>\n \u201cThis is partially offset by lower depreciation expectations (to better reflect store closures), resulting in a modest 2-3-per-cent reduction in our 2027-28 EPS,\u201d she added.<\/p>\n She kept a \u201chold\u201d rating and $38 target for shares of MTY, which initiated a formal strategic review<\/a> in November of 2005. The average target is $41.17.<\/p>\n There are \u201cplenty of tailwinds ahead\u201d for Exchange Income Corp. (EIF-T<\/a>), according to National Bank Financial analyst Cameron Doerksen, who emphasizes key aviation end markets \u201cremain positive.\u201d<\/p>\n \u201cAs the largest aviation provider into Canada\u2019s North and other remote areas, EIC is ideally positioned to see growth from Canada\u2019s investment in defence and other infrastructure in the North. The current Canadian government has set the stage to advance multiple major projects in the North, which should support growing passenger, cargo, and charter activity for EIC\u2019s northern airlines for years. In addition, demand trends for EIC\u2019s Regional One aircraft parts and leasing subsidiary remain highly positive.\u201d<\/p>\n In a client report previewing the Winnipeg-based company\u2019s third-quarter results, Mr. Doerksen also emphasized demand growth for demand growth for its environmental access-matting division, which falls under its Manufacturing segment, is \u201cpoised to accelerate.\u201d<\/p>\n \u201cEIC\u2019s Environmental Access Solutions segment (matting) is also poised for breakout growth in the coming years supported by investments in new power transmission lines in both Canada and the U.S., potential new pipelines in Canada, and other infrastructure investments,\u201d he added. \u201cThe segment makes up 10 per cent of total EIC revenue and revenue growth should be supportive of EIC\u2019s Manufacturing margins as matting rentals come with high EBITDA margins.\u201d<\/p>\n The equity analyst increased his third-quarter revenue projection to $1.042-billion from $1.033-billion previously with his fully diluted adjusted earnings per share estimate rising 6 cents to $1.59.<\/p>\n Also increasing his full-year 2026 and 2027 forecast, Mr. Doerksen reaffirmed an \u201coutperform\u201d rating and $145 target for Exchange Income shares. The average on the Street is $148.82.<\/p>\n \u201cWe were previously forecasting full-year 2026 EBITDA towards the lower end of management\u2019s guidance range, but with underlying end market trends even more positive across most of EIC\u2019s segments, we are more confident that 2026 EBITDA can beat our prior estimate,\u201d he added. \u201cManagement will introduce its preliminary guidance for 2027 with the Q3\/26 report. We have also increased our 2027 estimates and now forecast EBITDA of $984-million (from $974-million) with the consensus sitting at just over $1.0-billion.\u201d<\/p>\n \u201cOn our updated 2027 forecast, the stock trades at 9.2 times EV\/EBITDA versus the stock\u2019s historical forward average of 8.0 times, but still reasonable in the context of the strong outlook across the company\u2019s key end markets and projected multiyear growth for the company. We value the stock by applying an 11.0-times EV\/EBITDA multiple to our 2027 forecast. After some modest upward adjustments to our EBITDA estimate, offset by higher assumed capex to support growth, our $145.00 target is unchanged.\u201d<\/p>\n TD Cowen analyst David Kwan has \u201ca greater appreciation for the many attractive organic growth opportunities\u201d across Wellstar Technologies Corp.\u2019s (WSTR-X<\/a>) three business lines after hosting recent investor meetings with its CEO Amir Javidan. <\/p>\n He said the Vancouver-based software-as-a-service company, which commenced trading on the TSX Venture Exchange on Oct. 1 after going public through parent Well Health Technologies Corp. (WELL-T<\/a>), is nearing \u201csome potentially large multi-year deals with provincial governments (e.g., Ontario PCMR RFP) that would be key catalysts and could drive continued Rule of 40 performances.\u201d<\/p>\n \u201cWith $90-million in cash\/no debt, we also see M&A upside (not baked into our forecasts),\u201d he added. <\/p>\n In a client note released Thursday, Mr. Kwan emphasized Ontario\u2019s procurement process for its province-wide Primary Care Medical Record (PCMR) system, which is a part of its $3.4-billion Primary Care Action Plan, could be \u201ca key near-term catalyst\u201d for investors to watch.<\/p>\n \u201cThe goal is to \u2018integrate patient records, reduce paperwork for doctors and improve the quality of care received by patients,\u2019\u201d he explained. \u201cThe PCMR system will \u2018securely connect patient information, reduce duplication and help health-care providers deliver faster, more connected and coordinated care.\u2019 <\/p>\n \u201cMultiple qualified vendors are expected to be selected, with a decision expected in the near-term. We believe WSTR is well-positioned to be one of the approved vendors given its open-source OSCAR Pro EMR meets key selection criteria, including interoperability (a core part of the PCMR initiative), with additional functionality including a growing number of AI features that enhance patient care and reduce administrative burden. If WSTR is selected, there could be attractive opportunities to grow its market share at the expense of vendors who did not make the cut, while we think there are other solid avenues to expand its EMR footprint.\u201d<\/p>\n He also emphasized other provinces are \u201cpursuing quicker procurement processes for primary care-to-specialist eReferrals, which we think could benefit WSTR, as we note Ocean has already won three province-wide mandates (Ontario, B.C., N.S.).\u201d<\/p>\n Mr. Kwan reaffirmed a \u201cbuy\u201d rating and $8.50 target for Wellstar shares. The average on the Street is $7.20.<\/p>\n In other analyst actions: <\/p>\n * Previewing quarterly results for IT service providers in his coverage universe, Desjardins Securities\u2019 Jerome Dubreuil reduced his targets for Alithya Group Inc. (ALYA-T<\/a>, \u201chold\u201d) to $1.10 from $1.15 and CGI Inc. (GIB.A-T<\/a>, \u201cbuy\u201d) to $115 from $118. The averages are $1.20 and $117.16, respectively.<\/p>\n \u201cAccenture\u2019s (ACN, NYSE, not rated) robust quarterly results, reported on October 1, improved sentiment across the IT services sector,\u201d Mr. Dubreuil said. \u201cWhile this data point alone does not lead us to expect a similarly strong quarter for GIB, it reinforces our view that IT services providers are likely to remain relevant in the AI era, particularly as enterprises navigate the transition toward broader AI adoption. Our 4Q FY26 forecast for GIB is broadly in line with consensus expectations.\u201d<\/p>\n \u201cKeeping things in perspective. ACN\u2019s quarterly results were strong, and the acceleration in consulting revenue was a positive signal for the health of discretionary demand, which has been an industry headwind for years. However, at the midpoint of its guidance, ACN is expecting a year-over-year deceleration in organic growth in the coming fiscal year, suggesting that demand headwinds are still present. Some uncertainty remains regarding how roles will evolve as AI adoption increases. For example, we anticipate that IT services companies and software companies could overlap (or compete) in the development and governance of agents.\u201d <\/p>\n