Tuesday’s analyst upgrades and downgrades

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

Desjardins Securities analyst Aditya Gupta is touting the upside to IGM Financial Inc.’s (IGM-T) economic interest in Wealthsimple, believing there is “a value-creation opportunity to consolidate the position for itself or parent Power Corp. of Canada (POW-T)

“Currently, Wealthsimple is housed at both IGM (owns an economic interest of 25.1 per cent) and POW (owns an economic interest of 15.4 per cent),” he added." By our math, consolidating the position entirely into either IGM or POW would allow either entity to capture more value from future Wealthsimple fair value increases (vs holding it in two different places)."

“Wealthsimple has more natural synergies with IGM in our view (and this is not dependent on where the investment is housed). (1) Mackenzie ETFs are already included in Wealthsimple’s managed investment portfolios. (2) Certain Wealthsimple ETFs (white label) are currently being managed by Mackenzie. (3) We see synergy potential between Wealthsimple and IGM’s alt platform (Northleaf). There are a number of caveats and assumptions used. We are making a number of assumptions in this analysis, and we acknowledge that these transactions have many financial (ie tax) and nonfinancial (ie securities law considerations) aspects to them. However, even if a swap does not ultimately materialize, this was at the very least an interesting exercise to go through. ”

In a client report released before the bell on Tuesday titled A wealth of opportunity, Mr. Gupta initiated coverage of IGM with a “buy” rating, emphasizing the performance at its core businesses has been “improving” and its ”strong capital position and annual cash generation should support continued dividend increases, buybacks and deployment into its strategic investments over time."

“There is a lot to like about the IG Wealth business. (i) Fundamentals are improving (EBITDA margin, flows). (ii) IG Wealth is positioned to capture the benefits from demographic and secular trends in the Canadian wealth market. (iii) The HNW pivot is working. (iv) Advisor productivity is increasing,” he said. “Mackenzie fundamentals are improving, and we like its diversified AUM base.

“Rockefeller and Northleaf have experienced strong growth, and we see several potential synergies for both with IGM’s other businesses.”

In justifying his bullish view of the company and its investment proposition, Mr. Gupta also emphasized “being part of the Power Corp ecosystem has many benefits,” including “a first-hand look at all the potential disruptive companies/technologies in the fintech space.”

He now sees adjusted earnings per share growth surpassing management’s medium-term target of 9 per cent or more over the next 2–3 years, “and while the markets are a primary driver, management has done well in managing the items that it can control.”

“Valuation is interesting,” he added. “While IGM may seem expensive on a consolidated basis, Wealthsimple and Rockefeller currently do not contribute meaningfully to earnings, and if you exclude the expected earnings and fair value from its non-core businesses, IG Wealth and Mackenzie trade at an attractive multiple vs peers (8.6 times vs 11 times for peers on a NTM [next 12-month] consensus basis).

“Our concerns are based on Mackenzie mutual fund net flows (which have underperformed the industry as of late) and well-known industry headwinds.”

Mr. Gupta set a 12-month target of $93 for IGM shares. The average target on the Street is $89.71.

The $800-million sale of High Liner Foods Inc. (HLF-T) to Japanese seafood giant Umios Corp. is “a logical outcome” for both its shareholders and the Nova Scotia-based company, according to RBC Dominion Securities analyst Ryland Conrad.

“Japanese-based Umios is one of the largest seafood and marine-protein companies globally and a longstanding supplier to High Liner,” he explained. “The transaction combines Umios’ marine resources (including access to 26 per cent of Alaska pollock) with High Liner’s processing, brands and distribution network, creating a vertically integrated platform for future growth in North America. Umios intends to maintain the company’s headquarters in Nova Scotia alongside its workforce and operations while investing in processing, innovation and initiatives to support the next phase of growth.

“In our view, the transaction is a logical outcome for High Liner shareholders and a superior proposal is unlikely considering the offer premium, completion of a competitive sale process and the inherent operating synergies between the two companies.”

Shares of the High Liner surged 77.5 per cent on Monday following the premarket announcement of the deal, which includes Umios offering to pay $27 per share.

“The transaction values High Liner at an equity value of $804-million and an EV [enterprise value] of $1.25-billion and implies a 2027E EV/EBITDA multiple of 8.5 times (9.5x on an LTM [last 12-month] basis), a modest premium to Canadian SMID-cap food processors and a meaningful stepup from the company’s five-year historical average of 6.0 times FTM [forward 12-month] EV/ EBITDA,” Mr. Conrad said.

“That said, we view the headline multiples as slightly inflated given near-term margin compression driven by tariffs and raw material inflation. The transaction is expected to close in January 2027, subject to: (i) shareholder approval requiring at least 75 per cent of votes cast by shareholders, with 45 per cent of outstanding shares (including Thornridge which holds 41 per cent) having entered into agreements to vote in favour of the transaction; and (ii) court and regulatory approvals including the Canadian Competition Act and U.S. HSR, though it does not require review under the Investment Canada Act.”

Maintaining his “sector perform” rating for High Liner shares, Mr. Conrad raised his target to $27 to reflect the offer from $18 previously. The average on the Street is $18.08.

Elsewhere, others making target adjustments include:

* Ventum’s Bahamin Abdolpanah to $27 from $16.50 with a “neutral” rating.

“Umios gains a complementary downstream North American platform, paying upfront for margin repair we expected the market to recognize gradually. With 45.4 per cent of shares committed, financing in place and a low regulatory bar, we expect the deal to close in Q1/27,” he said.

TD Cowen analyst Tim James expects Chorus Aviation Inc. (CHR-T) to “demonstrate predictability of CPA [capacity purchase agreements], capital returns, and ‘0ther revenue’ growth, with SkyCare acquisition a conference call focus” when it releases its third-quarter results before the bell on Nov. 10 after the bell.

“We don’t expect Q3 will provide a catalyst for Chorus shares but expect ongoing earnings stability and more information regarding the non-CPA businesses/opportunities will lead to a gradual move towards our target over 12 months,” he said.

“We believe capital returns (buybacks & dividends) should continue to reward investors. Chorus has no exposure to jet fuel prices. We forecast Q3/26 revenue flat year-over-year and adj. EBITDA of $44.5-million (consensus: $46.8-million), down 14 per cent year-over-year. The decline in EBITDA is due to contractual step-down in CPA fixed margin and CPA lease revenue, partially offset by parts sales, contract flying, MRO [maintenance, repair, and overhaul] & other revenue (driven by Kadex acquisition & organic growth). Conference call focus will likely be on SkyCare acquisition/ M&A/growth opportunities, 2026 guide & 2026-2029 target update and CPA outlook.”

In a client note released before the bell, Mr. James updated his economic, foreign exchange, fuel price, and other company-specific assumptions for both Halifax-based Chorus and its peer Transat A.T. Inc. (TRZ-T).

“We prefer Chorus Aviation in the current environment of high jet fuel prices and opportunities for Canadian defence spending exposed businesses,” he added. “We view a cautious approach to Transat A.T. as justified by challenges related to its narrow margins, leverage and the impact of high jet fuel prices on costs, air fares and the related risk to travel volume.”

Mr. James raised his target for Chorus shares by $1 to $35, reiterating a “buy” rating. The average on the Street is $33.86.

For Mississauga-based Transat, he kept a “hold” rating with a $2 target, which exceeds the $1.80 average.

“We continue to believe estimating intrinsic value for Transat A.T. is very challenging and volatile in the current environment,” he explained. Implied support from the Canadian government and those investors with the risk tolerance for a potential turnaround seem to be setting the current equilibrium share price in the $2 range. We do not expect Q4/F26 results to provide a catalyst for Transat shares. We forecast revenue of $797-million (cons: $798-million), up 4 per cent year-over-year when excluding prior year P&W compensation, based on flat yield and an increase of 4.4 per cent in traffic. We forecast adj. EBITDA of -$46.5 million (cons: $1.5-million), with the year-over-year decline driven by fuel expense. Conference call should focus on booking trends, fuel price pass-through, capacity outlook, liquidity, and new loyalty program."

“Transat stock response likely based on liquidity and management plans for managing balance sheet through a difficult jet fuel/travel environment.”

Desjardins Securities analyst Brent Stadler is expecting Hydro One Ltd. (H-T) to report “solid” third-quarter results on Nov. 1, pointing to its rate base growth and “modestly favourable weather to be partially offset by higher expenses (a push from 1H26).”

“With 3Q results, we will be looking for additional colour on the JRAP28 filing, an update on H’s 15–transmission line growth pipeline and a general growth update in Ontario,” he added.

“H is a high-quality defensive play, with best-in-class balance sheet and growth”

Mr. Stadler is now projecting quarterly earnings per share of 70 cents, matching last year’s result and a penny above the consensus estimate on the Street. He attributes the “flattish” result to “rate base growth and modestly higher average peak power demand being mostly offset by higher OM&A (partial push from 1H26).

“What to watch for with 3Q26 results. (1) Colour on H’s recent JRAP28 filing, including its $27-billion core investment program, 45-per-cent equity thickness ask and procedural next steps. Our note on JRAP28 can be found here. We continue to believe a reasonable expectation over the JRAP28 period includes a 12–13 per cent (10.0–10.5-per-cent net) rate base CAGR, and a 45-per-cent equity thickness would be more in line with North American peers; this makes sense given the significantly larger investment program required to meet economic demand in Ontario, but it is not our base case. In our view, an OEB decision could come in roughly mid-2027, with H hosting an investor day shortly after. (2) Construction update on the St Clair and Waasigan transmission lines, which total $1.6-billion and are expected to COD [commercial operating date] in late 2027. Recall that these lines are expected to contribute on a 100-per-cent basis to H’s results until the First Nations take ownership (likely 6–12 months following COD). (3) Growth pipeline update on H’s remaining 13 transmission lines which are expected to be online through 2032, including H reiterating a $8.6-billion spend in 2026–27. (4) Commentary on Ontario’s diversified growth drivers, such as mining activities in the north, agriculture in the south and increased manufacturing,” he added.

While he reduced his earnings assumptions through 2027 modestly, Mr. Stadler reaffirmed his “buy” rating and $61 target for Hydro One shares. The average is $57.10.

In separate reports, Mr. Stadler made forecast adjustments but kept his targets and ratings for these companies:

* Emera Inc. (EMA-T) with a $74 target and “hold” rating. The average is $75.30.

Analyst: “We have reduced our 3Q26E EPS to $0.90 (from $0.97) on expectations for lower CDD days in Florida and Nova Scotia, and a modest increase of corporate expense in the quarter. With 3Q results, we will be looking for an updated capital plan for the 2027–31 period where we expect EMA to maintain 7–8-per-cent rate base growth, colour on the CU merger, and a positive outlook in Florida, including an update on its progress around a data centre deal.”

* Fortis Inc. (FTS-T) with a “buy” rating and $85 target. The average is $80.18.

Analyst: “We have reduced our 3Q26E EPS to $0.84 (from $0.91) on expectations for continued regulatory lag at TEP (timing-related) and modestly higher corporate expenses. We continue to view FTS as a catalyst-rich utility that offers investors strong exposure to power demand/energy tailwinds, which in our view is leading to accelerating growth. With 3Q results, we will be looking for FTS’ capital plan roll-forward, which in our view has the potential to increase the five-year rate base CAGR.”

In other analyst actions:

* Stifel’s Daryl Young initiated coverage of Canadian National Railway Co. (CNR-T) with a “buy” rating and $200 target and Canadian Pacific Kansas City Ltd. (CP-T) with a “buy” rating and $150 target. The averages on the Street are $194.33 and $140.05, respectively.

* Jefferies’ Sam Burwell initiated coverage on Baytex Energy Corp. (BTE-T) with a “buy” rating and $9 target. The average on the Street is $8.53.

* Expecting to see “solid” quarterly results on Thursday from TMX Group Ltd. (X-T), TD Cowen’s Graham Ryding raised his target for its shares to $67 from $61, keeping a “buy” rating. The average is $65.36.

“We expect a noisy Q3/26 result given TMX closed on both the RAFI (indexing business) and Cboe Australia deals in August. Cboe Canada and MEMX deals are pending. Q3/26 market activity was mixed (strong derivatives, but softening equity trading and listings). Our $0.59 EPS estimate compares to $0.57 for consensus (we are in line for revenue). Our constructive thesis remains intact,” said Mr. Ryding.