Thursday’s analyst upgrades and downgrades

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

Following the release of third-quarter financial results that “slightly” exceeded his expectations, National Bank Financial analyst Cameron Doerksen said he continues to like the earnings growth profile for Canadian Pacific Kansas City Ltd. (CP-T), forecasting double-digit earnings per share growth in both 2026 and 2027 “supported by new business wins and ongoing merger synergies.”

“We see superior volume and earnings growth over our forecast time horizon supported by new business wins (new EVR coal contract a new tailwind in 2027) and further growth in volumes to and from Mexico (with CPKC’s SMX service volumes to the Southeast U.S. up 30 per cent sequentially in Q3),” he added. “We forecast 10.7-per-cent EPS growth in 2026 and 16.1 per cent in 2027.”

After the bell on Wednesday, the Calgary-based railway reported quarterly revenue of $4.219-billion, a gain of 15 per cent year-over-year and above both Mr. Doerksen’s $4.102-billion estimate and the Street’s projection of $4.187-billion. Core adjusted earnings per share rose 16 per cent to $1.28, which topped Mr. Doerksen’s $1.26 expectation but fell short of the consensus of $1.32.

“CPKC has maintained its 2026 guidance for EPS growth in the low-double-digit range with mid-single-digit RTM [revenue ton mile] growth,” said the analyst. “We forecast EPS growth of 10.7 per cent for the year (consensus was at up 12.0 per cent prior to the Q3 report). For Q4, based on the current fuel surcharges and pricing trends, $/RTM should be up in the high single digits and the O/R [operating ratio] should be below 60 per cent, both of which are consistent with our forecast.”

Mr. Doerksen also emphasized rail volume trends appear “positive” as the fourth quarter commences with new coal loads coming.

“So far early in Q4, CPKC’s RTMs are up 5.2 per cent year-over-year with notable strength in Potash (up 18.3 per cent), Intermodal (up 10.3 per cent), Metals, Mining and Consumer Products (up 12.6 per cent), and continued strength in Grain (up 7.1 per cent),” he said. “Coal volumes remain weak (down 6.2 per cent) but less so than prior quarters. CPKC also announced a renewed and expanded five-year deal to move coal for Elk Valley Resources from its mines in Southeast B.C. to export terminals in the Vancouver area. This represents an expansion of the existing volumes CPKC already moves for EVR (CPKC originates all the coal at the mines, but 50 per cent of the volumes that were previously interchanged with CN at Kamloops will shift back to CPKC).”

After modest increases to his forecasts for 2026 and 2027 after raising his coal revenue assumption to account for the new contract expansion, Mr. Doerksen bumped his target for CPKC shares to $142 from $140, reaffirming an “outperform” rating. The average on the Street is $140.43.

Elsewhere, Desjardins Securities’ Benoit Poirier lowered his target to $141 from $143 with a “buy” rating.

“CP’s 3Q26 slight miss largely reflected higher-than-expected stock-based comp, while fuel was a 190 basis points OR headwind. Solid volume growth, a sub-60-per-cent 4Q OR outlook, a new EVR coal contract and constructive comments on grain reinforce our confidence in CP’s 2027 outlook and ability to meet its 2026 guidance,” said Mr. Poirier.

RBC Dominion Securities Irene Nattel thinks the third-quarter results from Canada Packers Inc. (CPKR-T) “confirmed the challenging market backdrop ... with the conference call reinforcing our view that the current spread compression is cyclical.”

“Notwithstanding commodity markets volatility, CPKR is executing its capital-light opportunity to close a capacity utilization gap that should accelerate in 2027 as contracts kick in, reduce leverage, and return capital to shareholders by way of a dividend with an attractive current annualized yield of 6.3 per cent,” she added. “Our analysis indicates dividend should be sustainable.”

Ms. Nattel emphasized “commodity market dislocation” drove third-quarter earnings compression that is continuing early in the current quarter after Canada Packers reported EBITDA of $31.5-million, which fell in line with her forecast of $32-million. That represent 7.5 per cent of revenue, which falls below its annual target range of 8-12% per cent.

“Earnings recovery hinges on normalizing market conditions; nature of the current downturn suggests a transient pullback,” she added. “With broadly stable North American supply, the drag on cutout values is driven by softer demand for U.S. packaged meats off 5-9 per cenmt in key categories, and softness in exports to Mexico and Southeast Asia. While industry data suggests seasonal cutout pressure will persist through year-end and potentially into early Q1/27, belly freezer stocks roughly in line with prior year levels support the case for normalization as we move through 2027. On the volume side, new hog supply contracts should drive incremental deliveries, accelerating in H2/2027, reinforcing the capacity-fill opportunity over the coming years.”

After adjusting her forecast to reflect the results and sustained difficult conditions, Ms. Nattel lowered her target for Canada Packers shares by $1 to $19, keeping a “sector perform” rating. The average on the Street is $17.75.

“Our preliminary Q4/26E reflects ongoing cutout softness and seasonal headwinds unlikely to abate before year-end,” she noted. “For 2027 and 2028, we assume reversion toward more normalized market conditions. Our 2027 estimate is essentially unchanged. We are introducing preliminary 2028 estimate predicated on normalized spreads, hog volumes consistent with the 2-3-per-cent annual growth target, offset by modest FX and inflation headwinds. Looking further ahead, M&A optionality remains a medium-term consideration once volume scaling accelerates.”

TD Cowen analyst Vince Valentini said he’s “very pleased” by BCE Inc.’s (BCE-T) $2.45-billion sale of a minority stake in its cellphone towers to the Caisse de dépôt et placement du Québec from both from “both a valuation and balance sheet perspective.”

“The math is reasonably straightforward in our view, so we do not understand the lack of positive share price reaction,” he said after BCE slid 0.7 per cent on Tuesday after the announcement and a further 0.5 per cent on Wednesday.

“We struggle to see what is not to like here. It is a clean and attractive deal to partially monetize a valuable hidden asset. It should also ease any concerns about BCE not being able to achieve its leverage target of 3.5x, albeit full build-out of 1.7 GW of DC capacity (including the recent new backlog of 900 MW in Saskatchewan) is still not possible in our view without project level minority funding partners.”

Moving forward, Mr. Valentini said he’s looking forward to new data centre contract announcements “soon,” and “perhaps some commentary on the Q3 call about the ability to secure DC tenants with better credit ratings going forward.”

“This management team continues to surprise us on the upside with NAV accretive initiatives, which we do not view as consistent with the recent share price weakness,” he said. “If not for the material sports catalyst that we expect at Rogers in the next 2-4 months, we would be strongly considering BCE as our top pick amongst Canadian telco stocks. The dividend is safe in our view, and the yield of 6.2 per cent screens as attractive relative to current bond yields.

Mr. Valentini increased his target for BCE shares to $44 from $40 with a “buy” rating. The average is $36.87.

“We reiterate our BUY recommendation on BCE, as we see a more balanced and increasingly compelling risk/reward setup emerging,” he said. “While investor sentiment remains cautious following the dividend reset and uncertainty around Ziply, we believe the market is underappreciating BCE’s ability to compound modest but durable growth across its core Canadian wireless and internet businesses, while unlocking additional upside through AI data centre expansion, potential infrastructure partnerships, non-core asset monetization, and improved U.S. fiber execution. With management targeting 2025A-2028E revenue and EBITDA growth of 2-4 per cent and 2-3 per cent, respectively, a more sustainable payout ratio, and a 5-per-cent dividend yield, we believe the stock will outperform as execution improves and catalysts materialize over the next 12 months.”

National Bank Financial analyst Vishal Shreedhar thinks Aritzia Inc. (ATZ-T) introduced “ambitious” sales targets and “achievable” EBITDA margin guidance at its Investor Day event on Tuesday, seeing its strategic plan “reflecting footprint expansion and strong top-line growth.”

“We consider the F2032 targets to be positive, given higher revenue growth expectations vs. NBCCM and the Street,” he said in a client report. “We consider EBITDA margin guidance to be achievable reflecting leverage and efficiency, partly offset by international expansion and investment. International pressure is uncertain, and we suspect ATZ is being conservative.

“Our biggest takeaway is that ATZ has ambitious expectations for growth, which if realized, will drive continued share price outperformance.”

On Tuesday, the Vancouver-based clothing retail announced it expects to grow its net revenue to between $9.5-billion and $10.5-billion in its 2032 financial year, which it said represents a 15-per-cent to 17-per-cent compounded annual growth rate. It also hopes to open 12 to 14 stores annually in the United States through that period.

“The outlook drivers are: (i) 12-14 annual new boutiques in the U.S. and repositioning 5–7 boutiques (F2032 expected boutique count is 220), (ii) approximately doubling the client base, (iii) capex of $2-billion (net of proceeds from lease incentives), (iv) $2-billion of share repurchases reflecting 50% of FCF returned to shareholders, and (v) tax rates consistent with historical levels.

“Our EPS estimates are revised as follows: F2027E is $5.21 (unchanged), and F2028E is $6.24 from $6.10.”

With that change, Mr. Shreedhar raised his target for Aritzia shares to $188 from $182 with an “outperform” rating. The average on the Street is now $186.13.

“ATZ’s strength is its superior store productivity, supported by its brand promise and disciplined inventory control (primarily stocked with proven sellers). We believe that ATZ’s premium valuation vs. apparel peers is justified given its superior long-term operating performance and accelerated growth,” he concluded.

Desjardins Securities analyst Doug Young thinks “softening commercial pricing will weigh on top-line growth and sentiment” for the Canadian property and casualty insurance sector through earnings season.

“We remain underweight the P&C insurance sector due to softening market conditions; however, we are increasingly of the view that current valuations (specifically IFC and TSU) reflect the various risks and concerns that are top of mind for most investors,” he said.

In a report released Thursday, Mr. Young said he expects higher-than-normal catastrophe losses for both Intact Financial Corp. (IFC-T) and Definity Financial Corp. (DFY-T), and “another clean quarter” for Trisura Group Ltd.’s (TSU-T) U.S. programs business.

“We will be watching several themes: 1. Management’s comments on the pricing cycle. We expect P&C insurance market (pricing) conditions in large-case commercial lines to remain soft. Could we see conditions soften in the SME or mid-market commercial space? Or in personal lines? Something to watch for, in our view. 2. Canada personal auto. Regulatory changes in Ontario and pending regulatory changes in Alberta will remain topical. The outstanding question being—can results get any better? 3. Higher-than-normal CAT losses for IFC and DFY. That said, this won’t be a big surprise given both pre-announced anticipated CAT losses for 3Q26. Were non-CAT large losses elevated as well? 4. We expect decent underlying results in Canadian commercial/specialty lines. However, increasing competitive trends in certain D&O lines, Canadian fronting (relevant for TSU) and large-case traditional commercial lines (relevant for IFC and DFY) are worth keeping an eye on. 5. Macro headwinds. We expect the shifts in equity markets, interest rates and foreign exchange rates to weigh on book-value-per-share growth this quarter,” he said.

In order of preference, Mr. Young’s ratings and targets are:

1. Trisura with a “buy” rating and $56 target, down from $60 previously. The average on the Street is $55.28.
2. Intact with a “buy” rating and $310 target (unchanged). Average: $307.75.
3. Definity with a “hold” rating and $80 target, down from $85. Average: $84.45.

He added: “Topics of interest by company. IFC — How is its UK&I division performing, and any update on management’s M&A outlook? DFY — The TRV Canada integration will be the focal point. TSU — We expect clean results at its U.S. programs business; however, we also expect a softer top line at its Canadian warranty, Canadian fronting and U.S. programs businesses.”

In other analyst actions:

* TD Cowen’s Jonathan Kelcher trimmed his Morguard North American Residential REIT (MRG.UN-T) target to $20 from $21 with a “buy” rating. The average is $20.25.

“Q3 was a slight miss, largely on lower margins,” said Mr. Kelcher. “Fundamentals remain soft but appear to be stabilizing with improved SPNOI sequentially in both Canada and the U.S.. Additional details on the TDAM [TD Asset Management Inc.] portfolio purchase were provided and we now expect a year-end close. MRG trades near lowest multiple among North American apartment REITs.”

* TD Cowen’s Aaron MacNeil hiked his Precision Drilling Corp. (PD-T) target to $182, exceeding the $161.81 average, from $150, maintaining a “buy” rating.

“As expected, Precision formalized its Q4/26 U.S. margin guide that management views as sustainable into 2027. With leverage approaching 1.0 times, we see FCF shifting to buybacks. Our PT rises ... on higher estimates and modest multiple expansion as earnings visibility improves. We believe that the 2027 shareholder return framework is the next catalyst,” said Mr. MacNeil.